4: Elasticity: Quiz

Use the data in the table below to answer the following question. Price | Quantity Demanded $20 | 12 18 | 17 16 | 20 14 | 24 12 | 30 10 | 36 8 | 40 6 | 44 4 | 48 The price elasticity of demand (based on the midpoint formula) when price increases from $14 to $16 is rev: 05_14_2018 Multiple Choice ◉ -3.29. ◉ -1.37. ◉ -1. ◉ -0.33.

-1.37.

Suppose you are given the following demand data for a product. PriceQuantity Demanded$1030940850760670 The price elasticity of demand (based on the midpoint formula) when price increases from $7 to $9 is rev: 05_14_2018 Multiple Choice ◉ -.63. ◉ -1.16. ◉ -1.60. ◉ -2.27.

-1.60.

Use the following graph of demand curves to answer the next question. The vertical axis lists P1 and P2. Five decreasing curves intersect each other at the same point and are labeled D1 through D5, from left to right. The point of intersection connects to the vertical axis at P1 and a point at the curve D5 (above the point of intersection) connects to the vertical axis at P2. For a given change in supply, which demand curve is going to yield the largest change in quantity demanded? rev: 05_14_2018 Multiple Choice ◉ D1 ◉ D3 ◉ D4 ◉ D5

D1

Answer the next question on the basis of the following demand schedule. Price | Quantity Demanded $6 | 1 5 | 2 4 | 3 3 | 4 2 | 5 1 | 6 The price elasticity of demand is unit-elastic (based on the midpoint formula) rev: 05_14_2018 Multiple Choice ◉ throughout the entire price range because the slope of the demand curve is constant. ◉ in the $4 to $3 price range only. ◉ over the entire $3 to $1 price range. ◉ over the entire $6 to $4 price range.

in the $4 to $3 price range only.

Use the figure below, and the regular percentage change formula, to answer the following question: An increasing line, labeled supply is drawn with data points (5, 2) and (7, 10). The data points connects to both the axes with dotted straight lines Assume that price decreases from $10 to $2. The price elasticity of supply is about rev: 05_14_2018, 04_20_2020_QC_CS-207159 Multiple Choice ◉ 4 and supply is elastic. ◉ 1 and supply is unit-elastic ◉ 1.25 and supply is elastic. ◉ 0.36 and supply is inelastic.

0.36 and supply is inelastic.

If the price elasticity of demand for a product is equal to -0.5, then a 10 percent decrease in price will increase quantity demanded by rev: 05_14_2018 Multiple Choice ◉ 20%. ◉ 0.5%. ◉ 5%. ◉ 0.05%.

5%.

Answer the next question on the basis of the following demand schedule. Price | Quantity Demanded $6 | 1 5 | 2 4 | 3 3 | 4 2 | 5 1 | 6 Which of the following is correct? rev: 05_14_2018 Multiple Choice ◉ Although the slope of the demand curve is constant, price elasticity of demand goes from elastic to inelastic as we move from high to low price ranges. ◉ Although the slope of the demand curve is constant, price elasticity of demand goes from inelastic to elastic as we move from high to low price ranges. ◉ Although the demand curve is convex to the origin, price elasticity of demand is constant throughout. ◉ A steep slope means demand is relatively inelastic; a flat slope means demand is relatively elastic.

Although the slope of the demand curve is constant, price elasticity of demand goes from elastic to inelastic as we move from high to low price ranges.

Consider the parallel demand curves in the following graph to answer the question. The vertical axis lists P1. Two parallel decreasing curves from (0, B) to (B, 0) and (0, A) to (A, 0) are drawn above p1 at the vertical axis. Which curve is relatively more elastic at P1? rev: 05_14_2018 Multiple Choice ◉ AA ◉ BB ◉ It cannot be determined. ◉ Both have the same slope; therefore both have the same elasticity.

BB

Use the following graph to answer the question below. The horizontal axis ranges from Q1 through Q4 and the vertical axis ranges from P1 through P4. A decreasing line is labeled demand. The data points at the demand curve (Q1, P4), (Q2, P3), (Q3, P2), and (Q4, P1) connects to both the axes with dotted lines, forming 10 squares. From left to right and top to bottom, the squares are labeled A, B, C, and D; E, F and G; H and I; and J. If the price increases from P1 to P2, then the total revenue will gain areas rev: 05_14_2018 Multiple Choice ◉ B + E, but it will lose areas H + I + J. ◉ C + F + H, but it will lose area J. ◉ E + F + G, but it will lose area J. ◉ A + B + C, but it will lose areas G + I + J.

C + F + H, but it will lose area J.

Demand is said to be inelastic when rev: 05_14_2018 Multiple Choice ◉ an increase in price results in a reduction in total revenue. ◉ a reduction in price results in an increase in total revenue. ◉ a reduction in price results in a decrease in total revenue. ◉ the absolute value of the price elasticity of demand exceeds 1.

a reduction in price results in a decrease in total revenue.

The price elasticity of demand of a linear demand curve is rev: 05_14_2018 Multiple Choice ◉ elastic in high-price ranges and inelastic in low-price ranges. ◉ elastic but does not change at various points on the curve. ◉ inelastic but does not change at various points on the curve. ◉ 1 at all points on the curve.

elastic in high-price ranges and inelastic in low-price ranges.

If a 5% cut in the price of a product causes the quantity demanded to rise by 10%, the demand is rev: 05_14_2018 Multiple Choice ◉ inelastic. ◉ elastic. ◉ unit elastic. ◉ perfectly elastic.

elastic.

Use the figure below to answer the following question. Three increasing curves labeled S1, S2, and S3 intersects two decreasing curves labeled D1 and D2. S1 and S2 (to the left of S1) intersects D1, D2, and S3. S3 (to the left of S2) is a straight line perpendicular to the horizontal axis and intersects all four curves. The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate period, the short run, and the long run. In the long run, the increase in demand will rev: 05_14_2018 Multiple Choice ◉ have no effect on either equilibrium price or quantity. ◉ increase equilibrium price but not equilibrium quantity. ◉ increase equilibrium quantity but not equilibrium price. ◉ increase both equilibrium price and quantity.

increase both equilibrium price and quantity.

Use the figure below to answer the following question. Three increasing curves labeled S1, S2, and S3 intersects two decreasing curves labeled D1 and D2. S1 and S2 (to the left of S1) intersects D1, D2, and S3. S3 (to the left of S2) is a straight line perpendicular to the horizontal axis and intersects all four curves. The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate period, the short run, and the long run. In the immediate period, the increase in demand will rev: 05_14_2018 Multiple Choice ◉ have no effect on either equilibrium price or quantity. ◉ increase equilibrium price but not equilibrium quantity. ◉ increase equilibrium quantity but not equilibrium price. ◉ increase both equilibrium price and quantity.

increase equilibrium price but not equilibrium quantity.

When the price of a product is increased 15%, the quantity demanded decreases 10%. We can therefore conclude that the demand for this product is rev: 05_14_2018 Multiple Choice ◉ elastic. ◉ inelastic. ◉ cross-elastic. ◉ unitary elastic.

inelastic.

The price elasticity of demand is a measure of the Multiple Choice ◉ effect of changes in demand on the price. ◉ relationship between price and profitability. ◉ responsiveness of buyers of a good to changes in its price. ◉ sensitivity of a good's price to changes in demand.

responsiveness of buyers of a good to changes in its price.

Economists distinguish among the immediate period, the short run, and the long run by noting that rev: 05_14_2018 Multiple Choice ◉ supply is most elastic in the short run and perfectly inelastic in the immediate period. ◉ demand is most elastic in the long run and perfectly inelastic in the immediate period. ◉ supply is most elastic in the long run and perfectly inelastic in the immediate period. ◉ supply is most elastic in the short run and perfectly inelastic in the long run.

supply is most elastic in the long run and perfectly inelastic in the immediate period.

The main reason for the high price of antiques is that rev: 05_14_2018 Multiple Choice ◉ supply is relatively elastic and demand tends to increase over time. ◉ supply is relatively inelastic and demand tends to increase over time. ◉ demand is relatively elastic and supply tends to increase over time. ◉ demand is relatively inelastic and supply tends to increase over time.

supply is relatively inelastic and demand tends to increase over time.

We would expect rev: 05_14_2018 Multiple Choice ◉ the demand for Coca-Cola to be relatively more inelastic than the demand for soft drinks in general. ◉ the demand for Coca-Cola to be relatively more elastic than the demand for soft drinks in general. ◉ no relationship between the price elasticity of demand for Coca-Cola and the price elasticity of demand for soft drinks in general. ◉ none of these to hold true.

the demand for Coca-Cola to be relatively more elastic than the demand for soft drinks in general.

It takes a considerable amount of time to increase the production of pork. This implies that rev: 05_14_2018 Multiple Choice ◉ a change in the demand for pork will not affect its price in the short run. ◉ the short-run supply curve for pork is relatively less elastic than the long-run supply curve for pork. ◉ an increase in the demand for pork will elicit a larger supply response in the short run than in the long run. ◉ the long-run supply curve for pork is relatively less elastic than the short-run supply curve for pork.

the short-run supply curve for pork is relatively less elastic than the long-run supply curve for pork.