Chp. 5 ECON MULTIPLE CHOICE

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price would result in a

C) 40 % decrease in the quantity demanded

Suppose that good X has a negative income elasticity of demand. This implies that the good is

C) An inferior good

When price fall from point $40 to $30 we know that demand must be

A) Elastic, since total revenue increases from $8000 - $9000

Demand for a good would tend to be more inelastic the

A) Fewer the available substitutes

The price elasticity of supply measure how responsive

A) Seller are to a change in price

Demand is said to be inelastic if

A) the quantity demanded changes only slightly when the price of the good changes

When demand is inelastic, a decrease in price will cause.

B) A decrease in total revenue

A perfectly elastic demand curve will be

B) Horizontal

In the long run, the quantity supplied of most goods

C) Can respond substantially to a change in price

A perfectly inelastic demand curve will be

B) Vertical, because buyers purchase the same amount whether the price rises or falls.

Muriel's income elasticity of demand for football tickets is 1.50. All else equal, this means that if her income increase by 20 percent, she will buy

C) 30 % more football tickets

Last year, Sheila bought 6 pairs of shoes when her income was $40,000. This year, her income is $50,000 and she purchased 10 pairs of shoes. All else constant, it is obvious that Sheila.

C) Considers shoes to be a normal good

If you want to know how an increase in the price of ice cream at the next door Ice cream shop affects the demand for frozen yogurt in your show you would compute the

C) Cross- price elasticity of demand

The midpoint method is used to compute elasticity because it

C) Gives the same answer regardless of the direction of change.

How does total revenue changes as one moves down a linear demand curve

C) It first increases, then decreases

Demand is said to be inelastic if the

C) Quantity demanded changes proportionately less than price

There are very few, if any, good substitutes for motor oil. Therefore,

C) The demand for motor oil would tend to be price inelastic

If the elasticity of supply, is zero, then

C) The quantity supplied is the same regardless of price

Suppose the price of Twinkies is reduce 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

D) .64

The elasticity of demand from point A to point B, using the midpoint method would be (B= quantity of 300 and price 12) (A= quantity of 100 and price 18)

D) 2.5

In general elasticity is

D) A measure of how much a buyer and seller respond to changes in the price of the good.

The cross- price elasticity of demand can tell us whether good are

D) Complements or Substitutes

If marijuana were legalized, it is likely there would be a increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocate believe that the

D) Demand for marijuana is price inelastic

The supply of a good will be more elastic the

D) Longer the time period being considered

If a 6 percent increase in income result in a 10 percent increase in the quantity demanded of pizza, then the income elasticity of demand for pizza is.

D) Positive and therefore pizza is a normal good

Demand is said to be elastic if

D) The quantity demanded responds substantially to changes in the price of the good