Economics Chapter 5 practice quiz BYUH

If the total revenue received by a firm increases when it raises its price, this indicates that the demand for the firm's product is:

price inelastic.

Which factor is the most important in determining the price elasticity of supply?

the time period the producer has to adjust inputs and outputs

The income elasticity of demand for peaches has been estimated to be 1.43. If income grows by 15 percent in a period, how will that affect total expenditures on peaches in that period, all other things unchanged?

total expenditures will rise

If the University of Michigan increases the price of football tickets, it will result in increasing revenues if the price elasticity of demand is

Is equal to -1

The income elasticity of demand of an inferior good:

Is less than zero

If a decrease in the price of a good causes an increase in total revenue, the demand for the good is price inelastic.

False

If changes in price and total revenue move in the same direction, demand is price elastic in that portion of the demand curve.

False

If the demand for golf is price elastic and your local public golf course increases the greens fees for using the course,

a decrease in total revenue received by the course

The price elasticity of supply for milk in the short run has been estimated to be 0.36, while the price elasticity of supply for milk in the long run is estimated to be 0.51. That means the supply of milk is:

relatively more elastic (that is, less inelastic) in the long run than in the short run

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

-0.5

The price elasticity of demand is

Always negative

The slope of a line is another method of measuring elasticity.

False

The price elasticity of a demand curve with a constant slope:

increases in absolute value as the price rises.

Which of the following is not a factor in determining the price elasticity of demand?

the slope of the supply curve

The price elasticity of demand for gasoline in the long run has been estimated to be -1.5. If an extended war in the Middle-East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things unchanged?

total expenditures would fall

If demand is price elastic, it is certain that

An increase in price will lower total revenue

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

Bayer aspirin to be more price elastic

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered

Complimentary goods

When the percentage change in quantity demanded is less than the percentage change in price

Demand is price inelastic

A newspaper typically consumes a smaller fraction of a consumer's budget than a home entertainment system. Therefore, you would expect the demand for

Home entertainments system to be more price elastic

From the graph it can be seen that, along a given segment of the demand curve, if price falls and total revenue _________, then demand is price elastic.

Increases

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

Inferior Good

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when your income increases from $19,000 to $21,000 a year, then, for you, shoes are considered a(n):

Inferior good

If a good is a luxury item that looms large in the household budget, then the price elasticity of demand will tend to be

More price elastic

if demand is unit price elastic, a change in price causes

No change in total revenue

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

Normal Good

If your income increases and your consumption of bagels increases, bagels are considered a(n)

Normal Good

For a normal good, income elasticity of demand will be:

Positive

Demand is price inelastic when

Price Falls and Total Revenue Decreases

If the total revenue received by a firm increases when it raises its price, this indicates that the demand for the firm's product is

Price inelastic

When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue. This suggests that demand is

Price inelastic

The price elasticity of demand for soft drinks has been estimated to be -0.55. If the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacture and bottling), how will that affect total expenditures on soft drinks, all other things unchanged?

Total expenditures will rise

Given an inelastic demand for agricultural output, a decrease in supply will lead to an increase in farm income (taken collectively)

True

If demand is unit price elastic, then quantity changes by the same percentage as the percentage change in the price

True

If people purchase less of a good when they have an increase in income, the good in question is an inferior good

True

If the percentage change in quantity is less than the percentage change in price, demand is said to be price inelastic.

True

Income elasticity of demand measures the response of the change in quantity demanded at a specific price to a change in income

True

Income elasticity of demand measures the response of the change in quantity demanded at a specific price to a change in income.

True

Price elasticity of demand is the responsiveness of quantity demanded to changes in price.

True

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:

Unrelated Goods

if demand is price elastic, a change in price in either direction (up or down) causes

a change in total revenue in the opposite direction

A curve whose price elasticity of demand is the same at every point is:

a constant elasticity of demand curve.

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

greater than 2 (absolute value).

Other things being equal, the price elasticity of demand for a product will be less

if there are few or no substitutes available

The ratio of the percentage change in the quantity demanded to the percentage change in price, all other things unchanged, is:

price elasticity of demand.

Which of the following will lead to a decrease in total revenue?

price increases and demand is price elastic

If the quantity demanded of agricultural output is very unresponsive to a fall in price, the demand for agricultural output is

price inelastic