Microeconomics: Chapter 6

The income elasticity for peanut butter is −3. This defines peanut butter as what type of good? Question options: a) a good with elastic demand X b) an inferior good c) a good that is a complement for jelly d) a necessity

?

What do economists use the concept of elasticity for? Question options: a) to explain how producers respond to consumers' needs b)to measure how one economic variable responds to changes in another economic variable c)to define the slope of supply and demand curves

?

If you know the value for price elasticity of demand, then which of the following can you compute? Question options: a) the effect of a price change on the quantity demanded b) the responsiveness of the quantity supplied of a good to changes in its price c) the price elasticity of supply d) all of the answers are correct

A

What happens when the quantity demanded is very responsive to changes in price? Question options: a) The percentage change in quantity demanded will be greater than the percentage change in price. b) The percentage change in quantity demanded will be less than the percentage change in price. c) The percentage change in quantity demanded will be equal to the percentage change in price. d) The percentage change in quantity demanded will be unrelated to the percentage change in price.

A

What is the name given to the responsiveness of the quantity supplied of a good to a change in its price? Question options: a) price elasticity of supply b) price elasticity of demand c) income elasticity d) cross-price elasticity

A

How do economists avoid confusion over units in the computation of elasticity? Question options: a) by using index numbers rather than whole numbers b) by using percentage changes rather than simple differences c) by using aggregate values rather than single values d) by using the same number as the value of the slope of the curve

B

What do economists use the concept of elasticity for? Question options: a) to explain how producers respond to consumers' needs b) to measure how one economic variable responds to changes in another economic variable c) to define the slope of supply and demand curves d) all of the answers are correct

B

How is the responsiveness of the quantity demanded to a change in price measured? Question options: a) by dividing the percentage change in the product's price by the percentage change in the quantity demanded of a product b) by multiplying the percentage change in the product's price by the percentage change in the quantity demanded of a product c) by dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price d) by multiplying the percentage change in the quantity demanded of a product by the percentage change in the product's price

C

Which of the following measures is more sensitive to the units chosen for quantity and price? Question options: a) price elasticity of demand b) price elasticity of supply c) the slope of a demand or supply curve d) cross-price elasticity

C

Who benefits from the concept of elasticity? Question options: a) business managers b) policymakers c) both business managers and policymakers d) neither business managers nor policymakers; only economists benefit from it

C

Which of the following is true if quantity demanded is not very responsive to price? Question options: a) The percentage change in quantity demanded will be less than the percentage change in price. b) The price elasticity of demand will be less than 1 in absolute value. c) Demand is inelastic. d) All of the answers are true.

D

Refer to the graph below which shows the demand for DVDs. What happens to total revenue as we move down the demand curve?

It rises up to the midpoint, and then it falls.

Refer to the graph below which shows the demand for DVDs. What happens to price elasticity as we move down the demand curve?

It rises up to the midpoint, and then it falls.?

Fill in the blanks. In general, the price elasticity of demand for a good will be _________ elastic the___________ the share of the good in the average consumer's budget. Question options: a) less; smaller b) more; smaller c) less; larger d) unit; larger

a

Fill in the blanks: An increase in the price of a substitute for iPods will lead to __________ in quantity demanded of iPods, so the cross-price elasticity of demand will be _________. Question options: a) an increase; positive b) an increase; negative c) a decrease; positive d) a decrease; negative

a

If Amazon.com raises its prices by 10 percent and, as a result, the quantity of books demanded on Barnesandnoble.com increases by 35 percent, what do consumers consider the two web sites to be? Question options: a) close substitutes b) close complements c) unrelated d) identical

a

If demand is perfectly elastic, then what is the impact of an increase in price? Question options: a) a decrease in quantity demanded to zero b) no change in quantity demanded c) a change in quantity demanded exactly equal to the change in price d) a very small change in quantity demanded

a

In the graph of demand in the market for DVDs below, when the price is $6, demand a) is elastic. b) is inelastic. c) is unit elastic. d) cannot be determined from the graph. X

a

Refer to the graph below which shows two potential demand curves in the market for photocopies at a printing company. When price falls from $30 to $20, demand is ________ between points A and C on D2 and demand is ________ between points A and B on D1. a) inelastic; elastic b) elastic; elastic c) inelastic; inelastic d) elastic; inelastic

a

The price elasticity of demand for a particular brand of raisin bran is, in absolute value, Question options: a) larger than the price elasticity of demand for all breakfast cereals. b) the same as the price elasticity of demand for all breakfast cereals. c) smaller than the price elasticity of demand for all types of breakfast cereals. d) neither larger nor smaller than the price elasticity of demand for any other type of cereal.

a

What is the cross-price elasticity of demand for two products that are unrelated? Question options: a) zero b) 1 c) infinite d) negative

a

When an increase in the quantity demanded is not large enough to make up for a decrease in price, total revenue falls. Which graph is more applicable to this statement? Question options: a) the graph on the left b) the graph on the right c) both graphs d) neither graph

a

When demand is inelastic, what is the relationship between price and total revenue? Question options: a) They move in the same direction. b) They move in opposite directions. c) They always remain unchanged. d) They are entirely unrelated.

a

When quantity demanded is completely unresponsive to price, what is the value of price elasticity ofdemand? Question options: a) zero b) 1 c) a number between zero and 1 d) a negative number

a

When the percentage change in quantity demanded is greater than the percentage change in price, which of the following is true? Question options: a) The price elasticity of demand will be greater than 1 in absolute value. b) Demand is inelastic. c) There are few substitutes for the good in question. d) All of the answers are true.

a

When the percentage change in quantity demanded is greater than the percentage change in price,which of the following is true? Question options: a) The price elasticity of demand will be greater than 1 in absolute value. b) Demand is inelastic. c) There are few substitutes for the good in question. d) All of the above are true.

a

Which of the following does the midpoint formula use to compute elasticity? Question options: a) the averages of the initial and final quantity and the initial and final price b) the differences between initial and final prices and quantities c) the sums of the initial and final prices and quantities d) the product of the initial and final prices and quantities

a

Which of the following is the most important determinant of price elasticity of demand? Question options: a) the availability of substitutes b) the passage of time c) the difference between necessities and luxuries d) the definition of the market

a

Which of the following is true about the value of the price elasticity of demand? Question options: a) The value is always negative. b) The value is always positive. c) The value may be positive or negative depending on the value of the slope of the demand curve. d) The value is positive when the slope is negative and negative when the slope is positive.

a

If a 20% increase in the price of Red Bull energy drinks results in a decrease in the quantitydemanded of 25%, we say demand for Red Bull is ______________ in this range. Question options: a) inelastic b) elastic c) unit elastic d) vertical

b

If the income elasticity of SUVs is greater than 1, what is the good considered? Question options: a) a necessity b) a luxury c) a substitute good d) an inferior good

b

If we find that the price elasticity of demand for hamburgers is −1.3 while the price elasticity ofdemand for textbooks is −0.6, which of the following can we say is true? Question options: a) The law of demand is violated in both the market for hamburgers and the market for textbooks. b) The demand for hamburgers is more elastic than the demand for textbooks. c) A 10% increase in the price of hamburgers will result in a 13% increase in the quantity of hamburgers demanded. d) Consumers like hamburgers more than they like textbooks.

b

Refer to the graph below which shows two potential demand curves in the market for photocopies at a printing company. Between points A and B on D1, what is the price elasticity of demand? a) -1.2 b) −1.4 c) −0.83 d) −12

b

Refer to the graphs above which show two potential demand curves in the market for photocopies at a printing company. In which of the two graphs does a price decrease lead to an increase in total revenue? Question options: a) in the graph on the left b) in the graph on the right c) in both graphs d) in neither graph

b

Sarah spends 2% of her weekly budget on chewing gum, and she spends 50% of her weekly budget on books. All else equal, we would expect her demand for chewing gum to be Question options: a) more elastic than her demand for books. b) less elastic than her demand for books. c) elastic. d) unit elastic.

b

The median income in the US increased from $30,000 in 1970s to $45,000 in 1990s. Suppose during the same time, wine consumption increased from roughly 200,000 to 500,000 bottles per year. Using the midpoint formula determine which of the following statements is correct. Question options: The income elasticity of demand is 2.14. This implies that wine is a normal good and a luxury

b

What is the effect of a cut in price when demand is inelastic? Question options: a) an increase in total revenue b) a decrease in total revenue c) no effect on total revenue d) a change in total revenue by an amount equal to the cut in price

b

What is true about quantity demanded if a good is considered a necessity? Question options: a) It is very responsive to changes in income. b) It is not very responsive to changes in income. c) It is unrelated to changes in income. d) It is always the same regardless of price changes.

b

When demand is elastic, how will an increase in price affect total revenue? Question options: a) Total revenue will rise. b) Total revenue will fall. c) Total revenue will be unaffected by the change in price. d) Total revenue may rise or fall, but the effect will depend on the size of the price change.

b

Which of the following is true about what happens to the quantity demanded of an inferior good? Question options: a) It rises when income rises. b) It falls when income increases. c) It does not change with changes in price. d) It does not change with changes in income.

b

Which of the following statements about the slope and the price elasticity of demand is correct? Question options: a) The slope is calculated using percentage changes in quantity and price, whereas elasticity is calculated using simple numerical changes. b) The slope is calculated using changes in quantity and price, whereas elasticity is calculated using percentage changes. c) Both the slope and elasticity must be calculated using percentage changes. d) Neither the slope nor the value of elasticity can be calculated using simple numerical changes.

b

Which of the following would occur when calculating price elasticity between two points on a demand curve if we are not using the midpoint formula? Question options: a) The value of elasticity we would get would be the same whether we apply it to price increases or to price decreases. b) We would get a different value for price increases than for price decreases. c) The values we would get would be the same if the demand curve is downward sloping. d) The values would coincide with the value of the slope of the demand curve.

b

If a 20% increase in the price of Red Bull energy drinks results in a decrease in the quantitydemanded of 25%, the price elasticity of demand is Question options: a) −25. b) −0.8. c) −1.25. d) −20.

c

If the quantity demanded of a good increases as income increases, then that good must be which ofthe following? Question options: a) a necessity b) a luxury c) a normal good d) an inferior good

c

Refer to the graph above which shows two potential demand curves in the market for photocopies at a printing company. If you start at point A on D1, what is the percentage change in quantity demanded when price falls from $30 to $20? Use the midpoint formula to calculate this percentage change. Question options: a) quantity demanded rises by 22% b) quantity demanded rises by 4% c) quantity demanded rises by 55% d) quantity demanded falls by 40%

c

Refer to the graph below which shows two potential demand curves in the market for photocopies at a printing company. If you start at point A on D1, what is the percentage change in quantity demanded when the price falls from $30 to $20? Use the midpoint formula to calculate this percentage change. a) quantity demanded rises by 22% b) quantity demanded rises by 4% c) quantity demanded rises by 55% d) quantity demanded rises by 40%

c

When demand increases, equilibrium price will rise ____________ when supply is _________ elastic. Question options: more; more less; less more; less None of the above. Supply elasticity does not affect the impact of a shift in demand on the equilibrium price.

c

Fill in the blanks: An increase in the price of a complement for DVDs will lead to _________ in the quantity demanded of DVDs, so the cross-price elasticity of demand will be _________. Question options: a) an increase; positive b) an increase; negative c) a decrease; positive d) a decrease; negative

d

Suppose that an innovation in harvesting technology increases the supply of corn. Corn farmers will experience an increase in total revenue when Question options: a) the supply of corn is inelastic. b) the supply of corn is elastic. c) the demand for corn is inelastic. d) the demand for corn is elastic.

d

What is total revenue? Question options: a) the total amount of funds a firm receives from selling a good or service b) an amount calculated by multiplying price per unit by the number of units sold c) an amount that increases when price increases if demand is inelastic d) all of the answers are correct

d

When is a change in price exactly offset by a proportional change in quantity demanded, leaving revenue unaffected? Question options: a) never b) when demand is elastic c) when demand is inelastic d) when demand is unit elastic

d

Which of the following is a true statement? Question options: a) The fewer substitutes available for a product, the greater the price elasticity of demand. b) The more time that passes, the more inelastic the demand for a product becomes. c) The demand curve for a luxury is less elastic than the demand curve for a necessity. d) The more narrowly defined a product is, the larger the price elasticity of demand.

d

Which of the following is a true statement? Question options: a) The more substitutes available for a product, the greater the price elasticity of demand. b) The more time that passes, the more elastic the demand for a product becomes. c) The demand curve for a luxury is more elastic than the demand curve for a necessity. d) All of the answers are true.

d