MICRO. CH 6 Quiz

2. The price-elasticity of demand coefficient for a perfectly inelastic demand curve equals: A. 0 B. 1 C. Infinity D. -1

A. 0

41. ELASTIC - Price & "Total Revenue" do which of the following... A. Change in opposite directions B. Stay the same C. Change in the same direction D. All of the above

A. Change in opposite directions

8. If a 5% increase in the "price" of one goods results in a decrease of 2% in the quantity of another good, then it can be concluded that the two goods are... A. Complements B. Substitutes C. Independent D. Normal

A. Complements

The __________ measures the degree to which quantity demanded of one product is affected by a change in the price of another product. A. Cross Elasticity of Demand B. Income Elasticity of Demand C. Price Elasticity of Supply D. Price Elasticity of Demand

A. Cross Elasticity of Demand

17. The measure of the sensitivity of the consumption of one product given a change in the price of another product is the ________ elasticity of demand, while the measure of the responsiveness of consumer purchases to changes in income is _______ elasticity of demand. A. Cross, Income B. Income, Cross

A. Cross, Income

What formula would you use to find the Income Elasticity of Demand? A. Ed-Income = % Change in Quantity (Prod. a, b, etc.) DIVIDED by % Change in Income B. Es = % Change in "QTY Supplied" (Prod. x) DIVIDED by % Change in "Price" (Prod. x) C. Ed = % Change in "QTY Demanded" (Prod. x) DIVIDED by % Change in "Price" (Prod. x) D. Ed-Cross = % Change in Quantity (Prod. y) DIVIDED by % Change in "Price" (Prod. x)

A. Ed-Income = % Change in Quantity (Prod. a, b, etc.) DIVIDED by % Change in Income

When QUANTITY DEMANDED is relatively RESPONSIVE to a price change, demand is said to be... A. Elastic B. Inelastic C. Unit Elastic D. Perfectly Elastic

A. Elastic

What is the elasticity coefficient for UNITARY ELASTIC? A. Exactly 1 B. Less than 1 C. Greater than 1 D. Equal to 0

A. Exactly 1

6. Assume that the price of a product declines in cases a, b, and c. A. When demand is inelastic, the loss revenue due to the lower price is (less, greater) _______ than the gain in revenue due to the greater quantity demanded. B. When demand is elastic, the loss of revenue due to the lower price is (less, greater) _______ than the gain in revenue due to the greater quantity demanded. C. When demand is unit-elastic, the loss of revenue due to the lower price (exceeds, is equal to) _______ the gain in revenue due to the greater quantity demanded.

A. Greater B. Less C. Equal to

10. The price elasticity of demand will tend to be greater when the price of the product relative to consumer income is ______. A. Higher B. Lower C. Increasing D. Decreasing

A. Higher

50. Indicate whether the following elasticity of demand/supply coefficients are: elastic, perfectly elastic, perfectly inelastic, or unit elastic. A. +.4 B. +1.8 C. -.01 D. 0 E. +Infinity F. -0.9 G. +1.0 H. -5.2 I. +3.5 J. -1.0

A. INELASTIC B. ELASTIC C. INELASTIC D. PERFECTLY INELASTIC E. PERFECTLY ELASTIC F. INELASTIC G. UNIT ELASTIC H. ELASTIC I. ELASTIC J. UNIT ELASTIC

15. In the immediate market period, the price elasticity of supply will be perfectly ________ and the supply curve will be ________. Typically, in the short run the price elasticity of supply is ________ elastic, but in the long run the price elasticity of supply is ________ elastic. A. Inelastic, Vertical, Less, More B. Inelastic, Horizontal, More, Less C. Elastic, Vertical, Less, More D. Elastic, Horizontal, More, Less

A. Inelastic, Vertical, Less, More

9. The price elasticity of demand will tend to be greater when the number of substitute goods that are available for the product is ________. A. Larger B. Increasing C. Decreasing D. Smaller

A. Larger

What the price elasticity of supply in the short run? A. Perfectly Inelastic B. Perfectly Elastic C. Perfectly Unit-Elastic D. Elastic

A. Perfectly Inelastic

What does price elasticity of supply in the long-run mean for producers? A. Producers can make adjustments to all inputs to vary production B. Producers cannot make adjustments to all inputs to vary production C. Producers cannot make adjustments to all outputs to vary production D. Producers can make adjustments to all outputs to vary production

A. Producers can make adjustments to all inputs to vary production

37. What does it mean if prices are raised? A. Quantity demanded will decrease & it is inelastic B. Quantity demanded will increase & it is inelastic C. Quantity demanded will decrease & it is elastic D. Quantity demanded will increase & it is elastic

A. Quantity demanded will decrease & it is inelastic

47. Long-Run period has... A. Tremendous flexibility for firm's to adjust their plant sizes/capacities and for new firm's to enter B. Some flexibility to use fixed plant more or less intensively C. No time for producers to respond with a change in "quantity supplied" D. None of these

A. Tremendous flexibility for firm's to adjust their plant sizes/capacities and for new firm's to enter

What does PERFECTLY INELASTIC demand mean? A. A change in price results in a small change in quantity demanded of a product. B. A change in price results in no change in quantity demanded of a product. C. A change in price results in a large change in quantity demanded of a product. D. None of these.

B. A change in price results in no change in quantity demanded of a product

Why doesn't the price elasticity of supply have a total revenue test? A. Because price and total revenue don't move in the same direction of the degree of price elasticity of supply. B. Because price and total revenue move in the same direction regardless of the degree of price elasticity of supply.

B. Because price and total revenue move in the same direction regardless of the degree of price elasticity of supply.

9. According to the textbook, which of the following products is considered to be "inelastic"? A. Motor Vehicle B. Cigarettes C. Restaurant Meals D. Fresh Peas

B. Cigarettes

3. Which is not a "determinant of price elasticity of demand"? A. Time B. Consumer Tastes C. Substitutability D. Proportion of Income

B. Consumer Tastes

6. If a firm's price decreases from $4 to $2 and its "quantity demanded" increases from 10 to 30 units, the "price elasticity of demand" coefficient for this firm would equal... (Note use the midpoint formula and take the absolute value of your answer) A. .67 B. 1.00 C. 1.50 D. 2.25

C. 1.50 Po = $4.00 Pmid = 3.00 P1= $2.00 (decrease) Change in Price = -$2.00 % Change in Price = Change in Price / Price Midpoint % Change in Price = -$2.00 / $3.00 = -0.666 Qo = 10 units Qmid = 20 Q1 = 30 units (increase) Change in Quantity = +20 units % Change in Quantity = Change in Quantity / Quantity Midpoint % Change in Quantity = +20 / 20 = +1.00 Use price elasticity of demand formula... Ed = % Change in Quantity / % Change in Price Ed = +1.00 / -0.666 = -1.50

48. Cross elasticity is... A. Between 6 products B. Between 4 products C. Between 2 Products D. Not between any products

C. Between 2 Products Substitue Goods: Positive (+) Coefficient Complementary Goods: Negative (-) Coefficient

36. If inelastic you want to... A. Leave Price Alone B. Lower Prices C. Raise Prices D. All of the above

C. Raise Prices

11. During a recession, the quantity demanded for which product is likely to be most affected by the decline in consumer incomes? A. Buying of Ketchup B. Purchasing Toothpaste C. Sales of Toilet Paper D. Meals bought at Restaurants

D. Meals bought at Restaurants

What is the price elasticity of supply in the long-run? A. Price Inelastic B. Inelastic C. Price Unit-Elastic D. Price Elastic

D. Price Elastic

Which statement is false about the relationship between price elasticity of demand and total revenue? A. When demand price is ELASTIC, as price declines and quantity increases along the demand curve, total revenue increases in the total revenue graph. B. When demand is price INELASTIC, as price declines and quantity increases along the demand curve, total revenue decreases. C. When demand is UNIT-ELASTIC, as price and quantity change along the demand curve, total revenue remains the same. D. There are no false statements.

D. There are no false statements. DEMAND $ = ELASTIC $ Declines, QTY Increases = Total Revenue Increases DEMAND $ = INELASTIC $ Declines, QTY Increases = Total Revenue Decreases DEMAND = UNIT-ELASTIC Price & QTY both change = Total Revenue Remains the SAME

If demand is ELASTIC, will there be a decrease or increase in price? Will it decrease or increase total revenue?

DEMAND = ELASTIC: Price will decrease. Total Revenue will decrease.

If demand is INELASTIC, will there be a decrease or increase in price? Will it decrease or increase total revenue?

DEMAND = INELASTIC: Decrease in price = Decrease in total revenue Increase in price = Increase in total revenue

40. Slope measures elasticity. True or False?

FALSE.

You should judge the price elasticity of demand based on the slope of the demand curve. True or False?

FALSE. You should NOT judge the price elasticity of demand based on the slope of the demand curve UNLESS it is horiztonal (perfectly elastic) or vertical (perfectly inelastic).

21. If the percentage change in price is greater than the percentage change in quantity demanded, the price elasticity coefficient is greater than 1. True or False?

False

23. A product with a price elasticity of demand equal to 1.5 described as price inelastic. True or False?

False

46. If, when the price of a product rises from $1.50 to $2, the quantity demanded of the product decreases from 1,000 to 900, the price elasticity of demand coefficient, using the midpoint formula, is... A. 3.00 B. 2.71 C. 0.37 D. 0.33

Po = $1.50 Pmid = 1.75 P1= $2.00 (increase) Change in Price = + $0.50 % Change in Price = Change in Price / Price Midpoint % Change in Price = +.50 / 1.75 = 0.285 Qo = 1,000 units Qmid = 950 Q1 = 900 units (decrease) Change in Quantity = -100 % Change in Quantity = Change in Quantity / Quantity Midpoint % Change in Quantity = -100/950 = -0.105 Use price elasticity of demand formula... Ed = % Change in Quantity / % Change in Price Ed = - 0.105 / 0.285 = - 0.368 C. 0.37

What are the four determinants for the price elasticity of demand? A. Time, Luxury vs. Necessity, Proportion of Income, Substitutability B. Consumer Tastes/Preferences, Time, Proportion of Income, Substitutability C. Prices of Related Goods, Consumer Expectations about Prices and Incomes, Consumer Tastes/Preferences, Luxury vs. Necessity D. Prices of Related Goods, Consumer Expectations about Prices and Incomes, Consumer Tastes/Preferences, Number of Consumers

A. Time, Luxury vs. Necessity, Proportion of Income, Substitutability

What formula would you use to find the Price Elasticity of Supply? A. Ed = % Change in "QTY Demanded" (Prod. x) DIVIDED by % Change in "Price" (Prod. x) B. Es = % Change in "QTY Supplied" (Prod. x) DIVIDED by % Change in "Price" (Prod. x) C. Ed-Cross = % Change in Quantity (Prod. y) DIVIDED by % Change in "Price" (Prod. x) D. Ed-Income = % Change in Quantity (Prod. a, b, etc.) DIVIDED by % Change in Income

B. Ed = % Change in "QTY Supplied" (Prod. x) DIVIDED by % Change in "Price" (Prod. x)

47. If a 1% fall in the price of a product causes the quantity demanded of the product to increase by 2%, demand is... A. Inelastic B. Elastic C. Unit-Elastic D. Perfectly Elastic

B. Elastic

The __________ measures the effect of a change in income on the quantity demanded of a product. A. Cross Elasticity of Demand B. Income Elasticity of Demand C. Price Elasticity of Supply D. Price Elasticity of Demand

B. Income Elasticity of Demand

When QUANTITY DEMANDED is relatively UNRESPONSIVE to a price change, demand is said to be... A. Elastic B. Inelastic C. Unit Elastic D. Perfectly Elastic

B. Inelastic

1. If a relatively large change in the price results in a relatively small change in quantity demanded, demand is _________. If a relatively small change in price results in a relatively large change in quantity demanded, demand is _______. A. Elastic, Inelastic B. Inelastic, Elastic C. Unit-Elastic, Inelastic D. Elastic, Unit-Elastic

B. Inelastic, Elastic

4. If a change in price causes no change in quantity demanded, demand is perfectly _________ and the demand curve is ________. If an extremely small change in price causes an extremely large change in quantity demanded, demand is perfectly _______ and the demand curve is __________. A. Elastic, Horizontal, Inelastic, Vertical B. Inelastic, Vertical, Elastic, Horizontal C. Horizontal, Elastic, Vertical, Inelastic D. Vertical, Inelastic, Horizontal, Elastic

B. Inelastic, Vertical, Elastic, Horizontal

12. The price elasticity of demand will tend to be greater when the time period under consideration for a change in quantity is _________. A. Shorter B. Longer

B. Longer

38. If elastic you want to... A. Leave Price Alone B. Lower Prices C. Raise Prices D. All of the above

B. Lower Prices

11. The price elasticity of demand will tend to be greater when a product is considered to be a _________. A. Necessity B. Luxury

B. Luxury

48. Compared to the lower-right portion, the upper-left portion of the most demand demand curves tends to be... A. More Inelastic B. More Elastic C. Unit-Elastic D. Perfectly Inelastic

B. More Elastic

7. Compared to the lower-right portion, the upper-left portion of most demand curves tend to be... A. More Inelastic B. More Elastic C. Unit Elastic D. Perfectly Inelastic

B. More Elastic

4. The income elasticity of demand for an inferior good is __________. A. Positive B. Negative C. 0 D. Infinity

B. Negative

What does price elasticity mean to in the short-run? A. Producers have lots of flexibility to change output in response to a change in price because they have fixed inputs that they cannot change. B. Producers have less flexibility to change output in response to a change in price because they have fixed inputs that they cannot change. C. Producers have lots of flexibility to change input in response to a change in price because they have fixed outputs that they cannot change. D. Producers have less flexibility to change input in response to a change in price because they have fixed outputs that they cannot change.

B. Producers have less flexibility to change output in response to a change in price because they have fixed inputs that they cannot change

46. Short-Run period has... A. Tremendous flexibility for firm's to adjust their plant sizes/capacities and for new firm's to enter B. Some flexibility to use fixed plant more or less intensively C. No time for producers to respond with a change in "quantity supplied" D. None of these

B. Some flexibility to use fixed plant more or less intensively

43. UNITARY ELASTIC - Price & "Total Revenue" do which of the following... A. Change in opposite directions B. Stay the same C. Change in the same direction D. All of the above

B. Stay the same

18. When the cross elasticity of demand is positive, two products are ___________, but when the cross elasticity of demand is negative, they are ___________. A. Complements, Substitutes B. Substitutes, Complements

B. Substitutes, Complements

What the price elasticity of supply depend on? A. The amount of time customers have to buy products B. The amount of time sellers have to adjust to a price change C. The amount of time sellers have to get rid of all their product D. None of these

B. The amount of time sellers have to adjust to a price change

5. Two characteristics of the price elasticity of a linear demand curve are that elasticity (is constant, varies) ______ over the different price ranges and that the slope is (a sound, unsound) _______ basis for judging its elasticity. A. Constant, A Sound B. Varies, An Unsound C. A Sound, Varies D. Unsound, Constand

B. Varies, Unsound.

19. When a percentage change in the price of one product has no effect on another product , then the cross elasticity of demand will be ___________ and the two products would be classified as being ___________. A. Zero, Dependent B. Zero, Independent C. One, Dependent D. One, Independent

B. Zero, Independent

2. The midpoint formula for the price elasticity of demand uses the _______ of the two quantities as a reference point in calculating the percentage change in quantity and the _______ of the two prices as a reference point in calculating the percentage change in price. A. Total, Average B. MidPoint, Total C. Average, Average D. MidPoint, Average

C. Average, Average

42. INELASTIC - Price & "Total Revenue" do which of the following... A. Change in opposite directions B. Stay the same C. Change in the same direction D. All of the above

C. Change in the same direction

What formula would you use to find the Price Elasticity of Demand? A. Es = % Change in "QTY Supplied" (Prod. x) DIVIDED by % Change in "Price" (Prod. x) B. Ed-Cross = % Change in Quantity (Prod. y) DIVIDED by % Change in "Price" (Prod. x) C. Ed = % Change in "QTY Demanded" (Prod. x) DIVIDED by % Change in "Price" (Prod. x) D. Ed-Income = % Change in Quantity (Prod. a, b, etc.) DIVIDED by % Change in Income

C. Ed = % Change in "QTY Demanded" (Prod. x) DIVIDED by % Change in "Price" (Prod. x)

What is the elasticity coefficient for elastic demand? A. Equal to 0 B. Less than 1 but greater than 0 C. Greater than 1 D. Infinity

C. Greater than 1

10. A "near zero (0) cross elasticity coefficient occurs" when the two products are... A. Substitutes B. Complements C. Independent D. Perfectly Inelastic

C. Independent

13. The demand for most farm products is highly _________, which means that large crop yields will most likely ________ the total revenue of farmers. Government often tax products such as liquor, gasoline, and cigarettes because the price elasticity of demand is ________. A higher tax on such products will ________ tax revenue. A. Elastic, Decrease, Elastic, Decrease B. Inelastic, Increase, Inelastic, Increase C. Inelastic, Decrease, Inelastic, Increase D. Elastic, Decrease, Inelastic, Increase

C. Inelastic, Decrease, Inelastic, Increase

45. Market period is has... A. Tremendous flexibility for firm's to adjust their plant sizes/capacities and for new firm's to enter B. Some flexibility to use fixed plant more or less intensively C. No time for producers to respond with a change in "quantity supplied" D. None of these

C. No time for producers to respond with a change in "quantity supplied"

20. If consumers increase purchases of a product as consumer incomes increase, then a good is classified as ________, but if consumers decrease purchases of a product as consumer incomes increase, then a good is classified as ________. A. Inferior, Normal B. Substitute, Inferior C. Normal, Inferior D. Normal, Substitutes

C. Normal, Inferior

3. The price elasticity formula is based on ___________ because it avoids the problems caused by the arbitrary choice of unit and permits meaningful comparisons of consumer ______________ to changes in the prices of different products. A. Absolute Amounts, Incomes B. Responsiveness, Incomes C.Percentages, Responsiveness D. Absolute Amounts, Percentages

C. Percentages, Responsiveness

The __________ is a measure of the sensitivity of quantity supplied to changes in the price of a product. A. Cross Elasticity of Demand B. Income Elasticity of Demand C. Price Elasticity of Supply D. Price Elasticity of Demand

C. Price Elasticity of Supply

When does unit elasticity occur? A. When the percentage change in quantity supplied is greater than the percentage change in price. B. When the percentage change in quantity supplied is less than the percentage change in price. C. When the percentage change in quantity demanded is equal to the percentage change in price. D. When the percentage change in quantity demanded is greater than the percentage change in price.

C. When the percentage change in quantity demanded is equal to the percentage change in price.

When does inelastic demand occur? A. When the percentage change in quantity supplied is greater than the percentage change in price. B. When the percentage change in quantity supplied is less than the percentage change in price. C. When the percentage change in quantity demanded is less than the percentage change in price. D. When the percentage change in quantity demanded is greater than the percentage change in price.

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

49. 5. In which range of the demand schedule is demand price inelastic? PRICE: $11, $9, $7, $5, $3 QUANTITY DEMANDED: 50, 100, 200, 300, 400 A. $11 - $9 B. $9 - $7 C. $7 - $5 D. $5 - $3

D. $5 - $3

5. Which "price elasticity of demand" coefficient is more elastic? A. -.20 B. -1 C. -5 D. -10

D. -10

Which of the following are true about the graph of a linear demand curve and price elasticity of demand? A. It is not the same at all prices. Demand is typically elastic at higher prices and inelastic at lower prices. B. It cannot be judged from the slope of the demand curve. C. It can be judged from the slope of the demand curve. D. A & B

D. A & B

What does PERFECTLY ELASTIC demand mean? A. A large change in price causes buyers to not want to purchase all they desire of a product. B. A large change in price causes buyers to purchase all they desire of a product. C. A small change in price causes buyers to not purchase all they desire of a product. D. A small change in price causes buyers to purchase all they desire of a product.

D. A small change in price causes buyers to purchase all they desire of a product.

44. Which of the following are applications of price elasticity of demand? A. Large crop yields (i.e. "Bumper Crops") B. Excise Taxes C. Decriminalization of illegal drugs (i.e. Legalize Drugs) D. All of the above

D. All of the above

What does the total revenue test show? A. When demand is ELASTIC, a decrease in price will decrease total revenue. B. When demand is INELASTIC, a decrease in price will decrease total revenue and an increase price will increase total revenue. C. When demand UNIT-ELASTIC, an increase or decrease in price will NOT affect total revenue. D. All of the above

D. All of the above

Which statement is a CROSS ELASTICITY of demand? A. Positive for products that are substitutes B. Negative for products that are complements C. Zero or near zero for products that are unrelated or independent. D. All of the above

D. All of the above CROSS ELASTICITY: + for substitutes - for compliments 0 for unrelated/independent

Which statements are INCOME ELASTICITY of demand? A. Negative for products that are complements B. Positive for normal or superior products C. Negative for inferior products D. B & C

D. B & C INCOME ELASTICITY: + for normal/superior products = more normal/superior goods are demanded as income rises. - for inferior products = less demand for inferior goods as income rises.

49. Income elasticity is based on... A. Changes at school B. Changes at the mall C. Changes at your moms house D. Changes in Income

D. Changes in Income Normal Goods: Positive (+) Coefficient Inferior Goods: Negative (-) Coefficient

16. There is a total-revenue test for the elasticity of _________. There is no total-revenue test of the elasticity of _________ because regardless of the degree of elasticity, price and total revenue are _________ related. A. Supply, Supply, Indirectly B. Supply, Demand, Directly C. Demand, Demand, Indirectly D. Demand, Supply, Directly

D. Demand, Supply, Directly

What formula would you use to find the Cross Elasticity of Demand? A. Ed-Income = % Change in Quantity (Prod. a, b, etc.) DIVIDED by % Change in Income B. Es = % Change in "QTY Supplied" (Prod. x) DIVIDED by % Change in "Price" (Prod. x) C. Ed = % Change in "QTY Demanded" (Prod. x) DIVIDED by % Change in "Price" (Prod. x) D. Ed-Cross = % Change in Quantity (Prod. y) DIVIDED by % Change in "Price" (Prod. x)

D. Ed-Cross = % Change in Quantity (Prod. y) DIVIDED by % Change in "Price" (Prod. x)

39. What does it mean if quantity demanded increases? A. It's elastic and prices will increase B. It's inelastic and prices will increase C. It's inelastic and prices will decrease D. It's elastic and prices will decrease

D. It's elastic and prices will decrease

What is the elasticity coefficient for inelastic demand? A. Equal to 0 B. Less than 1 but greater than 0 C. Greater than 1 D. Less than 1

D. Less than 1

1. The __________ measures the responsiveness (or sensitivity) of consumers' demand to a price change. A. Cross Elasticity of Demand B. Income Elasticity of Demand C. Price Elasticity of Supply D. Price Elasticity of Demand

D. Price Elasticity of Demand

14. The price elasticity of supply measures the percentage change in ________ divided by the percentage change in ________. The most important factor affecting the price elasticity of supply is ________. It is easier to shift resources to alternative uses when there is _______ time. A. Price, Quantity Supplied, Less, Time B. Price, Quantity Supplied, More, Less C. Quantity Supplied, Price, Time, Less D. Quantity Supplied, Price, Time, More

D. Quantity Supplied, Price, Time, More

What does the immediate market period mean? A. There is too much time for producers to change output response to a change in price B. There is too much time for producers to change input response to a change in price C. There is too little time for producers to change input response to a change in price D. There is too little time for producers to change output response to a change in price

D. There is too little time for producers to change output response to a change in price

8. What are the four most important determinants of the price elasticity of demand? A. Time, Luxury vs. Necessity, Change in Prices of Related Goods, Change in Consumer Tastes/Preferences B. Change in Technology, Change in Prices of Other Goods, Proportion of Income, Change in Resource Prices C. Change in Consumer Tastes/Preferences, Substitutability, Time D. Time, Luxury vs. Necessity, Proportion of Income, Substitutability

D. Time, Luxury vs. Necessity, Proportion of Income, Substitutability

When does elastic demand occur? A. When the percentage change in quantity supplied is greater than the percentage change in price. B. When the percentage change in quantity supplied is less than the percentage change in price. C. When the percentage change in quantity demanded is less than the percentage change in price. D. When the percentage change in quantity demanded is greater than the percentage change in price.

D. When the percentage change in quantity demanded is greater than the percentage change in price.

If demand is UNIT-ELASTIC, will there be a decrease or increase in price? Will it decrease or increase total revenue?

DEMAND = UNIT-ELASTIC: A decrease/increase in price will NOT affect total revenue.

What is the midpoint formula?

FIND: Price original Price midpoint (Porignal + P1 = ? / 2 = PMidPoint) New Price (also known as P1) Change in Price (However much new price decreased or increased by) % Change in Price = Change in Price/PMidPoint Quantity original Quantity midpoint (Qorignal + Q1 = ? / 2 = QMidPoint New Quantity (also known as Q1) Change in Quantity (However much new quantity decreased or increased by) % Change in Quantity = Change in Quantity / QMidPoint INPUT INTO FORMULA... Ed = % Change in "QTY Demanded" / % Change in Price

24. If the price of a product increases from $5 to $6 and the quantity demanded decreases from 45 to 25, then according to the total-revenue test, the product is price inelastic in this price range. True or False?

False

28. Demand tends to be inelastic at higher prices and elastic at lower prices along a down-sloping linear demand curve. True or False?

False

30.In general, the larger the number of a substitute goods that are available, the less the price elasticity of demand. True or False?

False

33. The more that a good is considered to be a "luxury" rather than a "necessity," the less is the price elasticity of demand. True or False?

False

35. A state government seeking to increase its excise-tax revenues is more likely to increase the tax rate on restaurant meals than on gasoline. True or False?

False

37. If an increase in product price results in no change in the quantity supplied, supply is perfectly elastic. True or False?

False

40. There is a total-revenue test for the elasticity of supply. True or False?

False

41. Cross elasticity of demand is measured by the percentage change in quantity demanded over the percentage change in income. True or False?

False

45. Inferior goods have a positive income elasticity of demand. True or False?

False

There is a total revenue test for price elasticity of supply. True or False?

False. Only price elasticity of demand has the total revenue test.

22. If the quantity demanded for a product increases from 100 to 150 units when the price decreases from $14 to $10, using the midpoint formula, the price elasticity of demand for this product in this price range is 1.2. True or False?

True

25. Total revenue will not change when price changes if the price elasticity of demand is unitary. True or False?

True

26. When the absolute value of the price elasticity coefficient is greater than 1 and the price of the product decreases, then the total revenue will increase. True or False?

True

27. The flatness or steepness of a demand curve is based on absolute changes in price and quantity, while elasticity is based on relative or percentage changes in price and quantity. True or False?

True

29. Price elasticity of demand and the slope of the demand curve are two different things. True or False?

True

31. Other things equal, the higher the price of a good relative to consumers' incomes, the greater the price elasticity of demand. True or False?

True

32. Other things equal, the higher the price of a good relative to the longer the time period, the purchase is considered, the greater the price elasticity of demand. True or False?

True

34. The demand for most agricultural products is price inelastic. Consequently, an increase in supply will reduce the total income of producers of agricultural products. True or False?

True

36. The degree of price elasticity of supply depends on how easily and quickly producers can shift resources between alternative uses. True or False?

True

38. The immediate market period is a time so short that producers cannot respond to a change in demand and price. True or False?

True

39. The price elasticity of supply will tend to be more elastic in the long run. True or False?

True

42. For a substitute product, the coefficient of the cross elasticity of demand is positive. True or False?

True

43. Two products are considered to be independent or unrelated when the cross elasticity of demand is zero. True or False?

True

44. The degree to which consumers respond to a change in their incomes by buying more or less of a particular product is measured by the income elasticity of demand. True or False?

True

The price elasticity of demand and total revenue can be shown by graphing the demand curve and the total revenue curve, one above the other. True or False?

True