1475675
Description
Quiz by amy.lee1989, updated more than 1 year ago
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Created by amy.lee1989
over 9 years ago
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Question 1
Question
What is the defining characteristic of a normal good?
Answer
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An increase in income leads to an increase in quantity demanded
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The price elasticity of demand is greater than unity
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The income effect of a fall in price is negative
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The substitution effect of a fall in price is positive
Question 2
Question
Given that potatoes are an inferior good, what will cause an increase in the price of potatoes?
Answer
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a decrease in advertising expediture
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a failure of the potato harvest
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an increase in subsidies to potato growers
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an increase in the income of consumers
Question 3
Question
What will make it more difficult for an industry to react quickly to an increase in market demand?
Answer
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There is a high level of unemployment
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The industry employs highly skilled workers
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There is a high degree of substitutability between capital and labour
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There are no close substitutes for the industry's product
Question 4
Question
In which of the following situation is the demand for a product said to be price elastic?
Answer
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The quantity demanded responds to a change in price
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An increase in price brings about a decrease in the quantity demanded
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An in crease in price induces consumers to spend more on the product
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A decrease in price brings about an increase in revenue
Question 5
Question
A silversmith sells 100 sets of earrings per week at a price of $5. As a direct result of a price increase to $6, the total revenue from sales rises by 8%.
Within which range does price elasticity of demand lie?
Answer
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under 0.4
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greater than 0.4 and less than 0.8
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greater than 0.8 and less than 1.2
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over 1.2
Question 6
Question
The demand for a commodity is perfectly elastic. A firm producing this commodity currently sells 100 units at $5 each.
What will be the revenue obtained by the firm, if it increases its price to $6?
Answer
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0
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$400
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$500
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$600
Question 7
Question
If pizza and soda are complements, we can conclude that
Answer
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the cross-elasticity of demand is positive
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the cross-elasticity of demand is negative
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the income elasticity of demand is negative
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the income elasticity of demand is positive
Question 8
Question
The price of a product in creases from $12 to $20 and the quantity demanded falls from 55 to 45. What is the PED?
Answer
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0.4
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2.5
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-0.4
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-2.5
Question 9
Question
Which of the following is not a factors affecting the elasticity of supply?
Answer
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ability to stock pile
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ability to increase output
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Number of close substitutes
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spare capacity
Question 10
Question
If total revenue remains constant after price is increased, demand is _______
Answer
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perfectly inelastic
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perfectly elastic
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inelastic
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unitary elastic
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