Econ 102 Quiz 7

Supply curves tend to be more ________ the greater the time period facing the producer is

A. price elastic

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, you would expect the demand for:

a. Bayer aspirin to be more price elastic.

A linear demand curve:

a. can have both elastic and inelastic price elasticities of demand.

The price elasticity of demand is measured by:

a. dividing the percentage change in quantity demanded by the percentage change in price.

If the price of Citgo gasoline increases 10% and the quantity demanded decreases 20%, then the demand curve for gasoline is:

a. elastic.

The ratio of the percentage change in the quantity demanded to the percentage change in price is the:

a. price elasticity of demand.

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

a. price-inelastic.

Total revenue will remain unchanged following a price increase if demand is:

a. unit elastic.

Each month Jessica buys exactly 15 Big Macs regardless of the price. Jessica's price elasticity of demand for Big Macs is:

b. 0.

If an increase in income of 10% causes the quantity demanded for generic macaroni and cheese to fall by 5%, then generic macaroni and cheese is a(n):

b. inferior good.

If demand is perfectly inelastic, then a 5% increase in price will cause:

b. no change in quantity demanded.

If the cross elasticity of demand between chicken and fish is 0.8, then chicken and fish are:

b. substitutes.

If you know the cross price elasticity between two goods is positive, then you know the two goods are:

b. substitutes.

Suppose the price of real estate increases by 37.11% in Oakland next year. If the quantity of new homes supplied does not change, this means that the price elasticity of ________ will be perfectly ________ in Oakland next year.

b. supply; inelastic

If your purchases of shoes remain constant at 9 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered:

b. unrelated goods.

Gas prices recently increased by 25%. In response, purchases of gasoline decreased by 5%. Based on this data, the price elasticity of demand for gas is:

c. 0.2.

If the price increases by 100% and the quantity decreases by 50%, then the elasticity of demand is ___.

c. 0.5

Nico's DVD rentals increase by 10% when his income increases by 20%. Based on this information, we know that:

c. DVDs are a normal good.

The price of gold increases by 200%. If the price elasticity of demand of gold is 40, what will happen in the market?

c. Gold sales will decrease by 8,000%.

There is one gas station in a small rural town. The owner of the station claims that he will sell the same quantity of gas, no matter how high or low the price. If he is correct in this assertion, what must be true about the demand curve for gas at his station?

c. It must be vertical with a price elasticity of zero

If a store deals in a good that has a unitary elastic demand, what would be the net results on their total revenue of an increase in price?

c. There would be would be zero, so no change in total revenue.

Which commodity probably has the highest elasticity of demand?

c. college tuition

If two goods are substitutes, their cross price elasticity of demand should be:

c. greater than 0.

If a good is very inexpensive, but it is a necessity, you would predict the price elasticity of demand for the good is:

c. inelastic.

The cross price elasticity of demand of complementary goods is:

c. less than 0.

If the income elasticity of demand for a good is _______, the good is said to be _________.

c. positive; normal good

If total revenue goes up when price falls, the price elasticity of demand is said to be:

c. price elastic.

Assume the supply curve shifts to the right by a given amount at each price. Price in the market will decline the most if demand is more:

c. price inelastic and supply is more price-inelastic.

Suppose the price of Vanilla Coke increases by 9% and quantity demanded falls by 13% overall, but only 4% for loyal Coca Cola customers. This means that for the general public there are ________ for Vanilla Coke, but for loyal Coca Cola customers, Vanilla Coke is more of a ________ item. This means that Coca Cola will enjoy an increase in total revenue only from ________.

c. several substitutes; necessity; loyal Coca Cola customers

If the price elasticity of demand for beach towels is 1.00, then the demand is _____ and total revenue will ______ if the price of beach towels increases.

c. unit-elastic; remain unchanged.

A perfectly price inelastic demand curve is:

c. vertical.

If an 8 percent increase in the price of cotton leads to a 10 percent increase in the quantity of cotton supplied, then the price elasticity of supply of cotton is:

d. 1.25

If quantity demanded rises by 60% and price falls by 20%, the price elasticity of demand is:

d. 3.

A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. The price elasticity of honey is:

d. 4.

If the price elasticity of demand is .1, then for every 10% decrease in quantity demanded, there is ______.

d. a 100% increase in price

If the estimated price elasticity of demand for foreign travel is 4, then:

d. a 20% decrease in the price of foreign travel will increase quantity demanded by 80%.

If a product's price rises by 6 percent, and its quantity demanded falls by 8 percent, then we can say that demand for this product is:

d. elastic.

The demand for strawberry ice cream tends to be relatively price elastic because:

d. for most people there are many close substitutes for strawberry ice cream

We would say that sports cars are a normal good if the ___________ for a sports car is __________ .

d. income elasticity of demand; positive.

When the absolute value of the percentage change in quantity demanded is less than the absolute value of the percentage change in price, demand is:

d. inelastic

Suppose the price elasticity of demand for fishing lures equals 1 in South Carolina and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should:

d. leave prices unchanged in South Carolina and raise prices in Alabama

If the income elasticity of demand for a good is positive, the good is said to be a(n):

d. normal good.

If the price of emergency visits to the doctor were to rise, we would expect:

d. only a slight decline in the number of emergency visits to the doctor.

If the price of chocolate covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are:

d. substitute goods.

Goods are ________ when the cross price elasticity of demand is positive and ________ when the cross price elasticity of demand is negative.

d. substitutes; complements

If a 20% price increase generates a 20% decrease in quantity demanded, then this is a(n) ________ response.

d. unit elastic

If the income elasticity of demand for a good is positive, the good is said to be an

normal good