Question 1

When consumers face rising gasoline prices, they typically
A) reduce their quantity demanded more in the long run than in the short run.
B) reduce their quantity demanded more in the short run than in the long run.
C) do not reduce their quantity demanded in the short run or the long run.
D) increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Accepted Answer

A

Question 2

Which of the following statements about the price elasticity of demand is correct?
A) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases.
B) Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes.
C) Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y.
D) All of the above are correct.

Accepted Answer

D

Question 3

Demand is said to be price elastic if
A) the price of the good responds substantially to changes in demand.
B) demand shifts substantially when income or the expected future price of the good changes.
C) buyers do not respond much to changes in the price of the good.
D) buyers respond substantially to changes in the price of the good.

Accepted Answer

Price elasticity of demand refers to the responsiveness of quantity demanded to a change in the price of a good. If buyers respond substantially to changes in price, then the demand is said to be price elastic. Therefore, option D is the correct choice.

Question 4

In general, elasticity is a measure of
A) the extent to which advances in technology are adopted by producers.
B) the extent to which a market is competitive.
C) how firms' profits respond to changes in market prices.
D) how much buyers and sellers respond to changes in market conditions.

Accepted Answer

Elasticity refers to how buyers and sellers react to changes in market conditions, such as changes in price or availability. It measures the responsiveness of demand and supply to these changes. Options A, B, and C may impact elasticity, but they do not define the concept.

Question 5

The price elasticity of demand for a good measures the willingness of
A) consumers to buy less of the good as price rises.
B) consumers to avoid monopolistic markets in favor of competitive markets.
C) firms to produce more of a good as price rises.
D) firms to respond to the tastes of consumers.

Accepted Answer

The price elasticity of demand measures the responsiveness of quantity demanded to changes in price. If the price elasticity of demand is high (i.e., demand is elastic), consumers are more willing to buy less of the good as price rises. This is because there are readily available substitutes or the good is a luxury. If the price elasticity of demand is low (i.e., demand is inelastic), consumers are less willing to buy less of the good as price rises. This is because there are no or few substitutes, and the good is a necessity.

Question 6

Which of the following statements about the consumers' responses to rising gasoline prices is correct?
A) About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
B) About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
C) About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
D) Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

Accepted Answer

The answer of Which of the following statements about the...

Question 7

The price elasticity of demand measures how much
A) quantity demanded responds to a change in price.
B) quantity demanded responds to a change in income.
C) price responds to a change in demand.
D) demand responds to a change in supply.

Accepted Answer

The price elasticity of demand specifically measures how much the quantity demanded of a good or service changes in response to a change in its price. It is a key concept in economics as it helps to determine the degree of responsiveness of consumers to changes in price, which affects how much firms are able to sell and at what price point they should operate at to maximize profits. The other options (B, C, and D) all describe other aspects of demand and supply dynamics, but do not directly relate to the concept of price elasticity of demand.

Question 8

The price elasticity of demand measures
A) buyers' responsiveness to a change in the price of a good.
B) the extent to which demand increases as additional buyers enter the market.
C) how much more of a good consumers will demand when incomes rise.
D) the movement along a supply curve when there is a change in demand.

Accepted Answer

Price elasticity of demand measures how much the quantity demanded of a good changes in response to a change in its price. It indicates the degree of responsiveness of demand to a change in price. Therefore, choice A is the correct answer. The other choices are incorrect as they relate to different economic concepts.

Question 9

Demand is said to be inelastic if
A) buyers respond substantially to changes in the price of the good.
B) demand shifts only slightly when the price of the good changes.
C) the quantity demanded changes only slightly when the price of the good changes.
D) the price of the good responds only slightly to changes in demand.

Accepted Answer

Inelastic demand means that the quantity demanded changes only slightly when the price of the good changes. This usually occurs when there are no close substitutes for the good, or when the good is a necessity. In such cases, even if the price of the good increases, consumers may not reduce their demand for the good by much, as they still need it. Therefore, the demand curve for an inelastic good is relatively steep, as a change in price leads to a small change in quantity demanded.

Question 10

When studying how some event or policy affects a market, elasticity provides information on the
A) change in the costs of production.
B) tradeoff between equality and efficiency.
C) effect on the budget deficit or surplus.
D) direction and magnitude of the effect.

Accepted Answer

Elasticity measures the responsiveness of quantity demanded or supplied to changes in price or other market factors. Therefore, it provides information on the direction and magnitude of the effect that a policy or event has on a market.

Question 11

Demand is inelastic if the price elasticity of demand is
A) less than 1.
B) equal to 1.
C) greater than 1.
D) equal to 0.

Accepted Answer

A price elasticity of demand less than 1 means that a change in price will result in a proportionally smaller change in quantity demanded. This indicates that demand is relatively insensitive to price changes, and therefore inelastic.

Question 12

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the
A) demand for the good is said to be elastic.
B) demand for the good is said to be inelastic.
C) law of demand does not apply to the good.
D) demand curve for the good shifts only slightly in response to a change in price.

Accepted Answer

When the quantity demanded responds only slightly to a change in price, it indicates that the good has an inelastic demand. This means that consumers are not very sensitive to price changes and will continue to purchase the same quantity even if the price increases.

Question 13

Elasticity is
A) a measure of how much buyers and sellers respond to changes in market conditions.
B) the study of how the allocation of resources affects economic well-being.
C) the maximum amount that a buyer will pay for a good.
D) the value of everything a seller must give up to produce a good.

Accepted Answer

Elasticity refers to the responsiveness of quantity demanded or quantity supplied to changes in price, income or other market conditions. Therefore, option A is the correct choice. Option B is describing microeconomics as a whole rather than elasticities specifically. Option C refers to the maximum price a buyer is willing to pay, not elasticity. Option D is referring to the concept of opportunity cost, which is not the same as elasticity.

Question 14

Demand is said to be inelastic if the
A) quantity demanded changes proportionately more than price.
B) price changes proportionately more than income.
C) quantity demanded changes proportionately less than price.
D) quantity demanded changes proportionately the same as price.

Accepted Answer

Inelastic demand means that a change in price will have a relatively small impact on the quantity demanded. In other words, quantity demanded changes proportionately less than price.

Question 15

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?
A) Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.
B) Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept.
C) Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage.
D) Without elasticity, it is very difficult to assess the degree of competition within a market.

Accepted Answer

Elasticity allows us to quantify how much the quantity demanded or supplied will change in response to changes in price or other factors. This enables us to make more accurate predictions about the behavior of consumers and producers in the market, and to analyze the effectiveness of various policies or strategies. Without elasticity, our understanding of supply and demand would be less precise and less useful for practical decision-making.

Question 16

When quantity demanded responds strongly to changes in price, demand is said to be
A) fluid.
B) elastic.
C) dynamic.
D) highly variable.

Accepted Answer

When quantity demanded responds strongly to changes in price, demand is said to be elastic. This means that if there is even a small change in the price of a good or service, consumers will significantly alter their purchasing behavior, resulting in a larger change in the quantity demanded.

Question 17

When studying how some event or policy affects a market, elasticity provides information on the
A) equity effects on the market by identifying the winners and losers.
B) magnitude of the effect on the market.
C) speed of adjustment of the market in response to the event or policy.
D) number of market participants who are directly affected by the event or policy.

Accepted Answer

Elasticity measures the responsiveness of the quantity demanded or supplied to changes in price or other variables. By knowing the elasticity, we can determine the magnitude of the effect of some event or policy on the market.

Question 18

Demand is elastic if the price elasticity of demand is
A) less than 1.
B) equal to 1.
C) equal to 0.
D) greater than 1.

Accepted Answer

An elasticity value greater than 1 indicates demand is elastic. This means that even small changes in price will result in larger changes in the quantity demanded.

Question 19

If demand is price inelastic, then
A) buyers do not respond much to a change in price.
B) buyers respond substantially to a change in price, but the response is very slow.
C) buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes.
D) the demand curve is very flat.

Accepted Answer

Price inelastic demand means that buyers do not respond much to a change in price, therefore option A is the correct answer.

Question 20

A 10 percent increase in gasoline prices reduces gasoline consumption by about
A) 6 percent after one year and 2.5 percent after five years.
B) 2.5 percent after one year and 6 percent after five years.
C) 10 percent after one year and 20 percent after five years.
D) 0 percent after one year and 1 percent after five years.

Accepted Answer

Research shows that a 10 percent increase in gasoline prices reduces gasoline consumption by approximately 2.5 percent in the short-term (one year) and 6 percent in the long-term (five years). Therefore, option B is the correct choice.

Quiz 5: Elasticity and Its Application

When consumers face rising gasoline prices, they typically

Which of the following statements about the price elasticity of demand is correct?

Demand is said to be price elastic if

In general, elasticity is a measure of

The price elasticity of demand for a good measures the willingness of

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

The price elasticity of demand measures how much

The price elasticity of demand measures

Demand is said to be inelastic if

When studying how some event or policy affects a market, elasticity provides information on the

Demand is inelastic if the price elasticity of demand is

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

Elasticity is

Demand is said to be inelastic if the

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

When quantity demanded responds strongly to changes in price, demand is said to be

When studying how some event or policy affects a market, elasticity provides information on the

Demand is elastic if the price elasticity of demand is

If demand is price inelastic, then

A 10 percent increase in gasoline prices reduces gasoline consumption by about