Question 1

An inferior good or service is any good or service for which:

Accepted Answer

A)  an increase in price causes an increase in the quantity demanded.
B)  a decrease in price causes an increase in demand.
C)  an increase in price causes a decrease in the quantity demanded.
D)  an increase in the amount consumed causes a decrease in marginal utility.
E)  an increase in income causes a decrease in demand.F) C) and E)
G) C) and D)

Question 2

What would be the consequences of a 10 percent decrease in the price of a good for which price elasticity of demand is 5?

Accepted Answer

A)  A 50 percent decrease in quantity demanded
B)  A 5 percent increase in quantity demanded
C)  A 50 percent increase in quantity demanded
D)  A decrease in quantity demanded by 0.2
E)  An increase in quantity demanded by 0.2F) A) and B)
G) C) and E)

Question 3

Which of the following goods is likely to have an income elasticity of demand that is less than zero?

Accepted Answer

A)  A luxury yacht
B)  A beach house
C)  A state-of-the-art cellular phone
D)  A box of generic macaroni and cheese dinner
E)  A dinner at a French restaurantF) B) and C)
G) C) and D)

Question 4

Other things remaining unchanged, the longer the time period under consideration the greater will be the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 5

If a consumer is spending a small portion of his or her income on a good, then the demand for the good is likely to be inelastic.

Accepted Answer

A) True 
 B)False

Question 6

As the price is raised along a straight-line demand curve, the demand curve becomes more elastic.

Accepted Answer

A) True 
 B)False

Question 7

For a given product, income elasticity of demand relates the percentage change in:

Accepted Answer

A)  quantity demanded to the percentage change in income.
B)  quantity demanded to the absolute change in income.
C)  income to the percentage change in price.
D)  price to the absolute change in quantity demanded.
E)  income to the percentage change in quantity available for sale.F) B) and C)
G) A) and B)

Question 8

If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to _____ by _____ percent.

Accepted Answer

A)  increase;0.25
B)  decrease;0.25
C)  increase;4
D)  decrease;25
E)  decrease;4F) A) and B)
G) A) and C)

Question 9

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, margarine is:

Accepted Answer

A)  an inferior good.
B)  a necessity.
C)  a normal good.
D)  a complementary good.
E)  a luxury good.F) C) and D)
G) A) and B)

Question 10

Price elasticity of demand is more likely to be greater than one if:

Accepted Answer

A)  consumers have a long time to adjust to a price change.
B)  the product is a necessity.
C)  demand is inelastic.
D)  there are few close substitutes for the product.
E)  total revenue declines in response to a price reduction.F) A) and C)
G) A) and E)

Question 11

A horizontal demand curve shows that demand for the good is _____.

Accepted Answer

A)  unit-elastic
B)  relatively inelastic
C)  perfectly inelastic
D)  relatively elastic
E)  perfectly elasticF) C) and E)
G) A) and E)

Question 12

Which of the following situations is represented by a nearly horizontal supply curve?

Accepted Answer

A)  Small price changes lead to small changes in quantity demanded of the good.
B)  Small price changes lead to small changes in quantity supplied of the good.
C)  Producers of the good are not operating efficiently.
D)  Producers of the good are not maximizing profit.
E)  Small changes in the price of the good lead to large changes in the quantity supplied of the good.F) C) and E)
G) A) and E)

Question 13

When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50 total revenue falls.This means that:

Accepted Answer

A)  the demand for movie tickets is highly elastic.
B)  the supply of movie ticket is perfectly elastic.
C)  the supply of movie tickets is elastic.
D)  the demand for movie tickets is inelastic.
E)  the supply of movie tickets is inelastic.F) A) and B)
G) None of the above

Question 14

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)  0.2F) A) and C)
G) C) and D)

Question 15

When income elasticity of demand is a negative number, one can correctly conclude that:

Accepted Answer

A)  the good is a normal good.
B)  the good is an inferior good.
C)  the good is a substitute.
D)  the good is a complement.
E)  total revenue will decrease when the price increases.F) A) and B)
G) D) and E)

Question 16

If a 15 percent reduction in the price of electricity per kilowatt hour has no impact on the total electricity consumption, we can infer that in the short run, the demand for electricity is _____.

Accepted Answer

A)  perfectly inelastic
B)  perfectly elastic
C)  unitary elastic
D)  relatively inelastic
E)  relatively elasticF) B) and E)
G) A) and E)

Question 17

When economists speak of the short run, they are referring to _____.

Accepted Answer

A)  a specific period of time, usually less than one year
B)  a specific period of time, more than one year, but less than two years
C)  a specific period of time just long enough that the quantities of all resources can be varied
D)  a period of time short enough that the quantities of at least one of the resources cannot be varied
E)  a period of time short enough that none of the quantities of the resources can be variedF) A) and E)
G) A) and D)

Question 18

If the price elasticity of supply is 0.75, it would imply that a _____.

Accepted Answer

A)  a 100 percent increase in price would increase the quantity supplied by 75 percent
B)  doubling of the price would increase the quantity supplied by 175 percent
C)  50 percent increase in price would increase the quantity supplied by 25 percent
D)  75 percent increase in price would increase the quantity supplied by 100 percent
E)  120 percent increase in price would increase the quantity supplied by 90 percentF) B) and D)
G) B) and E)

Question 19

The point elasticity is a measure of the sensitivity of consumers to a larger price change - a range from one price to another.

Accepted Answer

A) True 
 B)False

Question 20

Jen considers smoking an inferior good.In other words, for Jen to quit smoking she would require a significant increase in income.

Accepted Answer

A) True 
 B)False

Exam 33: Elasticity: Demand and Supply

An inferior good or service is any good or service for which:

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If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to _____ by _____ percent.

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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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When economists speak of the short run, they are referring to _____.

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Price elasticity of demand is more likely to be greater than one if:

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Jen considers smoking an inferior good.In other words, for Jen to quit smoking she would require a significant increase in income.

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For a given product, income elasticity of demand relates the percentage change in:

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Which of the following situations is represented by a nearly horizontal supply curve?

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When income elasticity of demand is a negative number, one can correctly conclude that:

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If a 15 percent reduction in the price of electricity per kilowatt hour has no impact on the total electricity consumption, we can infer that in the short run, the demand for electricity is _____.

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When the manager of a local movie theater raises the price of movie tickets from $7.50 to $8.50 total revenue falls.This means that:

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A horizontal demand curve shows that demand for the good is _____.

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What would be the consequences of a 10 percent decrease in the price of a good for which price elasticity of demand is 5?

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Which of the following goods is likely to have an income elasticity of demand that is less than zero?

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If a consumer is spending a small portion of his or her income on a good, then the demand for the good is likely to be inelastic.

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If the price elasticity of supply is 0.75, it would imply that a _____.

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Other things remaining unchanged, the longer the time period under consideration the greater will be the price elasticity of demand.

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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, margarine is:

Correct AnswerverifiedShow Answer

As the price is raised along a straight-line demand curve, the demand curve becomes more elastic.

Correct AnswerverifiedShow Answer

The point elasticity is a measure of the sensitivity of consumers to a larger price change - a range from one price to another.

Correct AnswerverifiedShow Answer

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If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to _ by _ percent.

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