Question 1

The price elasticity of supply measures

Accepted Answer

A)   the responsiveness of quantity supplied to changes in input prices.
B)   the responsiveness of quantity supplied to changes in technology.
C)   the responsiveness of quantity supplied to changes in price.
D)   a supplier's ability to produce a good in the face of scarcity.

Question 2

A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand.

Accepted Answer

A)   downward sloping; vertical
B)   horizontal; downward sloping
C)   vertical; downward sloping
D)   upward sloping; horizontal

Question 3

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

Accepted Answer

A)   -0.66
B)   0.5
C)   1.5
D)   2

Question 4

If a supply curve is a horizontal line, supply is said to be

Accepted Answer

A)   perfectly inelastic.
B)   unit-elastic.
C)   inelastic.
D)   perfectly elastic.

Question 5

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 6

For each pair of items below, determine which product would have the higher price elasticity of demand (in absolute value).
a. Blood pressure medicine for someone who has high blood pressure and the purchase of Clairol hair coloring product.
b. A new Ford Fusion or a tank of gas for your current car.
c. A Seiko watch or watches in general.

Accepted Answer

a. The demand for the hair product is mo...

Question 7

When there are few substitutes available for a good, demand tends to be relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 8

Necessities tend to have more inelastic demands than luxuries.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Accepted Answer

A)   A wide variety of substitutes are available for the good.
B)   The time period under consideration is short.
C)   The good is a necessity.
D)   The expenditure on the good is small relative to one's budget.

Question 10

Assume that you own a small boutique hotel. In an attempt to raise revenue you reduce your rates by 20 percent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

Accepted Answer

A)   Boutique hotel rooms are inferior goods.
B)   Demand is inelastic.
C)   The demand curve for your hotel rooms is vertical.
D)   Demand is elastic.

Question 11

A newspaper story on the effect of higher milk prices on the market for ice cream contained the following: "As a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . . . And ice cream consumption is down 3 percent."
Source: John Curran, "Ice Cream, They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press, July 23, 2001.
Based on the information given, what is the price elasticity of demand for ice cream?

Accepted Answer

A)   0.75 (in absolute value) 
B)   1.33 (in absolute value) 
C)   12%
D)   We do not have enough information to calculate the elasticity.

Question 12

According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates. "We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy," says Jim Schultenover, a vice president for Ritz-Carlton. Source: Jesse Drucker, "In Times of Belt-Tightening, We Seek Reasonable Rates," Wall Street Journal, April 6, 2001.
Based on the information above, the demand for hotel rooms is

Accepted Answer

A)   elastic.
B)   unit-elastic.
C)   inelastic.
D)   perfectly elastic.

Question 13

If the absolute value of the price elasticity of demand for aspirin equals 0.8, then

Accepted Answer

A)   aspirin is a normal good.
B)   the demand for aspirin is inelastic.
C)   aspirin has few substitutes.
D)   the demand for aspirin is elastic.

Question 14

Figure 6-1 
-Refer to Figure 6-1. The demand curve on which elasticity changes at every point is given in

Accepted Answer

A)   Panel A.
B)   Panel B.
C)   Panel C.
D)   none of the above graphs.

Question 15

Which of the following statements is true?

Accepted Answer

A)   The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic.
B)   The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic.
C)   The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly.
D)   Over short periods of time, increases in the demand for oil are greater than increases in the supply of oil. Over the long run, increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.

Exam 6: Elasticity: the Responsiveness of Demand and Supply

When there are few substitutes available for a good, demand tends to be relatively inelastic.

Correct Answer
verified

A demand curve which is represents perfectly inelastic demand, and a demand curve which is represents inelastic demand.

Correct Answer
verified

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

Correct Answer
verified

If a supply curve is a horizontal line, supply is said to be

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Assume that you own a small boutique hotel. In an attempt to raise revenue you reduce your rates by 20 percent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

Correct Answer
verified

The price elasticity of supply measures

Correct Answer
verified

If the absolute value of the price elasticity of demand for aspirin equals 0.8, then

Correct Answer
verified

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Correct Answer
verified

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Necessities tend to have more inelastic demands than luxuries.

Correct Answer
verified

Correct Answer
verified
a. The demand for the hair product is mo...
View Answer

Figure 6-1 -Refer to Figure 6-1. The demand curve on which elasticity changes at every point is given in

Correct Answer
verified

Exam 6: Elasticity: the Responsiveness of Demand and Supply

When there are few substitutes available for a good, demand tends to be relatively inelastic.

Correct AnswerverifiedShow Answer

A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand.

Correct AnswerverifiedShow Answer

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

Correct AnswerverifiedShow Answer

If a supply curve is a horizontal line, supply is said to be

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Assume that you own a small boutique hotel. In an attempt to raise revenue you reduce your rates by 20 percent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms?

Correct AnswerverifiedShow Answer

The price elasticity of supply measures

Correct AnswerverifiedShow Answer

If the absolute value of the price elasticity of demand for aspirin equals 0.8, then

Correct AnswerverifiedShow Answer

Which of the following would result in a higher absolute value of the price elasticity of demand for a product?

Correct AnswerverifiedShow Answer

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Necessities tend to have more inelastic demands than luxuries.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The demand for the hair product is mo...View AnswerShow Answer

Figure 6-1 -Refer to Figure 6-1. The demand curve on which elasticity changes at every point is given in

Correct AnswerverifiedShow Answer

Correct Answer
verified

A demand curve which is represents perfectly inelastic demand, and a demand curve which is represents inelastic demand.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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a. The demand for the hair product is mo...
View Answer

Correct Answer
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