Chapter 5 Econ Quiz
For which of the following goods would demand be most elastic?
Tommy Hilfiger jeans
When demand is inelastic, a decrease in price will cause
a decrease in total revenue
Refer to Figure 5-7. If rectangle D is larger than rectangle A, then
a.demand is elastic between prices P1 and P2. b.a decrease in price from P2 to P1 will cause an increase in total revenue. c.the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. d.All of the above are correct.
Demand is said to be inelastic if
the quantity demanded changes only slightly when the price of the good changes.
Refer to Figure 5-7. Total revenue when the price is P2 is represented by the area(s)
A + B
Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why?
A. Water or Diamonds B. Insulin or Nasal Decongestant Spray C. Food in General or Breakfast Cereal D. gas over the course of the week or gas over the course of the year E. Personal Computers or IBM Personal Computers
Refer to Figure 5-7. Total revenue when the price is P1 is represented by the area(s)
B + D
For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
The good is a luxury.
A perfectly elastic demand implies that
any rise in price above that represented by the demand curve will result in a quantity demanded of zero
If demand is inelastic, then
buyers do not respond much to a change in price
Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because
buyers tend to be much more sensitive to a change in price when given more time to react
Eric produces jewelry boxes. If the demand for jewelry boxes is elastic and Eric wants to increase his total revenue, he should
decrease the price of his jewelry boxes
An increase in price causes an increase in total revenue when
demand is inelastic
For a good that is a necessity,
demand tends to be inelastic
Holding all other forces constant, if raising the price of a good leads to a fall in total revenue, then the demand for the good must be
elastic
If a person only occasionally buys a cup of coffee, his demand for coffee is probably
elastic
When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bubble gum is
elastic
The demand for Werthers candy is likely
elastic because there are many close substitutes for Werthers
Other things equal, the demand for a good tends to be more inelastic, the
fewer the available substitutes
The case of perfectly elastic demand is illustrated by a demand curve that is
horizontal
In general, elasticity is a measure of
how much buyers and sellers respond to changes in market conditions
A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is
inelastic
In any market, total revenue is calculated by taking the price of the good and
multiplying it by the quantity of the good.
The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because
other flavors of ice cream are good substitutes for this particular flavor
Jean-Paul says that he will spend exactly 75 cents a day on M&Ms, regardless of the price of M&Ms. Jean-Paul's demand for M&Ms is
perfectly elastic
Demand is said to be unit elastic if
quantity demanded changes by the same percent as the price
The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, he should
raise the price of the bread sticks
Suppose you are in charge of setting prices at a local sandwich shop. The business needs to increase its total revenue and your job is on the line. If the demand for sandwiches is elastic, you
should decrease the price of sandwiches
For a good that is a luxury, demand
tends to be elastic
it is likely that
the demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general
Which of the following is not a determinant of the price elasticity of demand for a good?
the steepness or flatness of the supply curve for the good