Question 1

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

Accepted Answer

A)   increase by 4.2%.
B)   increase by 6%.
C)   decrease by 4.2%.
D)   decrease by 6%.

Question 2

Table 5-4
The following table shows the demand schedule for a particular good. 
-Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

Accepted Answer

A)   0.4
B)   1
C)   1.5
D)   2.33

Question 3

Food and clothing tend to have

Accepted Answer

A)   small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.
B)   small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels.
C)   large income elasticities because they are necessities.
D)   large income elasticities because they are relatively inexpensive.

Question 4

Which of the following is likely to have the most price inelastic demand?

Accepted Answer

A)   athletic shoes
B)   running shoes
C)   Nike running shoes
D)   Nike Shox running shoes

Question 5

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Accepted Answer

A) True 
 B)False

Question 6

Figure 5-8 
-Refer to Figure 5-8. When the price is $15, total revenue is

Accepted Answer

A)   $1,500.
B)   $2,500.
C)   $3,500.
D)   $4,500.

Question 7

Total revenue will be at its largest value on a linear demand curve at the

Accepted Answer

A)   top of the curve, where prices are highest.
B)   midpoint of the curve.
C)   low end of the curve, where quantity demanded is highest.
D)   None of the above is correct.

Question 8

Heath's income elasticity of demand for concerts is 2. All else equal, this means that if his income increases by 10 percent, he will purchase tickets for

Accepted Answer

A)   2 percent more concerts.
B)   5 percent more concerts.
C)   10 percent more concerts.
D)   20 percent more concerts.

Question 9

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 10

The demand for soap is more elastic than the demand for Dove soap.

Accepted Answer

A) True 
 B)False

Question 11

Figure 5-5 
-Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

Accepted Answer

A)   $100.
B)   $450
C)   $500.
D)   $1250.

Question 12

Economists compute the price elasticity of demand as the

Accepted Answer

A)   percentage change in price divided by the percentage change in quantity demanded.
B)   change in quantity demanded divided by the change in the price.
C)   percentage change in quantity demanded divided by the percentage change in price.
D)   percentage change in quantity demanded divided by the percentage change in income.

Question 13

Refer to Table 5-12. Between which two quantities listed is demand unit elastic?

Accepted Answer

The answer of Refer to Table 5-12. Between which two...

Question 14

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

Accepted Answer

A)   perfectly inelastic, and the demand curve is vertical.
B)   elastic, and the demand curve is a straight, downward-sloping line.
C)   perfectly elastic, and the demand curve is horizontal.
D)   elastic, and the demand curve is something other than a straight, downward-sloping line.

Question 15

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

Accepted Answer

A)   negative, and the good is an inferior good.
B)   negative, and the good is a normal good.
C)   positive, and the good is a normal good.
D)   positive, and the good is an inferior good.

Question 16

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

Accepted Answer

A)   0.82, and basketball tickets are a normal good.
B)   0.82, and basketball tickets are an inferior good.
C)   1.22, and basketball tickets are a normal good.
D)   1.22, and basketball tickets are an inferior good.

Question 17

Table 5-4
The following table shows the demand schedule for a particular good. 
-Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

Accepted Answer

A)   0.43
B)   0.67
C)   2.33
D)   4

Question 18

Suppose good X has a positive income elasticity of demand. This implies that good X could be

Accepted Answer

A)   (i)  only
B)   (i)  and (ii)  only
C)   (i) , (ii) , and (iv)  only
D)   (iii)  only

Question 19

Refer to Table 5-12. Between which two quantities listed is demand most inelastic?

Accepted Answer

The answer of Refer to Table 5-12. Between which two...

Question 20

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

Accepted Answer

A)   ignoring the law of demand.
B)   assuming that the demand for university education is elastic.
C)   assuming that the demand for university education is inelastic.
D)   assuming that the supply of university education is elastic.

Exam 5: Elasticity and Its Application

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

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Which of the following is likely to have the most price inelastic demand?

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A government program that reduces land under cultivation hurts farmers but helps consumers.

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Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

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Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

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Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

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Total revenue will be at its largest value on a linear demand curve at the

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If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

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Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

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Food and clothing tend to have

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Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

Correct AnswerverifiedShow Answer

Heath's income elasticity of demand for concerts is 2. All else equal, this means that if his income increases by 10 percent, he will purchase tickets for

Correct AnswerverifiedShow Answer

If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is

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Suppose good X has a positive income elasticity of demand. This implies that good X could be

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Refer to Table 5-12. Between which two quantities listed is demand unit elastic?

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Refer to Table 5-12. Between which two quantities listed is demand most inelastic?

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Economists compute the price elasticity of demand as the

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Figure 5-5 -Refer to Figure 5-5. At a price of $10 per unit, sellers' total revenue equals

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Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

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The demand for soap is more elastic than the demand for Dove soap.

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