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Exam 5: Price Elasticity of Demand and Supply

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Question 1

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The longer the time period under study,

A) the more elastic is the price elasticity of demand.
B) the less sensitive consumers will be to price changes.
C) the more likely any given price cut will result in a smaller reaction by the consumer.
D) the more inelastic is the price elasticity of demand.

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Question 2

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If an excise tax is placed on a product that has a perfectly inelastic demand, then:

A) the entire tax will be paid by the consumer.
B) the entire tax will be paid by the producer.
C) the consumer and producer will each pay a share of the tax.
D) the incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply.

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Question 3

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In the country of Bora Bora, consumers buy large quantities of alcohol, tobacco, and coffee. Last year, the prices of these goods each increased by 10 percent. The quantities demanded for these goods fell by 10, 3, and 8 percent, respectively. If the government is thinking about imposing a unit tax on one of these goods, which good should they choose to tax to raise the most tax revenue, and why?

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then demand is:

If demand for a good is elastic, then the price elasticity will be:

If Stimpson University increases tuition in order to increase its revenue, it will:

In the long run, price elasticities of demand are usually

The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

A local doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:

A lower price elasticity of demand coefficient occurs when:

Exhibit 5-2 Price and quantity demanded data $\begin{array} { | c | c | } \hline \text { Price } & \text { Quantity Demanded } \\\hline 5 & 20 \\4 & 25 \\3 & 30 \\2 & 35 \\1 & 40 \\\hline\end{array}$ Using Exhibit 5-2, what is the price elasticity of demand when the price falls from five dollars to four?

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:

If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:

If a good has a price elasticity of demand coefficient less than one, then:

For which of the following goods are consumers likely to have the most elastic demand?

The elastic portion of the downward-sloping straight-line demand curve lies:

As one moves down a straight-line, down-sloping demand curve, price elasticity will:

If the value of the price elasticity of demand is 0.2, this means that:

The demand for gasoline will be most elastic

If the demand for cigarettes is highly inelastic, this indicates that: