Quiz 4 - Elasticity
What is the price elasticity of demand for designer shoes if for every 20% price increase clothing demand decreases by 5%. The price elasticity of demand would be 1) -.5; inelastic 2) -4; elastic 3) -.25; inelastic
-.25; inelastic
Which of these questions is the best example of elasticity? 1) How much will a change in price or quantity impact consumer and producer behavior? 2) What is the least amount of goods a supplier can produce without upsetting the customers? 3) How will a change in consumer behavior affect the overall consumer experience?
How much will a change in price or quantity impact consumer and producer behavior?
Elasticity measures the behavioral response of economic agents in a given situation. Which of the following questions is likely to be answered using elasticity? 1) If a business raises its prices, will that have a large or small impact on demand? 2) If hot dogs go on sale, will it affect the price of bread? 3) If you get a pay raise, are you more productive at work?
If a business raises its prices, will that have a large or small impact on demand?
What is the name of the method that uses the average price and average quantity to calculate elasticity? 1) The percent change approach 2) The midpoint (arc) elasticity approach 3) The point elasticity approach
The midpoint (arc) elasticity approach
What happens to total revenue (TR) if the price decreases on a product with demand that is price inelastic? 1) Total revenue will rise. 2) Total revenue will fall. 3) Total profit will remain the same.
Total revenue will fall.
If a tobacco farmer has inelastic demand and voluntarily does not plant tobacco on 15% of their land then what scenario would happen? 1) Total revenues would decrease. 2) Consumers would buy more tobacco 3) Total revenues would increase.
Total revenues would increase.
The demand for cigarettes is highly inelastic. This suggests that the incidence of a higher tax on cigarettes will fall primarily on 1) cigarette sellers. 2) government. 3) cigarette consumers.
cigarette consumers.
In a market with relatively inelastic demand, if the supply curve shifts due to a fall in production costs, the equilibrium price will ________ by ________ than equilibrium quantity. 1) decrease; more 2) increase; less 3) decrease; less
decrease; more
Demand is ________ if a small change in price creates a large change in demand. 1) inelastic 2) elastic 3) stagnant
elastic
Supply is said to be ________ when the quantity supplied is very responsive to changes in price. 1) inelastic 2) unit elastic 3) elastic
elastic
Elasticity refers to 1) how responsive one variable is to changes in another. 2) how frequently a demand curve or supply curve changes slope. 3) how long it takes a market to reach equilibrium.
how responsive one variable is to changes in another.
Demand is ________ if a large change in price causes a small change in demand. 1) stagnant 2) elastic 3) inelastic
inelastic
If a product is considered ________, then higher costs can be passed on to the consumer. 1) inelastic 2) elastic 3) perfectly elastic
inelastic
If demand is ________, an increase in price also causes an increase in total revenue. 1) inelastic. 2) elastic. 3) unit elastic.
inelastic.
If you have a graph of the supply and demand for salt and calculate that the % change in quantity divided by the % change in price is greater than 1, it is considered 1) unitary. 2) inelastic. 3) elastic.
inelastic.
Adult workers are assumed to have ________ labor supply and teenage workers are assumed to have ________ labor supply. 1) elastic; inelastic 2) elastic; elastic 3) inelastic; elastic
inelastic; elastic
A person who takes life-saving prescription drugs most likely has a(n) ________demand for that drug. Therefore an increase in the price of the drug will result in ________ total revenue for the drug company. 1) inelastic; decreased 2) inelastic; increased 3) elastic; increased
inelastic; increased
When income increases and the demand for a good increases, the good is considered a 1) normal good. 2) inferior good. 3) complementary good.
normal good.
The elasticity of supply is defined as the ________ change in quantity supplied divided by the ________ change in price. 1) total; percentage 2) marginal; percentage 3) percentage; percentage
percentage; percentage
The cross-price elasticity of demand is ________ for substitute goods and ________ for complementary goods. 1) negative; positive 2) positive; negative 3) positive; positive
positive; negative
When a good is perfectly inelastic the 1) product varies when there is a change in price. 2) product graph is a perfectly horizontal line. 3) product does not vary when there is a change in price.
product does not vary when there is a change in price.
The price elasticity of demand measures the responsiveness of 1) quantity demanded to a change in quantity supplied. 2) price to a change in quantity demanded. 3) quantity demanded to a change in price.
quantity demanded to a change in price.
If buyers do not respond much to a change in price, then demand is considered 1) relatively elastic. 2) fairly elastic. 3) relatively inelastic
relatively inelastic
If consumers find cola and iced tea to be substitute goods, then it is likely that 1) the goods' price elasticities of demand are less than one. 2) the goods' income elasticities are less than zero. 3) the goods' cross-price elasticities are greater than zero.
the goods' cross-price elasticities are greater than zero.
When a 5% increase in income causes a 3% drop in quantity demanded of a good 1) the income elasticity is .6 and the good is an inferior good. 2) the cross-price elasticity is .6 and the good is an inferior good. 3) the income elasticity is 1.67 and the good is a normal good.
the income elasticity is .6 and the good is an inferior good.
The equation for calculating the price elasticity of demand 1) does not use percent change in the numerator and denominator. 2) uses percent change in both the numerator and denominator. 3) takes into account slope.
uses percent change in both the numerator and denominator.