ECON MID TERM HW QUESTIONS 4(part 2)

A good is likely to have an inelastic demand curve if the: -good accounts for a large share of consumer income. -consumer has significant time to respond to the price change -good has few available substitutes -good is a luxury.

good has few available substitutes

The income elasticity of demand for eggs has been estimated to be 0.57. If income grows by 5% in a period, all other things unchanged, demand will: -decrease by less than 5.7%. -decrease by more than 5.7%. -increase by more than 5.7%. -increase by about 2.9%.

increase by about 2.9%.

The price elasticity of demand along a demand curve with a constant slope: -increases in absolute value as the price rises. -is less than the slope. -is greater than the slope. -is equal to the slope.

increases in absolute value as the price rises.

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is: -price inelastic. -zero elastic. -price elastic. -price unit-elastic.

price inelastic

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be: -perfectly price-elastic. -inferior. -price-inelastic. -price-elastic.

price-inelastic

(Figure: The Demand Curve for Oil) Use Figure: The Demand Curve for Oil. The price elasticity of demand between $20 and $21 is _____ since the price elasticity is _____. -price-inelastic; less than 1. -price-inelastic; a negative number. -price unit-elastic; equal to 1. -price-elastic; less than 1.

price-inelastic; less than 1.

If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, this indicates that these two goods are _____ goods. -inferior -normal -complementary -substitute

substitue

Since the demand for cashews increases as the price of walnuts increases, we can assume that these two goods are: -unrelated. -inferior. -substitutes. -superior.

substitutes

Gas prices recently increased by 25%. In response, purchases of gasoline decreased by 5%. According to this finding, the price elasticity of demand for gas is: -0.5 -2 -0.2 -5

0.2

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to: -1. -approximately 0.33. -approximately 1.33. -0.75.

0.75

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, all other things equal, you would expect the demand for: -the two to be equally price-elastic. -Bayer aspirin to be more price-elastic than is the demand for medical examinations. -medical examinations to be more price-elastic than is the demand for Bayer aspirin. -Bayer aspirin to be more perfectly price-inelastic.

Bayer aspirin to be more price-elastic than is the demand for medical examinations.

A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student in about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is: -highly elastic -.1. -highly inelastic. -0.

High inelastic

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged? -Total revenue will fall. -Total revenue will remain unchanged. -Total revenue will rise. -The information is insufficient to answer the question.

Total revenue will rise

The price elasticity of demand can be found by: -knowing that when price changes, quantity demanded goes in the opposite direction. -comparing the percentage change in quantity demanded to the percentage change in price. -examining only the slope of the demand curve. -measuring absolute changes in price and quantity demanded.

comparing the percentage change in quantity demanded to the percentage change in price.