Quiz 3 Ch. 5

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

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.

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.

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.

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.

A

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.

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.

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.

C

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.

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.

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.

D