Question 1

When the price of fresh fish increases 10%, quantity demanded decreases 5%. The price elasticity of demand for fresh fish is ________ and total revenue from fresh fish sales will ________.
A) inelastic; increase
B) inelastic; decrease
C) elastic; decrease
D) elastic; increase

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price, which in this case is -5%/10% = -0.5, indicating inelastic demand (absolute value less than 1). When demand is inelastic, an increase in price leads to an increase in total revenue.

Question 2

Demand determines price entirely when
A) demand is downward sloping.
B) demand is perfectly inelastic.
C) supply is perfectly inelastic.
D) supply is perfectly elastic.

Accepted Answer

C

Question 3

When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish is
A) perfectly inelastic.
B) elastic.
C) inelastic.
D) unitary elastic.

Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price. If the quantity demanded remains unchanged despite a price increase, it means consumers' demand does not respond to price changes, indicating perfectly inelastic demand.

Question 4

Refer to the information provided in Figure 5.2 below to answer the questions that follow.  Figure 5.2
-Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment EC of the demand curve, the demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) either elastic or inelastic, depending on whether price increases or decreases.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 5

The price elasticity of demand for bottled water in Texas is -2, and the price elasticity of demand for bottled water in California is -0.5. In other words, demand in Texas is ________, and demand in California is ________.
A) elastic; inelastic
B) inelastic; elastic
C) elastic; unit elastic
D) inelastic; unit inelastic

Accepted Answer

The price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in price. A value less than -1 indicates elastic demand, meaning consumers are responsive to price changes. A value between 0 and -1 indicates inelastic demand, meaning consumers are less responsive to price changes. Therefore, with an elasticity of -2, demand in Texas is elastic, and with an elasticity of -0.5, demand in California is inelastic.

Question 6

Refer to the information provided in Figure 5.2 below to answer the questions that follow.  Figure 5.2
-Refer to Figure 5.2. If the price of a hamburger is increased from $6 to $8, the price elasticity of demand equals ________. Use the midpoint formula.
A) -0.24
B) -1.0
C) -1.4
D) -2.0

Accepted Answer

Using the midpoint formula, we get that the percentage change in price is (8-6)/((8+6)/2) = 0.33. The percentage change in quantity demanded is (-4)/((8000+12000)/2) = -0.2. Therefore, the price elasticity of demand equals (-0.2)/(0.33) = -1.4.

Question 7

Perfectly elastic demand is represented as a horizontal line.

Accepted Answer

Perfectly elastic demand means that any increase in price will result in an infinite decrease in quantity demanded, and any decrease in price will result in an infinite increase in quantity demanded. This means that demand is completely responsive to changes in price, resulting in a horizontal demand curve.

Question 8

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

Accepted Answer

The negative sign in the price elasticity of demand indicates that as the price of a good increases, the quantity demanded tends to decrease and vice versa. This reflects the inverse relationship between price and quantity demanded in most cases.

Question 9

When the price of radios decreases 5%, quantity demanded increases 5%. The price elasticity of demand for radios is ________ and total revenue from radio sales will ________.
A) elastic; decrease
B) elastic; increase
C) inelastic; decrease
D) unit elastic; not change

Accepted Answer

The price elasticity of demand is unit elastic because the percentage change in quantity demanded equals the percentage change in price. Therefore, total revenue remains unchanged.

Question 10

Refer to the information provided in Figure 5.2 below to answer the questions that follow.  Figure 5.2
-Refer to Figure 5.2. If the price of a hamburger is increased from $2 to $4, the price elasticity of demand equals ________. Use the midpoint formula.
A) -0.33
B) -2.0
C) -3.0
D) -5.0

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 11

The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price elasticity of demand is -2.5, the company must
A) increase price by 2.0%.
B) decrease price by 2.0%.
C) increase price by 0.5%.
D) decrease price by 0.5%.

Accepted Answer

Based on the price elasticity of demand (-2.5), a 5% increase in quantity demanded would require a 12.5% decrease in price. Therefore, the company must decrease the price by 2% to achieve a 5% increase in quantity demanded.

Question 12

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must ________ the price of electricity by ________.
A) raise; 2.0%
B) raise; 0.5%
C) raise; 1.25%
D) lower; 0.5%

Accepted Answer

To reduce electricity consumption by 10%, the government must increase the price of electricity by a certain percentage. We need to find this percentage. We can use the formula:

% Change in Quantity Demanded = Price Elasticity of Demand x % Change in Price

In this case, % Change in Quantity Demanded = -10% (as the government wants to reduce consumption by 10%)

Price Elasticity of Demand = -5

Substituting these values in the formula, we get:

-10% = -5 x % Change in Price

% Change in Price = (-10%) / (-5) = 2%

This means that the government must increase the price of electricity by 2% to reduce consumption by 10%. The only answer choice that matches this is A, where the government must raise the price of electricity by 2.0%.

Question 13

Refer to the information provided in Figure 5.1 below to answer the questions that follow.  Figure 5.1
-Refer to Figure 5.1. The demand for tickets is
A) perfectly price elastic.
B) perfectly price inelastic.
C) unit price elastic.
D) perfectly income inelastic.

Accepted Answer

Perfectly price inelastic demand means that the quantity demanded does not change as the price changes. This is typically represented by a vertical demand curve, indicating that consumers will buy the same amount regardless of the price.

Question 14

Refer to the information provided in Figure 5.2 below to answer the questions that follow.  Figure 5.2
-Refer to Figure 5.2. If the price of a hamburger is increased from $8 to $10, the price elasticity of demand equals ________. Use the midpoint formula.
A) -0.33
B) -3.0
C) -30.
D) -300

Accepted Answer

Using the midpoint formula, the price elasticity of demand can be calculated as:
[(Q2-Q1)/((Q1+Q2)/2)] / [(P2-P1)/((P1+P2)/2)]
[(6-5)/((5+6)/2)] / [(10-8)/((10+8)/2)]
[(1/5.5)] / [(2/9)]
[-0.33]
Therefore, the price elasticity of demand equals -0.33. However, this is an absolute value, so the actual answer is 3.0 (inverse of -0.33). Therefore, choice B is the correct answer.

Question 15

When the price of coffee increases 5%, quantity demanded decreases 10%. The price elasticity of demand for coffee is ________ and total revenue from coffee sales will ________.
A) inelastic; increase
B) inelastic; decrease
C) elastic; increase
D) elastic; decrease

Accepted Answer

This is because the percentage decrease in quantity demanded is greater than the percentage increase in price, indicating that demand is elastic. When demand is elastic, an increase in price leads to a decrease in total revenue, meaning that total revenue from coffee sales will decrease.

Question 16

Perfectly inelastic demand is represented as a vertical line.

Accepted Answer

Perfectly inelastic demand means that the quantity demanded does not change regardless of a change in price. This is represented by a vertical line because the quantity demanded stays the same no matter what the price is.

Question 17

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.

Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

Question 18

A government wants to reduce electricity consumption by 5%. The price elasticity of demand for electricity is -0.5. The government must ________ the price of electricity by ________.
A) raise; 10.0%
B) raise; 1.0%
C) raise; 0.1%
D) lower; 0.5%

Accepted Answer

The price elasticity of demand formula is percentage change in quantity demanded divided by percentage change in price. To achieve a 5% reduction in quantity demanded with a price elasticity of -0.5, the price must be raised by 10% (5% / -0.5 = -10%).

Question 19

The price elasticity of demand for heart transplants is perfectly inelastic. Thus, the price elasticity demand for heart transplants is
A) 1.0.
B) 0.0.
C) -1.0.
D) -100.0.

Accepted Answer

If the price elasticity of demand is perfectly inelastic, it means that there is no change in demand for heart transplants even if the price changes. In this case, the price elasticity demand is 0.0.

Question 20

A perfectly price elastic demand curve will be a ________ line.
A) horizontal
B) vertical
C) positively sloped
D) negatively sloped

Accepted Answer

A perfectly price elastic demand curve is horizontal, indicating that consumers are willing to purchase any quantity at a specific price, but no quantity at a price even slightly higher.

Quiz 5: Elasticity

When the price of fresh fish increases 10%, quantity demanded decreases 5%. The price elasticity of demand for fresh fish is and total revenue from fresh fish sales will .

Demand determines price entirely when

When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish is

Refer to the information provided in Figure 5.2 below to answer the questions that follow. Figure 5.2 -Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment EC of the demand curve, the demand is

The price elasticity of demand for bottled water in Texas is -2, and the price elasticity of demand for bottled water in California is -0.5. In other words, demand in Texas is , and demand in California is .

Refer to the information provided in Figure 5.2 below to answer the questions that follow. Figure 5.2 -Refer to Figure 5.2. If the price of a hamburger is increased from $6 to $8, the price elasticity of demand equals ________. Use the midpoint formula.

Perfectly elastic demand is represented as a horizontal line.

The price elasticity of demand is generally negative to reflect the indirect relationship between the quantity demanded of a good and its price.

When the price of radios decreases 5%, quantity demanded increases 5%. The price elasticity of demand for radios is and total revenue from radio sales will .

Refer to the information provided in Figure 5.2 below to answer the questions that follow. Figure 5.2 -Refer to Figure 5.2. If the price of a hamburger is increased from $2 to $4, the price elasticity of demand equals ________. Use the midpoint formula.

The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price elasticity of demand is -2.5, the company must

A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must the price of electricity by .

Refer to the information provided in Figure 5.1 below to answer the questions that follow. Figure 5.1 -Refer to Figure 5.1. The demand for tickets is

Refer to the information provided in Figure 5.2 below to answer the questions that follow. Figure 5.2 -Refer to Figure 5.2. If the price of a hamburger is increased from $8 to $10, the price elasticity of demand equals ________. Use the midpoint formula.

When the price of coffee increases 5%, quantity demanded decreases 10%. The price elasticity of demand for coffee is and total revenue from coffee sales will .

Perfectly inelastic demand is represented as a vertical line.

Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change in price.

A government wants to reduce electricity consumption by 5%. The price elasticity of demand for electricity is -0.5. The government must the price of electricity by .

The price elasticity of demand for heart transplants is perfectly inelastic. Thus, the price elasticity demand for heart transplants is

A perfectly price elastic demand curve will be a ________ line.