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PE Chapter 20b: Elasticity
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Questions in this quiz (59)
1If demand is inelastic, an increase in the price of a good will cause total expenditures on the good to
Select one:- Aa. remain constant since the decrease in quantity sold is exactly offset by the price increase.
- Bb. rise if it is a normal good and fall if it is an inferior good.
- Cc. rise.
- Dd. fall.
2If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would
Select one:- Aa. not exist.
- Bb. be identical to the supply curve for the good.
- Cc. be a vertical line, and demand would be perfectly inelastic.
- Dd. be a horizontal line, and the demand would be perfectly elastic.
3If the price of tickets to Disney World increases 10 percent, and as a result, attendance falls by 15 percent, the demand for the tickets is
Select one:- Aa. inelastic.
- Bb. elastic.
- Cc. of unitary elasticity.
- Dd. indeterminate.
4The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller. The airlines base the policy on the assumption that
Select one:- Aa. consumers are not aware of airline prices.
- Bb. consumer demand becomes more elastic as departure time approaches.
- Cc. consumer demand becomes more inelastic as departure time approaches.
- Dd. consumer demand is unrelated to prices.
5Other things equal, the demand for a good tends to be more inelastic when
Select one:- Aa. the market for the good is more narrowly defined.
- Bb. a longer time period is considered.
- Cc. the good is considered a luxury good.
- Dd. there are fewer available substitutes.
6Which of the following describes a situation in which demand must be inelastic?
Select one:- Aa. Total revenue decreases by 10 percent when the price of jeans rises by 10 percent.
- Bb. Total revenue increases by more than 10 percent when the price of jeans rises by 10 percent.
- Cc. Total revenue decreases by less than 10 percent when the price of jeans rises by 10 percent.
- Dd. Total revenue decreases by more than $10 when the price of jeans rises by $10.
- Ee. Total revenue decreases by $10 when the price of jeans rises by $10.
7Figure 7-3 depicts a demand curve with a price elasticity that is
Select one:
- Aa. unitary, implying that a percent change in price leads to an equal percent change in quantity demanded.
- Bb. relatively inelastic, implying that a percent increase in price results in a smaller percent reduction in sales.
- Cc. perfectly inelastic, implying that the same amount will be purchased regardless of the price of the good.
- Dd. perfectly elastic, implying that consumers will purchase as much as can be supplied at the market price.
8Why do economists use the concept of elasticity in addition to measurement of the slope of the demand curve?
Select one:- Aa. These terms are interchangeable, but elasticity has the more professional sound.
- Bb. Elasticities are independent of the units of measure.
- Cc. The concept of elasticity can be used in other areas of economics, whereas the slope of the demand curve is only useful in demand analysis.
- Dd. Mathematical equations are favored over graphical analysis.
9You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles,
Select one:- Aa. yours would be zero and your roommate's would approach infinity.
- Bb. yours would be positive and your roommate's would be negative.
- Cc. yours would approach infinity and your roommate's would be zero.
- Dd. yours would be negative and your roommate's would be positive.
10A successful advertising campaign would likely
Select one:- Aa. increase price elasticity of demand by stressing the uniqueness of the product.
- Bb. not alter the demand curve
- Cc. generally make the demand curve shift inward.
- Dd. reduce price elasticity of demand by stressing the uniqueness of the product.
- Ee. reduce price elasticity of demand by informing consumers of the availability of substitutes.
11If the quantity of oranges purchased decreases by 30 percent as the result of a 15 percent increase in the price of oranges, the price elasticity of demand for oranges is
Select one:- Aa. -0.50.
- Bb. -2.
- Cc. -1.25.
- Dd. -0.25.
12The price elasticity of demand for a commodity is determined primarily by the
Select one:- Aa. availability of complementary goods.
- Bb. size of the consumer surplus.
- Cc. attractiveness of the substitutes for the good.
- Dd. incomes of consumers.
13A good is classified as inferior if
Select one:- Aa. consumers buy more when income rises.
- Bb. consumers buy less when the price falls.
- Cc. consumers buy less when the price rises.
- Dd. consumers buy less when income rises.
14Tele-Com, Inc., a large cable TV company, tested the effect of a price reduction for the Disney Channel. It lowered prices from $10.75 to $7.95 and found that the number of customers more than doubled. This means the
Select one:- Aa. demand curve for the Disney Channel shifted to the right.
- Bb. demand for the Disney Channel is inelastic in this price range.
- Cc. supply curve of the Disney Channel shifted to the left.
- Dd. demand for the Disney Channel is elastic in this price range.
15If the demand for cigarettes is highly inelastic, this indicates that
Select one:- Aa. the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.
- Bb. higher cigarette prices will increase the demand for cigarettes.
- Cc. the price elasticity coefficient of cigarettes exceeds 1.
- Dd. the price elasticity coefficient of cigarettes equals 1.
16All things equal, the price elasticity of supply
Select one:- Aa. will be greater in the short run than in the long run.
- Bb. is the same for the short run and the long run.
- Cc. will be greater in the long run than in the short run.
- Dd. approaches zero in the long run.
17A local Krispy Kreme doughnut shop reduced its prices by 10 percent, and as a result, the quantity of doughnuts sold increased by 25 percent. Over this range, the absolute value of the price elasticity of demand was
Select one:- Aa. 2.
- Bb. 0.4.
- Cc. 1.
- Dd. 2.5
18Which of the following describes a situation in which demand must be elastic?
Select one:- Aa. A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded.
- Bb. Total revenue decreases when the price of pens rises.
- Cc. The price of pens rises by 10 cents, and quantity of pens demanded falls by 50.
- Dd. The price of pens rises by 10 cents, and total revenue rises.
- Ee. Total revenue does not change when the price of pens rises.
19If Sarah's income rises by 20 percent, and, as a result, she purchases 40 percent more designer clothing, her income elasticity for designer clothing is
Select one:- Aa. 1.0.
- Bb. Not enough information is given to answer this question.
- Cc. 2.0.
- Dd. 0.5.
20Refer to Figure 7-14. Which supply curve represents perfectly inelastic supply?
Select one:
- Aa. It is impossible to tell without more information.
- Bb. S2
- Cc. S3
- Dd. S1
21A perfectly inelastic demand curve indicates that
Select one:- Aa. the percent change in price is less than the percent change in quantity demanded.
- Bb. price has no effect on the quantity demanded
- Cc. a producer can sell as many units as desired at the market price but no units above the market price.
- Dd. for a given percent change in price, the quantity demanded rises by the same percentage.
22A 20 percent increase in the price of sugar reduces sugar consumption by about 10 percent. Such a price increase causes households to
Select one:- Aa. consume more goods like coffee and tea, which are sugar complements.
- Bb. spend the same amount on sugar as before.
- Cc. spend less on sugar.
- Dd. spend more on sugar.
23Refer to Figure 7-11. As price falls from PA to PB, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?
Select one:
- Aa. D3
- Bb. D2
- Cc. D1
- Dd. All of the above are equally elastic.
24Coach Ballford: "To increase our revenue from football games, we need to lower ticket prices." University President Smith: "Coach, that would be counterproductive; a reduction in ticket prices would reduce our revenue, not increase it." Which of the following best explains this disagreement?
Select one:- Aa. Although both the coach and the president believe demand is of unitary elasticity, they disagree about how much attendance will rise.
- Bb. The coach thinks that demand is elastic, whereas the university president thinks that demand is inelastic.
- Cc. The coach believes that lower ticket prices will increase attendance, but the university president must not believe attendance will increase when prices are lowered.
- Dd. The coach thinks that demand is inelastic, whereas the university president thinks that demand is elastic.
25If the price of apples increases, total expenditures on apples will decline if
Select one:- Aa. there are few good substitutes for apples.
- Bb. the quantity of apples purchased is unresponsive to changes in price.
- Cc. the demand for apples is inelastic.
- Dd. the demand for apples is elastic.
26Sarah recently got a 10 percent raise. She now purchases 30 percent more in groceries on a weekly basis. Sarah's income elasticity for groceries is
Select one:- Aa. 0.33.
- Bb. 0.5.
- Cc. 1.
- Dd. 3.
27If the price elasticity of demand for grapes was 2.5,
Select one:- Aa. the income elasticity for grapes must also be 2.5.
- Bb. consumer purchases are less sensitive to a change in the price of grapes than to a change in the price of bananas, which have a price elasticity of 1.6.
- Cc. the demand for grapes would be considered inelastic.
- Dd. an increase in the price of grapes would decrease total consumer spending on grapes.
28The demand for a product is likely to be more elastic when
Select one:- Aa. the share of the total budget spent on the product is small.
- Bb. more complementary products are available.
- Cc. more good substitutes for the product are available.
- Dd. the consumer has a short time to adjust to price changes.
29When the price elasticity of demand is large, then
Select one:- Aa. the percentage change in price divided by the percentage change in quantity demanded is large.
- Bb. the responsiveness of quantity demanded to a change in price is small.
- Cc. the product is more likely to be a necessity.
- Dd. the responsiveness of quantity demanded to a change in price is large.
30Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the absolute value of the price elasticity of demand for Starbucks coffee is
Select one:- Aa. 0.80.
- Bb. 2.50.
- Cc. 1.25.
- Dd. 4.
- Ee. 0.40.
31If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.
Select one:- Aa. 0.5; inelastic
- Bb. 0.5; elastic
- Cc. 2; inelastic
- Dd. 2; elastic
32If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be
Select one:- Aa. of unitary elasticity.
- Bb. relatively inelastic.
- Cc. perfectly elastic.
- Dd. relatively elastic.
33Refer to Figure 7-13. If price increases from $10 to $15, total revenue will
Select one:
- Aa. decrease by $20, so demand must be elastic in this price range.
- Bb. increase by $20, so demand must be inelastic in this price range.
- Cc. increase by $5, so demand must be inelastic in this price range.
- Dd. decrease by $10, so demand must be elastic in this price range.
34In which of the following cases will the total spending on a good decrease?
Select one:- Aa. Demand is elastic, and price decreases.
- Bb. Demand is elastic, and price increases.
- Cc. Demand is of unit elasticity, and price decreases.
- Dd. Demand is inelastic, and price increases.
35The price of product X increases from $35 to $40, and as a result, the quantity demanded decreases from 250 to 200. Over this price range,
Select one:- Aa. demand is elastic.
- Bb. demand is of unitary elasticity.
- Cc. demand is inelastic.
- Dd. there is insufficient information to determine the price elasticity of demand.
36In the price range between $3 and $4, the price elasticity of the demand curve depicted in Figure 7-6 is
Select one:
- Aa. highly elastic.
- Bb. approximately equal to -3.
- Cc. approximately equal to -0.33.
- Dd. of unitary elasticity.
37If a 30 percent decline in the price of gasoline leads to a 15 percent rise in expenditures on gasoline, the price elasticity of demand for gasoline in this range must be
Select one:- Aa. 2.
- Bb. inelastic.
- Cc. elastic.
- Dd. 0.5.
38For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
Select one:- Aa. The relevant time horizon is short.
- Bb. There are many close substitutes for this good.
- Cc. The good is a necessity.
- Dd. The market for the good is broadly defined.
39Other things constant, the price elasticity of demand for a product will tend to be smaller (more inelastic) if
Select one:- Aa. people spend a large share of their income on the product.
- Bb. there are many good substitutes for the product.
- Cc. the population in the market area is large.
- Dd. people spend an insignificant share of their income on the product.
40Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is
Select one:- Aa. 0.4.
- Bb. 5.
- Cc. 0.5.
- Dd. inelastic.
- Ee. 2.5.
41If a Krispy Kreme doughnut shop near campus increases its prices by 5 percent, but revenues from its sales are unchanged, the price elasticity of demand for the services offered by the doughnut shop must be
Select one:- Aa. equal to 0.5.
- Bb. elastic.
- Cc. of unitary elasticity.
- Dd. inelastic.
42A good that takes up a very large percentage of the consumer's budget will tend to have
Select one:- Aa. an upward-sloping demand curve.
- Bb. very many substitutes.
- Cc. an inelastic demand.
- Dd. a perfectly elastic demand.
- Ee. an elastic demand.
43Suppose the state of New York imposes a one dollar per pack tax on cigarettes, which increases their price by 30 percent, and as a result, the quantity sold declines by 20 percent. The price elasticity of demand for cigarettes is equal to
Select one:- Aa. -0.20.
- Bb. -1.50.
- Cc. -0.67.
- Dd. -3.00.
44Making drugs, such as cocaine, illegal results in a higher price than would be present if the drugs were legal. All else constant, the higher price results in drug users spending
Select one:- Aa. more on drugs if the demand for drugs is inelastic.
- Bb. less on drugs if the demand for drugs is inelastic.
- Cc. more on drugs if the demand for drugs is elastic.
- Dd. more on drugs if the demand for drugs is unitary elastic.
45When the price of designer jeans goes from $85 to $60, the quantity demanded increases from 100,000 to 120,000. Over this price range, the
Select one:- Aa. demand for the jeans is inelastic.
- Bb. demand for the jeans is of unitary elasticity.
- Cc. demand for the jeans is elastic.
- Dd. arc elasticity of demand for the jeans is -4.
46Assuming that bus travel is an inferior good, an increase in consumer income, other things being equal, will cause
Select one:- Aa. a rightward shift in the demand curve for bus travel.
- Bb. a downward movement along the demand curve for bus travel.
- Cc. a leftward shift in the demand curve for bus travel.
- Dd. an upward movement along the demand curve for bus travel.
47Which demand curve in Figure 7-16 is perfectly elastic?
Select one:
- Aa. the curve in graph a
- Bb. the curve in graph b
- Cc. the curve in graph e
- Dd. the curve in graph c
- Ee. the curve in graph d
48The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as
Select one:- Aa. normal goods.
- Bb. inelastic goods.
- Cc. elastic goods
- Dd. inferior goods.
49If demand price elasticity measures 2, this implies that consumers would
Select one:- Aa. buy twice as much of the product if the price drops 10 percent.
- Bb. buy 2 percent more of the product in response to a 1 percent drop in price.
- Cc. require at least a $2 increase in price before showing any response to the price increase.
- Dd. require a 2 percent drop in price to increase their purchases by 1 percent.
- Ee. buy twice as much of the product if the price drops 1 percent.
50For a price increase from $10 to $11, the price elasticity of the demand curve depicted in Figure 7-8 is
Select one:
- Aa. approximately equal to -2.
- Bb. relatively inelastic.
- Cc. approximately equal to -1.
- Dd. highly inelastic.
51A recent increase in the supply of oranges caused the price to drop from $5 to $3 per bushel, and quantity demanded to rise from 10,000 bushels to 25,000 bushels. This indicates that the price elasticity of demand for oranges in this price range is
Select one:- Aa. -1.
- Bb. -0.58.
- Cc. -1.71.
- Dd. -0.33.
52As people have more time to adjust to a price change,
Select one:- Aa. elasticity of both demand and supply tends toward unity.
- Bb. both supply and demand become less elastic.
- Cc. demand becomes less elastic, and supply becomes more elastic.
- Dd. both supply and demand become more elastic.
- Ee. demand becomes more elastic, and supply becomes less elastic.
53If the price of apples rises from $.50 to $1.50 and quantity demanded falls from 1,000 to 900, we can conclude that the price elasticity for apples is
Select one:- Aa. unitary.
- Bb. inelastic.
- Cc. -20.
- Dd. elastic.
54If the demand for a good is elastic, then total revenue
Select one:- Aa. remains constant as quantity demanded increases.
- Bb. increases as price decreases.
- Cc. increases as price increases.
- Dd. decreases as price decreases.
- Ee. decreases as quantity demanded increases.
55Goods that consumers regard as luxuries generally have
Select one:- Aa. an income elasticity greater than 1.
- Bb. an income elasticity less than 1.
- Cc. a negative income elasticity.
- Dd. an income elasticity equal to 1.
56a. unitary, implying that a percent change in price leads to an equal percent change in quantity demanded.
- Ab. equal to zero.
- Bc. both b and c.
- Ca. unitary, implying that a percent change in price leads to an equal percent change in quantity demanded.
- Dd. perfectly inelastic, implying that the same amount will be purchased regardless of the price of the good.
57"Because of the unseasonably cold weather, Florida orange growers expect (1) fewer bushels of oranges to be harvested, (2) a higher market price for oranges, and (3) larger total revenues from this year's crop." This statement would most likely be correct if the
Select one:- Aa. demand for Florida oranges was unitary elastic.
- Bb. income elasticity of Florida oranges was negative.
- Cc. demand for Florida oranges was inelastic.
- Dd. demand for Florida oranges was elastic.
58Along the inelastic portion of a demand curve,
Select one:- Aa. the percentage change in price will be less than the percentage change in quantity demanded.
- Bb. the percentage change in price will be more than the percentage change in quantity demanded.
- Cc. the change in price will always be more than the change in quantity demanded.
- Dd. the change in price will always be less than the change in quantity demanded.
59If the price of apples increases, total expenditures on apples will decline if
Select one:- Aa. the supply of apples is inelastic.
- Bb. apples are a normal good.
- Cc. there are few substitutes for apples.
- Dd. the demand for apples is elastic.
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- Microeconomics (Test 2) Quiz on PE Chapter 20b: Elasticity, created by Debbie Morgan on 03/04/2019.
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