Question 1

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 2

Figure 6-1 
-Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

Accepted Answer

A)   Panel A.
B)   Panel B.
C)   Panel C.
D)   Panel D.

Question 3

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Accepted Answer

Price elasticity of demand measures the responsiveness of the quantity of a product demanded to a change in the price of the product.Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price.Demand is inelastic when the percentage change in quantity demanded is less than the percentage change in price.Demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price.

Question 4

Explain the relationship between price elasticity of demand and total revenue.

Accepted Answer

If demand is elastic,the an increase in ...

Question 5

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is

Accepted Answer

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

Question 6

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve?

Accepted Answer

A)   It is inelastic at high prices and elastic at low prices.
B)   It is unit-elastic throughout the demand curve.
C)   It is elastic at high prices and inelastic at low prices.
D)   It is perfectly elastic at very high prices and perfectly inelastic at very low prices. C

Question 7

Price elasticity of demand measures

Accepted Answer

A)   how responsive suppliers are to price changes.
B)   how responsive sales are to changes in the price of a related good.
C)   how responsive quantity demanded is to a change in price.
D)   how responsive sales are to a change in buyers' incomes.

Question 8

Facing stiff competition,Hendrix College,a small liberal arts institution in Conway,Ark.,decided two years ago to bolster its academic offerings,promising students at least three hands-on experiences outside the classroom,including research,internships and service projects.Although it raised tuition and fees by 29 percent,enrollment in the freshman class rose by 37 percent. Source: Jonathan D.Glater and Alan Finder,"In New Twist on Tuition Game,Popularity Rises With the Price," New York Times,December 12,2006
Based on the information above,the demand for Hendrix College education is

Accepted Answer

A)   unit-elastic.
B)   perfectly elastic.
C)   relatively inelastic.
D)   More information is needed to answer the question.

Question 9

According to a study of the U.S.demand for alcoholic beverages,the price elasticity of demand for beer is -0.23.Which of the following could explain why the price elasticity of demand for beer is low?

Accepted Answer

A)   Beer is an inferior alcoholic beverage.
B)   More and more people are switching to wine and cocktails rather than beer.
C)   The price of beer is relatively low and for many people it is a habit forming product.
D)   There are only a few major suppliers of beer.

Question 10

The price elasticity of an upward-sloping supply curve is always

Accepted Answer

A)   positive.
B)   negative.
C)   greater than one.
D)   impossible to determine.

Question 11

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Accepted Answer

Price elasticity of supply refers to the...

Question 12

Figure 6-1 
-Refer to Figure 6-1.A perfectly elastic demand curve is shown in

Accepted Answer

A)   Panel A.
B)   Panel B.
C)   Panel C.
D)   Panel D.

Question 13

Consider the following types of demand curves: 
a.a vertical demand curve
b.a horizontal demand curve
c.a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Accepted Answer

A)   a only
B)   b only
C)   a and b only
D)   a, b, and c

Question 14

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Accepted Answer

1.Availability of close substitutes: If ...

Question 15

When demand is elastic,a fall in price causes total revenue to rise because

Accepted Answer

A)   when price falls, quantity sold increases so total revenue automatically rises.
B)   the increase in quantity sold is large enough to offset the lower price.
C)   the percentage increase in quantity demanded is less than the percentage fall in price.
D)   the demand curve shifts.

Question 16

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?

Accepted Answer

A)   The elasticity coefficient is likely to be very high and supply is inelastic.
B)   The elasticity coefficient is likely to be close to zero and supply is perfectly elastic.
C)   The elasticity coefficient is likely to be low and supply is highly inelastic.
D)   The elasticity coefficient is likely to be low and supply is highly elastic.

Question 17

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Accepted Answer

A)   the decrease in quantity sold is proportionately larger than the resulting change in price.
B)   the resulting increase in price is proportionately greater than decrease in quantity sold.
C)   the demand curve for wheat must be vertical.
D)   the supply curve for wheat must be vertical.

Question 18

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is -0.75.Suppose that the government is considering raising the minimum wage from $7.25 per hour to $7.75 per hour.Based on this information,calculate the percentage change in the employment of low skilled workers.Use the midpoint formula.

Accepted Answer

percent ch...

Question 19

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase,quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Accepted Answer

A)   40 percent
B)   25 percent
C)   2.5 percent
D)   0.4 percent

Question 20

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because

Accepted Answer

A)   buyers of steel are more sensitive to a price change if they have more time to adjust to the price change.
B)   buyers of steel are less sensitive to a price change if they have more time to adjust to the price change
C)   sales revenue in the building industry will fall sharply.
D)   profits will fall by a greater amount in the long run than in the short run.

Exam 6: Elasticity: The Responsiveness of Demand and Supply

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

Figure 6-1 -Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

Correct Answer
verified

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Explain the relationship between price elasticity of demand and total revenue.

Correct Answer
verified
If demand is elastic,the an increase in ...
View Answer

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is

Correct Answer
verified
C

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve?

Correct Answer
verified
C

Price elasticity of demand measures

Correct Answer
verified

Correct Answer
verified

According to a study of the U.S.demand for alcoholic beverages,the price elasticity of demand for beer is -0.23.Which of the following could explain why the price elasticity of demand for beer is low?

Correct Answer
verified

The price elasticity of an upward-sloping supply curve is always

Correct Answer
verified

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Correct Answer
verified
Price elasticity of supply refers to the...
View Answer

Figure 6-1 -Refer to Figure 6-1.A perfectly elastic demand curve is shown in

Correct Answer
verified

Consider the following types of demand curves: a.a vertical demand curve b.a horizontal demand curve c.a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Correct Answer
verified

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Correct Answer
verified
1.Availability of close substitutes: If ...
View Answer

When demand is elastic,a fall in price causes total revenue to rise because

Correct Answer
verified

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?

Correct Answer
verified

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Correct Answer
verified

Correct Answer
verified
percent ch...
View Answer

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase,quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Correct Answer
verified

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because

Correct Answer
verified

Exam 6: Elasticity: The Responsiveness of Demand and Supply

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

Figure 6-1 -Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

Correct AnswerverifiedShow Answer

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Explain the relationship between price elasticity of demand and total revenue.

Correct AnswerverifiedIf demand is elastic,the an increase in ...View AnswerShow Answer

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is

Correct AnswerverifiedC

Which of the following statements is true about the price elasticity of demand along a downward sloping linear demand curve?

Correct AnswerverifiedC

Price elasticity of demand measures

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to a study of the U.S.demand for alcoholic beverages,the price elasticity of demand for beer is -0.23.Which of the following could explain why the price elasticity of demand for beer is low?

Correct AnswerverifiedShow Answer

The price elasticity of an upward-sloping supply curve is always

Correct AnswerverifiedShow Answer

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Correct AnswerverifiedPrice elasticity of supply refers to the...View AnswerShow Answer

Figure 6-1 -Refer to Figure 6-1.A perfectly elastic demand curve is shown in

Correct AnswerverifiedShow Answer

Consider the following types of demand curves: a.a vertical demand curve b.a horizontal demand curve c.a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Correct AnswerverifiedShow Answer

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

Correct Answerverified1.Availability of close substitutes: If ...View AnswerShow Answer

When demand is elastic,a fall in price causes total revenue to rise because

Correct AnswerverifiedShow Answer

Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?

Correct AnswerverifiedShow Answer

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Correct AnswerverifiedShow Answer

Correct Answerverifiedpercent ch...View AnswerShow Answer

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase,quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

Correct AnswerverifiedShow Answer

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If demand is elastic,the an increase in ...
View Answer

Correct Answer
verified
C

Correct Answer
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C

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
verified
Price elasticity of supply refers to the...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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1.Availability of close substitutes: If ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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percent ch...
View Answer

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Correct Answer
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