CH 5

If there is a 15 percent change in the demand for a product as a result of a 9 percent change in consumer income, then the income elasticity of demand for the product is _____. a. 1.67 b. 6 c. 5.4 d. 3.1

a. 1.67

Which of the following goods tends to have a high price elasticity of demand? a. A good with many close substitutes. b. A good that has a small share in consumers' budgets. c. An essential good. d. A good that gives consumers a very short time period to adjust to price changes.

a. A good with many close substitutes.

Which of the following sets of goods is most likely to have a positive cross-price elasticity of demand? a. Coke and Pepsi. b. Fish and bicycles. c. Gasoline and SUVs. d. Computer hardware and computer software.

a. Coke and Pepsi.

Which of the following is most likely to have a negative income elasticity of demand? a. Day-old bakery products sold at a discount. b. Organic vegetables sold at a farmers' market. c. Owner-occupied housing d. Vacations in exotic islands.

a. Day-old bakery products sold at a discount.

Which of the following is true of the price elasticity of demand for a good? a. It is greater in the long run than in the short run. b. The greater the availability of substitutes for a good, the lesser the price elasticity of demand of the good. c. The lesser the availability of substitutes of a good, the greater the price elasticity of demand of the good. d. It is greater in the short run than in the long run.

a. It is greater in the long run than in the short run.

Which of the following is true of a normal good? a. Its demand curve shifts rightward as the level of consumer income increases. b. There will be a downward movement along the demand curve for a normal good as the level of consumer income increases. c. There will be an upward movement along the demand curve for a normal good as the level of consumer income increases. d. Its demand curve shifts leftward as the level of consumer income increases.

a. Its demand curve shifts rightward as the level of consumer income increases.

Which of the following is most likely to have a perfectly inelastic supply curve? a. Rembrandt paintings. b. Marlboro cigarettes. c. Red wine. d. Wheat.

a. Rembrandt paintings.

Which of the following is true of the price elasticity of supply? a. The elasticity of supply is greater the longer the period of adjustment. b. If the elasticity of supply is less than one, supply is elastic. c. If the elasticity of supply is greater than one, supply is inelastic. d. The elasticity of supply is lesser the longer the period of adjustment.

a. The elasticity of supply is greater the longer the period of adjustment.

_____, the higher the price elasticity of demand. a. The greater the importance of a product in consumers' budgets b. The more essential a product for consumers c. The lower the availability of substitutes d. The shorter the time period consumers have to respond to a price change

a. The greater the importance of a product in consumers' budgets

A unit-elastic supply curve is _____. a. an upward-sloping line b. horizontal c. a downward-sloping line d. vertical

a. an upward-sloping line

If a decrease in the price of one good shifts the demand curve for another good rightward, then the two goods are said to be _____. a. complements b. luxury goods c. substitutes d. inferior goods

a. complements

If the absolute value of the price elasticity of demand is _____, then demand is said to be elastic. a. greater than 1 b. equal to 1 c. equal to 0 d. between 0 and 1

a. greater than 1

The price elasticity of demand measures: a. how responsive quantity demanded is to a change in price. b. how responsive price is to a change in demand. c. how responsive quantity demanded is to a change in consumer taste and preference. d. how responsive demand is to a change in price.

a. how responsive quantity demanded is to a change in price.

Suppose a 10-percent increase in the price of one good leads to a 20-percent decrease in the demand for another good. The cross-price elasticity of demand between the two goods is equal to _____. a. −2 b. 0 c. −2.5 d. −1

a. −2

Suppose the per-unit price of a product changes from $105 to $95 and the quantity demanded changes from 9,500 units to 10,500 units. The absolute value for the price elasticity of demand for this product equals _____. a. 1.5 b. 1 c. 0.5 d. ∞

b. 1

Which of the following goods is most likely to have a perfectly elastic supply curve? a. 1995 Dom Perignon champagne. b. Groceries sold at a grocery store. c. Cadillacs once owned by Elvis Presley. d. A physician's services.

b. Groceries sold at a grocery store.

Which of the following is true of a perfectly elastic supply curve? a. It is upward sloping. b. It is horizontal. c. It is downward sloping. d. It is vertical.

b. It is horizontal.

Which of the following is the most accurate definition of the price elasticity of demand? a. The total change in quantity demanded divided by the average price. b. The percentage change in quantity demanded divided by the percentage change in price. c. The percentage change in quantity demanded divided by the percentage change in the price of a substitute. d. The total change in demand divided by the total change in price.

b. The percentage change in quantity demanded divided by the percentage change in price.

A horizontal demand curve has _____. a. a varying slope and a varying elasticity of demand b. a constant slope and a constant elasticity of demand c. a varying slope and a constant elasticity of demand d. a constant slope and a varying elasticity of demand

b. a constant slope and a constant elasticity of demand

If the price elasticity of demand for a product is equal to zero, then a 5 percent increase in the price of this product: a. decreases total revenue by 5 percent. b. increases total revenue by 5 percent. c. decreases total revenue by less than 5 percent. d. increases total revenue by more than 5 percent.

b. increases total revenue by 5 percent.

If price decreases and demand is _____, then total revenue decreases. a. unit elastic b. inelastic c. elastic d. perfectly elastic

b. inelastic

The income elasticity of demand for _____ goods tends to be positive. a. inferior b. normal c. necessary d. public

b. normal

The ratio of the percentage change in the demand for one good to the percentage change in the price of another good is called: a. the income elasticity of demand. b. the cross-price elasticity of demand. c. the arc elasticity of demand. d. the point elasticity of demand.

b. the cross-price elasticity of demand.

If the quantity of potatoes demanded rises by 2 percent when the price of potatoes declines by 10 percent, then the price elasticity of demand for potatoes is _____. a. -2 b. -0 c. -0.2 d. -1

c. -0.2

Suppose Ed's Fine Bottled Water supplies 35,000 quarts of bottled water each month when the price per quart is $0.80. When the price of a quart increases to $1.20, supply increases to 45,000 quarts each month. The absolute value of Ed's price elasticity of supply of water is _____. a. 0 b. 1.6 c. 0.63 d. 1

c. 0.63

A survey shows that the income elasticity of demand for televisions in Whitland is 0.5. If the demand for televisions changed by 5 percent, then it can be assumed that the level of consumer income in Whitland changed by _____ percent. a. 7 b. 8 c. 10 d. 5

c. 10

If the price elasticity of supply for a good is 1.5 and the percentage change in its quantity supplied is 15 percent, the percentage change in its price equals _____. a. 15 percent b. 5 percent c. 10 percent d. 8 percent

c. 10 percent

Suppose the income elasticity of demand for cars is 3 and the income elasticity of demand for pizzas is -1. Which of the following is true of the two goods? a. A pizza is a luxury good and a car is an inferior good. b. A car is an inferior good and a pizza is a normal good. c. A car is a luxury good and a pizza is an inferior good. d. A pizza is a normal good and a car is a luxury good.

c. A car is a luxury good and a pizza is an inferior good.

Which of the following is most likely to have a price elasticity of supply greater than one? a. Gasoline. b. Lumber. c. Burgers. d. Electricity.

c. Burgers.

Which of the following goods or services is most likely to have an elastic demand curve in the short run? a. Electricity. b. Gasoline. c. The Toyota 4Runner SUV. d. Milk.

c. The Toyota 4Runner SUV.

Assume that Zark and Bora are related products on the planet Zappo. It is observed that when the price of Zark falls (due to the cyclical nature of the Zark harvest), the demand for Bora increases. On the basis of this information, which of the following can be considered true? a. Zark and Bora are inferior goods. b. Zark and Bora are both luxury goods. c. Zark and Bora are complements. d. Zark and Bora are substitutes.

c. Zark and Bora are complements.

If the demand curve is a linear downward-sloping curve, the price elasticity of demand: a. remains constant along the curve. b. is negative in the lower half of the curve. c. decreases as one moves down the curve. d. is less than one in the upper half of the demand curve.

c. decreases as one moves down the curve.

Suppose the income elasticity of demand for beer is -2. Beer is said to be a(n) _____. a. normal good b. luxury good c. inferior good d. merit good

c. inferior good

If the quantity demanded of a product drops to zero with an increase in its price, then the demand for that product is said to be _____. a. unit elastic b. perfectly inelastic c. perfectly elastic d. inelastic

c. perfectly elastic

Suppose the per-unit price of a product changes from $190 to $210 and the quantity supplied of the product changes from 19,000 to 21,000. The supply of this product is _____. a. elastic b. inelastic c. unit elastic d. perfectly inelastic

c. unit elastic

Suppose Katrina always buys exactly 5 Rain Forest Bars each week, regardless of whether they are regularly priced at $1 each or on sale for $0.50 each. Based on this information, Katrina's demand curve for Rain Forest Bars is _____. a. an upward-sloping linear curve b. a downward-sloping linear curve c. vertical d. horizontal

c. vertical

Suppose Jasper buys 35 quarts of bottled water each month when the price per quart is $1. When the price declines to $0.60 per quart, he buys 45 quarts each month. Jasper's price elasticity of demand for water equals _____. a. -0.25 b. -0.75 c. -1.00 d. -0.50

d. -0.50

If the price elasticity of demand for a good is 0.5 and the percentage change in its price is 8 percent, the percentage change in its quantity demanded equals _____. a. 10.5 percent b. 8 percent c. 8.5 percent d. 4 percent

d. 4 percent

Which of the following is most likely to have an income elasticity of demand greater than 1? a. Rental housing. b. Flour. c. Gasoline. d. Fine wine.

d. Fine wine.

Which of the following is true of an inferior good? a. There will be an upward movement along the demand curve for an inferior good as the level of consumer income increases. b. Its demand curve shifts rightward as the level of consumer income increases. c. There will be a downward movement along the demand curve for an inferior good as the level of consumer income increases. d. Its demand curve shifts leftward as the level of consumer income increases.

d. Its demand curve shifts leftward as the level of consumer income increases.

Identify the correct statement about the cross-price elasticity of demand. a. The cross-price elasticity of demand for unrelated goods is negative. b. The cross-price elasticity of demand for complements is positive. c. The cross-price elasticity of demand for substitutes is negative. d. The cross-price elasticity of demand for unrelated goods is zero.

d. The cross-price elasticity of demand for unrelated goods is zero.

Suppose the absolute value for the price elasticity of demand for a product is a number that is too large to be defined. Which of the following correctly describes the effect of a 1 percent increase in its price on total revenue? a. Total revenue decreases by 1 percent. b. Total revenue increases by 1 percent. c. Total revenue increases by more than 1 percent. d. Total revenue falls to zero.

d. Total revenue falls to zero.

When the absolute value of the price elasticity of demand falls in the range 0 to 1, demand is said to be _____. a. elastic b. unit elastic c. infinitely elastic d. inelastic

d. inelastic

A good that has a small share in a consumer's budget is likely to have a: a. high price elasticity of demand. b. positive cross-price elasticity of demand. c. negative cross-price elasticity of demand. d. low price elasticity of demand.

d. low price elasticity of demand.

When the percentage change in quantity supplied is equal to the percentage change in price, supply is said to be _____. a. perfectly inelastic b. perfectly elastic c. elastic d. unit elastic

d. unit elastic

A perfectly price inelastic supply curve is: a. a straight line from the origin. b. nonlinear and upward sloping. c. horizontal. d. vertical.

d. vertical.