Question 1

When the income elasticity of demand for a good is negative, the good is called a luxury good.

Accepted Answer

A) True 
 B)False

Question 2

If a 10 percent increase in price leads to a 20 percent increase in quantity supplied, then the elasticity of supply is 0.5.

Accepted Answer

A) True 
 B)False

Question 3

Ceteris paribus, if a 20 percent increase in the price of shoes leads to a 10 percent increase in the quantity supplied of shoes, then the price elasticity of supply is equal to _____.

Accepted Answer

A)  2
B)  20
C)  10
D)  0.5
E)  0.2

Question 4

Supply curves applicable to shorter periods of time tend to:

Accepted Answer

A)  be represented by horizontal lines parallel to the quantity axis.
B)  be perfectly elastic.
C)  be more inelastic than supply curves that apply to longer periods of time.
D)  be more elastic than supply curves that apply to longer periods of time.
E)  have a price elasticity of supply that is approximately equal to 1.

Question 5

If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____.

Accepted Answer

A)  a luxury good
B)  a normal good
C)  price sensitive
D)  not price sensitive
E)  an inferior good

Question 6

If consumer income increases, then the demand shifts right for an inferior good.

Accepted Answer

A) True 
 B)False

Question 7

The coefficient of the price elasticity of demand is always negative.

Accepted Answer

A) True 
 B)False

Question 8

Acme Tools manufactures anvils, a forging tool.When the price of anvils was increased from $7 to $13, Acme Tools was willing and able to increase production from 1 to 4 units per day.Using the midpoint formula, what is Acme's price elasticity of supply for anvils?

Accepted Answer

A)  2
B)  1
C)  0.5
D)  4
E)  3.5

Question 9

Which of the following items is likely to have the highest positive income elasticity of demand?

Accepted Answer

A)  Bread
B)  Jewelry
C)  Soap
D)  A plumber's service
E)  Table salt

Question 10

Which of the following is an example of inelastic demand?

Accepted Answer

A)  A 10 percent increase in the price of milk leads to a 20 percent decrease in the quantity demanded of milk.
B)  A 10 percent increase in the price of milk leads to a 10 percent decrease in the quantity demanded of milk.
C)  A 10 percent increase in the price of milk leads to a 5 percent decrease in the quantity demanded of milk.
D)  A 10 percent increase in the price of milk leads to no change in the quantity demanded of milk.
E)  A 10 percent increase in the price of milk leads to a 5 percent increase in the quantity demanded of milk.

Question 11

Which of the following would most likely be highly price-elastic?

Accepted Answer

A)  The demand for milk by a household
B)  The demand for insulin by a diabetes patient
C)  The demand for water
D)  The demand for new houses
E)  The demand for coal over a period of one month

Question 12

If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the elasticity of demand for pizza:

Accepted Answer

A)  is equal to 0.5 and demand is inelastic.
B)  is equal to 0.5 and demand is elastic.
C)  is equal to 2 and is elastic.
D)  is equal to 2 and is inelastic.
E)  cannot be determined from the information provided.

Question 13

If a price increase from $20 to $40 causes quantity demanded to decrease from 100 units to 50 units, one can conclude that demand for the product is _____.

Accepted Answer

A)  inelastic
B)  elastic
C)  perfectly inelastic
D)  infinitely elastic
E)  unit-elastic

Question 14

Price elasticity of demand is a measure of the:

Accepted Answer

A)  extent of competition in the market.
B)  change in the purchase of a product relative to a change in income.
C)  change in the quantity demanded due to factors other than price.
D)  degree of consumer responsiveness to changes in price.
E)  percentage change in the prices of two related products.

Question 15

Price elasticity of demand measures the responsiveness of quantity demanded in a market to a change in price.

Accepted Answer

A) True 
 B)False

Question 16

If demand is unit-elastic, a 25 percent increase in price will result in:

Accepted Answer

A)  a 25 percent change in total revenue.
B)  no change in quantity demanded.
C)  a 1 percent decrease in quantity demanded.
D)  a 25 percent decrease in quantity demanded.
E)  a 100 percent change in quantity demanded.

Question 17

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income. Table 19.2
 Refer to Table 19.2.What is the income elasticity of demand for automobiles?

Accepted Answer

A)  0.5
B)  0.35
C)  2
D)  0.2
E)  Zero

Question 18

When the price of hot dogs at the supermarket increases, the quantity demanded of hot dog buns declines.This situation describes:

Accepted Answer

A)  the income elasticity of demand for hot dogs.
B)  the income elasticity of demand for hot dog buns.
C)  the price elasticity of supply for hot dogs.
D)  the cross-price elasticity of demand for hot dogs and hot dog buns.
E)  the cross-price elasticity of supply for hot dogs and hot dog buns.

Question 19

Which of the following statements correctly describe the elasticities of demand for gasoline and automobiles?

Accepted Answer

A)  The income elasticity of demand for gasoline and automobiles is negative.
B)  The price elasticity of demand for gasoline is elastic and the cross-price elasticity between gasoline and SUVs is positive.
C)  The price elasticity of demand for gasoline is inelastic and the cross-price elasticity between gasoline and SUVs is negative.
D)  The price elasticity of demand for gasoline is inelastic and the income elasticity between gasoline and SUVs is positive.
E)  The price elasticity of demand for gasoline is elastic and the income elasticity between gasoline and SUVs is negative.

Question 20

The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income. Table 19.2
 Based on the information given in Table 19.2, coffee would be considered:

Accepted Answer

A)  an inferior good.
B)  a necessity.
C)  a normal good.
D)  a negative good.
E)  a luxury good.

Exam 33: Elasticity: Demand and Supply

If a 10 percent increase in price leads to a 20 percent increase in quantity supplied, then the elasticity of supply is 0.5.

Correct AnswerverifiedShow Answer

Acme Tools manufactures anvils, a forging tool.When the price of anvils was increased from $7 to $13, Acme Tools was willing and able to increase production from 1 to 4 units per day.Using the midpoint formula, what is Acme's price elasticity of supply for anvils?

Correct AnswerverifiedShow Answer

When the price of hot dogs at the supermarket increases, the quantity demanded of hot dog buns declines.This situation describes:

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If a price increase from $20 to $40 causes quantity demanded to decrease from 100 units to 50 units, one can conclude that demand for the product is _____.

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The coefficient of the price elasticity of demand is always negative.

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Which of the following statements correctly describe the elasticities of demand for gasoline and automobiles?

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Which of the following items is likely to have the highest positive income elasticity of demand?

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If consumer income increases, then the demand shifts right for an inferior good.

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Ceteris paribus, if a 20 percent increase in the price of shoes leads to a 10 percent increase in the quantity supplied of shoes, then the price elasticity of supply is equal to _____.

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If the demand for beans tends to decline as incomes rise, everything else held constant, beans are _____.

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Price elasticity of demand measures the responsiveness of quantity demanded in a market to a change in price.

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Price elasticity of demand is a measure of the:

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If a 50 percent increase in the price of pizza results in a 25 percent decrease in the quantity demanded of pizza, then the elasticity of demand for pizza:

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Which of the following would most likely be highly price-elastic?

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If demand is unit-elastic, a 25 percent increase in price will result in:

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The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income. Table 19.2 Based on the information given in Table 19.2, coffee would be considered:

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When the income elasticity of demand for a good is negative, the good is called a luxury good.

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Supply curves applicable to shorter periods of time tend to:

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The table below shows the quantities of automobiles, margarine, and coffee purchased by Ted at different levels of income. Table 19.2 Refer to Table 19.2.What is the income elasticity of demand for automobiles?

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Which of the following is an example of inelastic demand?

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