ECO2023 Elasticity Review Quiz

The price elasticity of demand is always __________ because the quantity demanded always moves in the___________ direction from the price.

negative; opposite

If the price of a cup of coffee increases by 50 percent, the quantity demanded decreases by 50 percent. The price elasticity of demand is:

unit elastic.

A perfectly inelastic demand curve is; Price elasticity of demand is equal to

vertical; 0

If the price of hairbrushes decreases by 20 percent, the quantity demanded increases by 2 percent. the price elasticity of demand is:

-0.1 and is inelastic.

If the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. The price elasticity of demand is:

-5.

Suppose that when the price of coffee beans goes from $1 to $1.35 per pound, production increases from 72 million bags of coffee beans per year to 100 million bags. Using the midpoint method, the price elasticity of supply would be

1.093

A perfectly elastic demand curve is; Price elasticity of demand is equal to

horizontal; -∞

Which of the following goods would tend to have the most inelastic demand?

Gasoline, in the short run

Suppose when the price of calculators is $10, the quantity demanded is 100, and when the price is $12, the quantity demanded drops to 80. Using the mid-point method, the price elasticity of demand is:

NOT -0.81.

When the price of gasoline is set at $4.00, the gas station sells 1,000 gallons per week. When the price of gasoline falls to $3.80, the station sells 1,050 gallons. Calculate the price elasticity of demand using the midpoint formula.The price elasticity of demand is

NOT 1.05

When the price of paperback books is set at $10, the local bookstore sells 100 books per week. When the price of books increases to $12.00, the store sells 75 books. Calculate the price elasticity of demand, using the midpoint formula.

NOT The price elasticity of demand is 0.80

If a good has a highly elastic demand, then:

NOT any percentage change in price will cause an almost immediate response in quantity demanded.

Consider two goods: brownies and cupcakes. These two goods can be expected to have a:

NOT positive cross-price elasticity, so that if the price of brownies decreases, the demand for cupcakes will increase.

Which of the following goods would tend to have the most elastic demand?

Raisin Bran

Consider two markets: real estate in downtown Manhattan or real estate in rural Oklahoma. Which will have a more price-elastic supply over six months?

Rural Oklahoma because the supply can change more easily.

When the price of paperback books is set at $10, the local bookstore sells 100 books per week. When the price of books increases to $12.00, the store sells 75 books. Calculate the price elasticity of demand, using the midpoint formula.

The price elasticity of demand is 1.57

When demand is elastic:

a price increase causes total revenue to fall.

The factors that determine the price elasticity of demand include:

availability of substitutes, time needed to adjust to price changes, relative need and relative cost.

Along a linear demand curve, price elasticity of demand is

different at different points

A perfectly elastic demand curve is;

highly elastic demand.

When a small percentage change in price causes a large percentage change in the quantity demanded, we say that a good has:

highly elastic demand.

You have been hired by the government of Kenya, which produces a lot of coffee, to examine the supply of gourmet coffee beans. Suppose you discover that the price elasticity of supply is 0.85. When you share your information with the Kenyan government, you explain that a price elasticity of supply is 0.85 means that:

if the price rises by 1%, the quantity supplied will increase by .85%.

Although we could describe both the cross-price elasticity of demand between paper coffee cups and plastic coffee lids and the cross-price elasticity of demand between sugar and artificial sweeteners as highly elastic, the first cross-price elasticity is negative and the second is positive. This is because:

paper coffee cups and plastic coffee lids are strong complements and sugar and artificial sweeteners are strong substitutes.

Consider the market for meals at fine dining restaurants. You can expect that the income elasticity of demand would be:

positive since people eat out more as their income increases.

You are working as a private math tutor to raise money during spring break. The price elasticity of demand for math tutoring might be inelastic because:

students may need to use the limited break time to catch up on work.

You are working as a private math tutor to raise money during spring break. The price elasticity of demand for math tutoring might be elastic because:

the break provides students with more time to look for a substitute tutor

Mathematically, price elasticity of demand is:

the percentage change in the quantity of a good that is demanded in response to a given percentage change in price.

The price elasticity of supply is always ___________ because the quantity supplied moves in the ___________ direction as the price.

positive; same

The price elasticity of demand will always be a negative number because:

price and quantity demanded move in opposite directions.

Suppose when the price of movie tickets is $5, the quantity demanded is 500, and when the price is $7, the quantity demanded is 300. Using the mid-point method, the price elasticity of demand is:

-1.61.

Certain skilled labor, such as hair cutting, requires licensing or certification. This is costly and takes a long time to acquire. If this licensing requirement were removed, the price elasticity of supply for haircuts would:

increase, or become more elastic because more people could enter the occupation.

The calculated price elasticity of demand:

is always a negative number, although many times is reported as an absolute value.

When a good has a lot of close substitutes available, it is likely to be:

more price elastic than goods without close substitutes available.

A box of corn flakes cereal is likely to be:

very price elastic, since there are many close substitutes available.

Suppose when the price of a can of tuna is $1, the quantity demanded is 250, and when the price is $2, the quantity demanded is 100. Using the mid-point method, the price elasticity of demand is:

−1.29.

If the price of a DVD decreases by 50 percent, the quantity demanded increases by 75 percent. The price elasticity of demand is:

−1.5 and is elastic.