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Suppose that the demand for men's ties is price inelastic for the range of prices between $10 and $12. If Joe raises the price of the ties in his shop from $10 to $12, what will happen to Joe's total revenues?


A) Total revenues will decrease.
B) Total revenues will increase.
C) Total revenues will not change.
D) Total revenues will have no relationship to the quantity of ties demanded.

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Robert must always have cream in his coffee. For Robert, the cross price elasticity of demand for coffee and cream is


A) equal to 0.
B) negative.
C) positive.
D) impossible to determine without more information.

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Moving down a straight-line demand curve, the absolute price elasticity of demand


A) increases.
B) is constant.
C) decreases.
D) varies in uncertain ways.

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-Refer to the above table. Suppose the price of Y rises from $18 to $20. What is the cross price elasticity of demand between Y and Z? A) -1.7273 B) -1.1176 C) -0.8947 D) +1.7273 -Refer to the above table. Suppose the price of Y rises from $18 to $20. What is the cross price elasticity of demand between Y and Z?


A) -1.7273
B) -1.1176
C) -0.8947
D) +1.7273

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A demand relationship in which the quantity demanded changes exactly in proportion to the change in price is


A) elastic.
B) unit-elastic.
C) inelastic.
D) consistent with zero elasticity.

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-Refer to the above figure. Demand will be unit-elastic when quantity is between A) 0 and A. B) 0 and B. C) A and B. D) B and C. -Refer to the above figure. Demand will be unit-elastic when quantity is between


A) 0 and A.
B) 0 and B.
C) A and B.
D) B and C.

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-Use the above figure. When the price increases from $2 to $10, total revenue A) increases from areas A + B to areas B + C and demand is inelastic. B) increases from areas B + C to areas A + B and demand is inelastic. C) increases from areas B + C to areas A + D and demand is elastic. D) increases from areas C + D to areas B + A and demand is elastic. -Use the above figure. When the price increases from $2 to $10, total revenue


A) increases from areas A + B to areas B + C and demand is inelastic.
B) increases from areas B + C to areas A + B and demand is inelastic.
C) increases from areas B + C to areas A + D and demand is elastic.
D) increases from areas C + D to areas B + A and demand is elastic.

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A perfectly elastic supply curve is


A) a straight line that crosses the horizontal axis.
B) a straight line coming out of the origin.
C) a horizontal straight line.
D) a vertical straight line.

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The most important determinant of price elasticity of supply is


A) the number of close substitutes there are for the good.
B) the time period firms have to adjust to the new price.
C) the price of the good.
D) the importance of the good in the budgets of consumers.

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When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary's income elasticity of demand for concert tickets equals ________ and the tickets are a(n) ________ good for Mary.


A) -1.36; normal
B) -0.21; inferior
C) +0.21; complementary
D) +0.73; normal

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The demand for diet soft drinks (as a group) is relatively inelastic because


A) there are many of them on the market.
B) there are few substitutes.
C) the purchase of a soft drink represents a large portion of a person's budget.
D) none of the above.

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-Consider the above figure. Which of the following statements is correct? A) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D<sub>1</sub> is equal to the price elasticity of demand associated with demand curve D<sub>2</sub>. B) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D<sub>1</sub> is less than the price elasticity of demand associated with demand curve D<sub>2</sub>. C) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D<sub>1</sub> is greater than the price elasticity of demand associated with demand curve D<sub>2</sub>. D) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand is infinite. -Consider the above figure. Which of the following statements is correct?


A) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is equal to the price elasticity of demand associated with demand curve D2.
B) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is less than the price elasticity of demand associated with demand curve D2.
C) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand associated with demand curve D1 is greater than the price elasticity of demand associated with demand curve D2.
D) In any range of prices encompassing the crossing point of the two demand curves, the price elasticity of demand is infinite.

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If goods are completely unrelated, their cross price elasticity will


A) be greater than one.
B) be less than one.
C) be equal to zero.
D) be negative.

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-Refer to the above table. At a price below $5, the absolute price elasticity of demand is A) 1.0. B) below 1. C) between 0.8 and 1.0. D) greater than 1. -Refer to the above table. At a price below $5, the absolute price elasticity of demand is


A) 1.0.
B) below 1.
C) between 0.8 and 1.0.
D) greater than 1.

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One of the most important determinants of a good's price elasticity of demand is


A) the profits of suppliers.
B) the numbers of buyers in the market.
C) the ease with which consumers can substitute other goods for that product.
D) the cost of producing the good.

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Demand is said to be inelastic when


A) a given percentage change in price will result in a less than proportionate percentage change in the quantity demanded.
B) demand exhibits zero responsiveness to price changes.
C) small price increases will lead to zero quantity demanded.
D) a given percentage change in price will result in a greater than proportionate percentage change in the quantity demanded.

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"The price elasticity of demand for a particular good is smaller in the long run because consumers adapt to higher prices over time." Do you agree or disagree? Explain.

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Disagree. Price elasticity of demand is ...

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The price elasticity of demand is


A) always positive, so there is no reason to consider the absolute value of the price elasticity of demand.
B) always negative, but by convention, economists typically express the price elasticity of demand as an absolute value.
C) always equal to -1, which by convention economists typically express as an absolute value, or 1.
D) always equal to zero, so there is no reason to consider the absolute value of the price elasticity of demand.

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-Refer to the above figure. Demand will be inelastic when quantity is between A) 0 and A. B) 0 and B. C) A and B. D) B and C. -Refer to the above figure. Demand will be inelastic when quantity is between


A) 0 and A.
B) 0 and B.
C) A and B.
D) B and C.

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A supply curve that is parallel to the quantity axis is


A) perfectly elastic.
B) perfectly inelastic.
C) relatively inelastic.
D) unitary elastic.

Correct Answer

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