Chapter 5 Econ Quiz

For which of the following goods would demand be most elastic?

Tommy Hilfiger jeans

When demand is inelastic, a decrease in price will cause

a decrease in total revenue

Refer to Figure 5-7. If rectangle D is larger than rectangle A, then

a.demand is elastic between prices P1 and P2. b.a decrease in price from P2 to P1 will cause an increase in total revenue. c.the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. d.All of the above are correct.

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.

Refer to Figure 5-7. Total revenue when the price is P2 is represented by the area(s)

A + B

Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why?

A. Water or Diamonds B. Insulin or Nasal Decongestant Spray C. Food in General or Breakfast Cereal D. gas over the course of the week or gas over the course of the year E. Personal Computers or IBM Personal Computers

Refer to Figure 5-7. Total revenue when the price is P1 is represented by the area(s)

B + D

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a luxury.

A perfectly elastic demand implies that

any rise in price above that represented by the demand curve will result in a quantity demanded of zero

If demand is inelastic, then

buyers do not respond much to a change in price

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

buyers tend to be much more sensitive to a change in price when given more time to react

Eric produces jewelry boxes. If the demand for jewelry boxes is elastic and Eric wants to increase his total revenue, he should

decrease the price of his jewelry boxes

An increase in price causes an increase in total revenue when

demand is inelastic

For a good that is a necessity,

demand tends to be inelastic

Holding all other forces constant, if raising the price of a good leads to a fall in total revenue, then the demand for the good must be

elastic

If a person only occasionally buys a cup of coffee, his demand for coffee is probably

elastic

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

elastic

The demand for Werthers candy is likely

elastic because there are many close substitutes for Werthers

Other things equal, the demand for a good tends to be more inelastic, the

fewer the available substitutes

The case of perfectly elastic demand is illustrated by a demand curve that is

horizontal

In general, elasticity is a measure of

how much buyers and sellers respond to changes in market conditions

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

inelastic

In any market, total revenue is calculated by taking the price of the good and

multiplying it by the quantity of the good.

The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because

other flavors of ice cream are good substitutes for this particular flavor

Jean-Paul says that he will spend exactly 75 cents a day on M&Ms, regardless of the price of M&Ms. Jean-Paul's demand for M&Ms is

perfectly elastic

Demand is said to be unit elastic if

quantity demanded changes by the same percent as the price

The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, he should

raise the price of the bread sticks

Suppose you are in charge of setting prices at a local sandwich shop. The business needs to increase its total revenue and your job is on the line. If the demand for sandwiches is elastic, you

should decrease the price of sandwiches

For a good that is a luxury, demand

tends to be elastic

it is likely that

the demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general

Which of the following is not a determinant of the price elasticity of demand for a good?

the steepness or flatness of the supply curve for the good