Chapter 5 Econ Sample Questions

If a good is a necessity with few substitutes, then the price elasticiry of demand will tend to be:

Less price elastic

To say that two goods are complements, their cross price elasticities of demand should be

Less than 0

If the income elasticity of demand for a good is ______, the good is said to be a(n) _________.

Negative, inferior good

If your income increases and your consumption of bagels increases, other things equal, bagels are consudered a(n):

Normal good

A linear demand curve

Can have both elastic and inelastic price elasticities of demand

The price elasticity of demand is measured by:

Dividing the percentage change in quantity demanded by the percentage change in price

The income elasticity of demand of a normal good is:

Greater than 0

To say that two goods are substitues, their cross-price elasticities of demand should be:

Greater than 0

A perfectly elastic supply sruve is:

Horizontal

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

If there are few or no substitutes available

When the absolute value of the percentaga change in quantity demanded is less than the absolute value of the percentage change in price, demand is:

Inelastic

Yovanka has diabetes, and she will pay any amount of money to buy the insulin she needs to stay alove. Yovanka's price elasticity of demand for insulin is:

Perfectly inelastic

If the price elasticity of demand between two points on a demand curve is 0.75, then demand between those two points is:

Price-inelastic

The supply curve for a good will be more elastic if:

Production inputs are readily available at a relatively low cost.

The price elasticity of supply is computed as the percentage change in:

Quantity supplied divided by the percentage change in price

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

Relatively high

If someone did not regard health care as very important, often using home remedies and other substitutes, his or her demand curve for health care would mostly be ______ over the relevant range of prices for health care

Relatively price elastic

Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 while the cross price elasticity of demand for water and lemon is -0.13. This means that butter and margarine are _______, and water and lemon are ________.

Substitutes; complements

The demand for textbooks is price inelastic because:

Textbooks are a necessity

The price elasticity of a good will tend to be greater:

The longer the relevant time

If demand is elastic:

The quantity effect dominates the price effect, and a decrease in price causes total revenue to rise

Determining the price elasticity of demand invloves all of the following EXCEPT:

The slope of the supply curve

The demand for strawberry icecream tends to be relatively price elastic because

There are many close substitutes for strawberry ice cream

A demand curve that is perfectly inelastic is

Vertical

A perfectly inelastic demand curve is

Vertical