QUIZZ 3

A

Elasticity is A. a measure of how much buyers and sellers respond to changes in market conditions. B. the study of how the allocation of resources affects economic well-being. C. the maximum amount that a buyer will pay for a good. D. the value of everything a seller must give up to produce a good.

B

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the A. steeper the demand curve will be. B. flatter the demand curve will be. C. further to the right the demand curve will sit. D. closer to the vertical axis the demand curve will sit.

B

For a good that is a luxury, demand A. tends to be inelastic. B. tends to be elastic. C. has unit elasticity. D. cannot be represented by a demand curve in the usual way.

A

Goods with many close substitutes tend to have A. more elastic demands. B. less elastic demands. C. price elasticities of demand that are unit elastic. D. income elasticities of demand that are negative

D

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is A. 0.45 B. 0.90 C. 1.11 D. 2.20

A

Demand is inelastic if elasticity is A. less than 1. B. equal to 1. C. greater than 1. D. equal to 0.

C

Economists compute the price elasticity of demand as the 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.

A

For a good that is a necessity, demand A. tends to be inelastic. B. tends to be elastic. C. has unit elasticity. D. cannot be represented by a demand curve in the usual way.

B

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because A. buyers tend to be much less sensitive to a change in price when given more time to react. B. buyers tend to be much more sensitive to a change in price when given more time to react. C. buyers will have substantially more real income over a ten-year period. D. the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.

C

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is A. 0.75. B. 1.25. C. 1.33. D. 1.60.

C

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is A. 0.63, and supply is elastic. B. 0.63, and supply is inelastic. C. 1.60, and supply is elastic. D. 1.60, and supply is inelastic.

C

If the price elasticity of demand for a good is 0.25, then a 20 percent decrease in price results in a A. 0.0125 percent increase in the quantity demanded. B. 4 percent increase in the quantity demanded. C. 5 percent increase in the quantity demanded. D. 80 percent increase in the quantity demanded.

D

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a A. 0.4 percent decrease in the quantity demanded. B. 2.5 percent decrease in the quantity demanded. C. 4 percent decrease in the quantity demanded. D. 40 percent decrease in the quantity demanded.

C

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase amounted to A. 0.67%. B. 0.83%. C. 1.20%. D. 2.70%.

B

If the quantity supplied responds only slightly to changes in price, then A. supply is said to be elastic. B. supply is said to be inelastic. C. an increase in price will not shift the supply curve very much. D. even a large decrease in demand will change the equilibrium price only slightly.

D

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about A. 0.22. B. 0.53. C. 1.00. D. 1.89.

A

Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is A. inelastic and equal to 0.67. B. elastic and equal to 0.67. C. inelastic and equal to 1.50. D. elastic and equal to 1.50.

D

Suppose the price of Twinkies decreases from $1.45 to $1.25 and, as a result, the quantity of Twinkies demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for Twinkies in the given price range is A. 2.00. B. 1.55. C. 1.00. D. 0.64.

C

The price elasticity of demand changes as we move along a A. horizontal demand curve. B. vertical demand curve. C. linear, downward-sloping demand curve. D. All of the above are correct.

A

The price elasticity of demand measures how much A. quantity demanded responds to a change in price. B. quantity demanded responds to a change in income. C. price responds to a change in demand. D. demand responds to a change in supply.

B

The price elasticity of supply measures how much A. the quantity supplied responds to changes in input prices. B. the quantity supplied responds to changes in the price of the good. C. the price of the good responds to changes in supply. D. sellers respond to changes in technology.

A

There are very few, if any, good substitutes for motor oil. Therefore, A. the demand for motor oil would tend to be inelastic. B. the demand for motor oil would tend to be elastic. C. the demand for motor oil would tend to respond strongly to changes in prices of other goods. D. the supply of motor oil would tend to respond strongly to changes in people's tastes for large cars relative to their tastes for small cars.

C

When a supply curve is relatively flat, A. sellers are not at all responsive to a change in price. B. the equilibrium price changes substantially when the demand for the good changes. C. the supply is relatively elastic. D. the supply is relatively inelastic.

B

When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bubble gum is A. inelastic. B. elastic. C. unit elastic. D. perfectly inelastic.

D

Which of the following is likely to have the most price inelastic demand? A. white chocolate chip with macadamia nut cookies B. Mrs. Field's chocolate chip cookies C. milk chocolate chip cookies D. cookies