Assignment 3

The price elasticity of demand at point A is: a) 5/2. b) 5/8. c) 2/5. d) 8/5.

a) 5/2.

If the price elasticity of demand for a good is greater than one, then the demand for that good is: a) elastic. b) inelastic. c) unit elastic. d) perfectly elastic.

a) elastic.

When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that a) the demand for Joe's regular unleaded gasoline is perfectly elastic. b) the demand for Joe's regular unleaded is inelastic. c) there are not many good substitutes for Joe's regular unleaded gasoline. d) consumers are switching to premium grades of gasoline.

a) the demand for Joe's regular unleaded gasoline is perfectly elastic.

The tendency for consumers to purchase more of a good or service as its price falls is captured by: a) the law of supply. b) the law of increasing cost. c) cross-price elasticity of demand. d) the law of demand.

a) the law of supply.

If 20% increase in the price of a good leads to a 60% decrease in the quantity demanded, then what is the price elasticity of demand? a) 30. b) 3. c) 1/3. d) 1/6.

b) 3.

At point A, demand is: a) inelastic. b) elastic. c) unit elastic. d) perfectly elastic.

b) elastic.

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is: a) negative. b) inelastic. c) elastic. d) unit elastic.

b) inelastic.

If demand is ______ with respect to price, a price increase will ______ total revenue. a) elastic; increase b) inelastic; increase c) unit elastic; decrease d) inelastic; decrease

b) inelastic; increase

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be _______ the flatter curve. a) more elastic than b) less elastic than c) as elastic as d) more likely to be unit elastic than

b) less elastic than

When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically: a) greater than one. b) positive. c) less than one. d) negative.

b) positive.

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that: a) plane tickets are an inferior good. b) the cross-price elasticity between plane tickets and train tickets is positive. c) the cross-price elasticity between plane tickets and train tickets is negative. d) plane tickets and train tickets are complements.

b) the cross-price elasticity between plane tickets and train tickets is positive.

When the price of a doughnut is 25 cents, what is the market demand for doughnuts? a) 9 doughnuts b) 13 doughnuts c) 16 doughnuts d) 20 doughnuts

c) 16 doughnuts

The price elasticity of demand for a good measures the responsiveness of: a) demand to a one percent change in price of that good. b) price to a one percent change in the demand for that good. c) quantity demanded to a one percent change in price of that good. d) price to a one percent change in the quantity demanded of that good.

c) quantity demanded to a one percent change in price of that good.

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50: a) total expenditure would increase. b) total expenditure would stay the same. c) total expenditure would decrease. d) the change in total expenditure, if any, would depend on the supply curve.

c) total expenditure would decrease.

The slope of the demand curve (ignoring the negative sign) is: a) 2. b) 1.5. c) 1. d) 0.5.

d) 0.5.

Refer to the figure below. If Laura and Chris are the only two consumers in this market then at a price of $2.50 per pound, the market demand for hamburger is: a) 1.5 pounds per week b) 3 pounds per week c) 4 pounds per week d) 4.5 pounds per week

d) 4.5 pounds per week

If two products are substitutes, then the: a) income elasticity of demand for both will be high. b) price elasticity of demand for both will be positive. c) cross-price elasticity of demand between them will be negative. d) cross-price elasticity of demand between them will be positive.

d) cross-price elasticity of demand between them will be positive.

The responsiveness of the quantity demanded of one good to a change in the price of a different good is measured by the: a) price elasticity of demand. b) income elasticity of demand. c) price elasticity of supply. d) cross-price elasticity of demand.

d) cross-price elasticity of demand.

If most consumer goods and services are ______, then most income elasticities are ______. a) normal; negative b) inferior; positive c) normal; greater than one d) normal; positive

d) normal; positive

If consumers completely cease purchasing a product when its price increases by any amount, then demand is: a) inelastic. b) perfectly inelastic. c) unit elastic. d) perfectly elastic.

d) perfectly elastic.