Question 1

If consumers' buying decisions are not very sensitive to changes in price, then their demand is:
A) more elastic.
B) less elastic.
C) perfectly inelastic.
D) unit elastic.

Accepted Answer

If consumers' buying decisions are not very sensitive to changes in price, their demand is less elastic. This means that changes in price have less of an impact on the quantity demanded by consumers. In other words, a price increase will not significantly decrease the quantity demanded, and a price decrease will not significantly increase the quantity demanded.

Question 2

If a large percentage change in price leads to a smaller percentage change in quantity demanded, the result is a:
A) very elastic demand.
B) less elastic demand.
C) low magnitude of response.
D) high magnitude of response.

Accepted Answer

When a large percentage change in price leads to a smaller percentage change in quantity demanded, it indicates a less elastic demand. This means that consumers are not very sensitive to price changes and are willing to pay more for the product.

Question 3

Economists use the percentage change in quantity rather than the absolute change in quantity because:
A) percentage changes are easier to calculate than absolute changes.
B) the measured elasticity is the same regardless of the unit of measurement for quantity.
C) absolute changes are confusing to convert.
D) absolute changes often result in negative numbers.

Accepted Answer

The measured elasticity is the same regardless of the unit of measurement for quantity. Using percentage changes allows for comparisons to be made across products with different units or scales of measurement. Additionally, percentage changes provide a standardized way to compare changes in quantity regardless of the starting point or magnitude of the change.

Question 4

Suppose a decrease in price increases quantity demanded from 8 to 12. Using the mid-point formula, the percentage change in quantity demanded is:
A) 0.1, and is elastic.
B) 40 = 400 percent.
C) 0.40 = 40 percent.
D) 0.40 = 40 percent

Accepted Answer

The answer of Suppose a decrease in price increases quantity...

Question 5

If a small percentage change in price causes a larger percentage change in the quantity demanded, the good has:
A) an inelastic demand.
B) a low magnitude of response.
C) an elastic demand.
D) a high magnitude of response.

Accepted Answer

This is the definition of an elastic demand. If a small change in price causes a large change in quantity demanded, it means consumers are highly sensitive to changes in price and will adjust their consumption accordingly, hence elastic demand.

Question 6

The mid-point method of calculating price elasticity of demand:
A) measures the percentage changes relative to a point midway between two points on a demand curve.
B) measures the absolute change relative to a point midway between two points on a demand curve.
C) measures the percentage change relative to a point midway between demand and supply.
D) None of these is true.

Accepted Answer

The mid-point method of calculating price elasticity of demand measures the percentage changes relative to a point midway between two points on a demand curve. It is considered a more accurate method than the simple percentage method because it takes into account the fact that the elasticity of demand may vary at different points along a demand curve.

Question 7

The price elasticity of demand for eggs is 0.27. Thus, 0.27 is the:
A) percentage change in the quantity demanded of eggs when the price of eggs increases by one percent.
B) size of the shift in the demand for eggs when the price of eggs changes by one percent.
C) size of the percentage change in the quantity supplied of eggs when the demand for eggs changes due to a price change.
D) percentage change in the price of eggs when the quantity demanded of eggs increases by one percent.

Accepted Answer

Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Therefore, if the price elasticity of demand for eggs is 0.27, then a one percent increase in the price of eggs will result in a 0.27 percent decrease in the quantity demanded of eggs.

Question 8

Elasticities are used to measure responses to a change in:
A) the price of a good.
B) the price of a related good.
C) income.
D) All of these are true.

Accepted Answer

Elasticities can be used to measure responses to a change in the price of a good, the price of a related good, or income. Therefore, all of the choices are true.

Question 9

The mid-point method of calculating elasticity is typically used because:
A) it is easier to calculate.
B) it is universally understood by all economists.
C) the negative sign can then be ignored.
D) it is a consistent way to estimate the elasticity of demand between two points on a demand curve, regardless of the direction of the movement.

Accepted Answer

The mid-point method of calculating elasticity is considered a consistent way to estimate the elasticity of demand between two points on a demand curve, regardless of the direction of the movement. This is because it calculates the elasticity as a ratio of percentage changes in quantity and price, which takes into account the fact that elasticity values can be different depending on whether the change is an increase or a decrease. Therefore, it is considered a better method than other alternatives like the basic formula that only considers the change in quantity and price without taking into account the direction of the movement.

Question 10

Suppose an increase in price decreases quantity demanded from 210 to 190. Using the mid-point formula, the percentage change in quantity demanded is:
A) 2 = 200 percent.
B) 0.2 = 20 percent.
C) 0.2 = 20 percent
D) 0.1 = 10 percent

Accepted Answer

The answer of Suppose an increase in price decreases quantity...

Question 11

If supply and demand analysis is a measure of how, then elasticity is a measure of:
A) how much.
B) when.
C) why.
D) how quickly.

Accepted Answer

Elasticity measures how much the quantity demanded or supplied changes in response to a change in price, income, or other factors.

Question 12

The calculated price elasticity of demand:
A) is always a negative number, although it is sometimes reported as an absolute value.
B) is sometimes negative and sometimes positive, depending on the magnitude of response.
C) is always a positive number, because price and quantity are directly related in terms of demand.
D) can be positive or negative, but is always reported as an absolute value.

Accepted Answer

The calculated price elasticity of demand is always a negative number, indicating the inverse relationship between price and quantity demanded. However, it is sometimes reported as an absolute value in order to ignore the negative sign and focus on the magnitude of responsiveness.

Question 13

If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil, then 0.02 is the
A) price elasticity of demand.
B) price elasticity of supply.
C) cross-price elasticity of demand.
D) income elasticity of demand.

Accepted Answer

The price elasticity of demand measures the responsiveness of the quantity demanded to a change in the price of the good. In this case, a one percent change in price results in a 0.02 percent change in the quantity demanded, which means that demand is relatively inelastic (i.e. less than one), since the percentage change in quantity demanded is small compared to the percentage change in price. Therefore, the correct answer is A.

Question 14

If a good has an elastic demand, then:
A) a small percentage change in price will cause a larger percentage change in quantity demanded.
B) a small percentage change in price will cause virtually no change in quantity demanded.
C) a large percentage change in price will cause a smaller change in quantity demanded.
D) any percentage change in price will cause an almost immediate response in quantity demanded.

Accepted Answer

If a good has an elastic demand, a small percentage change in price will cause a larger percentage change in quantity demanded. This means that consumers are more sensitive to changes in price and will adjust their consumption accordingly. In other words, if the price increases by a certain percentage, the quantity demanded will decrease by a larger percentage, and if the price decreases by a certain percentage, the quantity demanded will increase by a larger percentage.

Question 15

Suppose price increases from $7.00 to $13.00. Using the mid-point formula, the percentage change in price is:
A) .0.6 = 60 percent.
B) 0.6 = 60 percent.
C) 70 percent.
D) 130 percent.

Accepted Answer

The mid-point formula is [(new price - old price) / ((new price + old price)/2)] * 100. Applying the formula, we get [(13-7)/((13+7)/2)] * 100 = 0.6 * 100 = 60%. Therefore, the percentage change in price is 60%, which is option B.

Question 16

Different measurements of elasticity include:
A) income elasticity of demand, income elasticity of supply.
B) price elasticity of demand, price elasticity of supply.
C) cross-price elasticity of demand, income elasticity of supply.
D) preference elasticity of demand, cross-price elasticity of supply.

Accepted Answer

Price elasticity of demand and price elasticity of supply are the most common measures of elasticity used in economics. Income elasticity and cross-price elasticity are also important measures, but are not as widely used as price elasticity. Preference elasticity is not a commonly used measure of elasticity.

Question 17

Mathematically, price elasticity of demand is the percentage change in the:
A) quantity demanded of a good in response to a given percentage change in the price of the good.
B) price of a good that is demanded in response to a given percentage change in quantity.
C) quantity of a good that is supplied in response to a given percentage change in price.
D) price of a good that is supplied in response to a given percentage change in quantity.

Accepted Answer

Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Therefore, option A is the correct answer as it defines the concept of price elasticity of demand accurately. Option B refers to the concept of price elasticity of supply while option C and D refer to the concept of supply elasticity.

Question 18

Price elasticity is a measure of how
A) much a market responds to a change in market conditions.
B) much consumers or producers respond to a change in market price.
C) quickly consumers or producers respond to a change in market price.
D) quickly a market will respond to a change in market conditions.

Accepted Answer

Price elasticity refers to how much consumers or producers respond to a change in market price. It measures the sensitivity of the quantity demanded or supplied to changes in the price of a good or service.

Question 19

The concept of price elasticity is applied to changes in:
A) quantity demanded, but not quantity supplied.
B) quantity supplied, but not quantity demanded.
C) both quantities supplied and quantity demanded.
D) neither quantity supplied nor quantity demanded.

Accepted Answer

Price elasticity is a measure of the responsiveness of quantity demanded or quantity supplied to changes in the price of a product. Therefore, it is applied to both quantities demanded and supplied.

Question 20

The most commonly used measures of elasticity are:
A) income elasticity of demand and price elasticity of supply.
B) price elasticity of demand and price elasticity of supply.
C) cross-price elasticity of demand and cross-price elasticity of supply.
D) price elasticity of demand and cross-price elasticity of supply.

Accepted Answer

The most commonly used measures of elasticity are the price elasticity of demand and price elasticity of supply. These provide information about how sensitive the quantity demanded or supplied is to changes in price. While income elasticity and cross-price elasticity are also important measures, they are not as commonly used as the price elasticities of demand and supply.

Quiz 4: Elasticity

If consumers' buying decisions are not very sensitive to changes in price, then their demand is:

If a large percentage change in price leads to a smaller percentage change in quantity demanded, the result is a:

Economists use the percentage change in quantity rather than the absolute change in quantity because:

Suppose a decrease in price increases quantity demanded from 8 to 12. Using the mid-point formula, the percentage change in quantity demanded is:

If a small percentage change in price causes a larger percentage change in the quantity demanded, the good has:

The mid-point method of calculating price elasticity of demand:

The price elasticity of demand for eggs is 0.27. Thus, 0.27 is the:

Elasticities are used to measure responses to a change in:

The mid-point method of calculating elasticity is typically used because:

Suppose an increase in price decreases quantity demanded from 210 to 190. Using the mid-point formula, the percentage change in quantity demanded is:

If supply and demand analysis is a measure of how, then elasticity is a measure of:

The calculated price elasticity of demand:

If a one percent change in the price of oil causes a 0.02 percent change in the quantity demanded of oil, then 0.02 is the

If a good has an elastic demand, then:

Suppose price increases from $7.00 to $13.00. Using the mid-point formula, the percentage change in price is:

Different measurements of elasticity include:

Mathematically, price elasticity of demand is the percentage change in the:

Price elasticity is a measure of how

The concept of price elasticity is applied to changes in:

The most commonly used measures of elasticity are: