Chapter 5: Elasticity: Measuring Responsiveness

c) 0.5.

If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is: a) 2. b) -0.5. c) 0.5. d) -2.

c. 2.5

Lyft cuts the price of a ride in New York City by 10%. Thereafter, the quantity of rides demanded rises by 25%. What is the price elasticity of demand for Lyft rides? a. 0.4 b. -0.4 c. 2.5 d. -2.5

c. 1.25

Lyft cuts the price of a ride in New York City by 20%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides? a. 0.8 b. -0.8 c. 1.25 d. -1.25

quantity demanded of a good is to changes in income.

Income elasticity of demand measures how responsive the:

product B

(Figure: Demand Curves) The figure shows four different demand curves for four products: A, B, C and D. Which of the products has a perfectly elastic demand curve?

product B

(Figure: Demand Curves) The figure shows four different demand curves for four products: A, B, C and D. Which of the products has the most elastic demand curve?

A

(Figure: Jane's Demand for Medication) It is mandatory for Jane to take several pills of a certain medication each day in order to remain healthy. The medication has no substitutes and is produced by only one pharmaceutical company. Which of the following demand curves represents Jane's demand for the medication?

price elasticity of demand.

A measure of how responsive buyers are to price changes is the:

relatively steep.

If an item is a necessity rather than a luxury, its demand curve will be:

a. bologna

Good M has an income elasticity of demand of -0.7. Which of the following items is good M? a. bologna b. organic eggs c. cruise line tickets d. designer handbags

d. generic-brand toothpaste

Good M has an income elasticity of demand of -0.7. Which of the following items might good M be? a. champagne b. cognac c. organic, fresh juice d. generic-brand toothpaste

d. relatively flat.

If a firm produces a product that has easily available variable inputs, its supply curve will be: a. perfectly elastic. b. perfectly inelastic. c. relatively steep. d. relatively flat.

c) Mary has an inelastic demand for avocados

Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true? a) All consumers in the market have a high demand for avocados. b) Avocados are in large supply in the market. c) Mary has an inelastic demand for avocados. d) Mary has an elastic demand for avocados.

b. vertical; perfectly inelastic

Suppose the percent change in the quantity demanded for water for any price change is zero. The demand curve for water is _____, and the price elasticity of demand is perfectly _____. a. vertical; perfectly elastic b. vertical; perfectly inelastic c. horizontal; perfectly elastic d. horizontal; perfectly inelastic

b) infinity; perfectly elastic

Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____. a) infinity; perfectly inelastic b) infinity; perfectly elastic c) 0; perfectly elastic d) 0; perfectly inelastic

c. infinity; perfectly elastic

Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____. a. 0; perfectly elastic b. 0; perfectly inelastic c. infinity; perfectly elastic d. infinity; perfectly inelastic

b) more elastic

Suppose the price of gasoline rises. As time passes, people adjust to the higher price, and the demand for gasoline becomes: a) higher. b) more elastic. c) steeper. d) more inelastic.

remove the ability to tell whether the two products are substitutes or complements.

Taking the absolute value of the cross-price elasticity of demand is incorrect because it would:

b) remove the ability to tell whether the product is an inferior good or a normal good

Taking the absolute value of the income elasticity of demand is incorrect because it would: a) remove the ability to tell whether the two products have inelastic demand or elastic demand. b) remove the ability to tell whether the product is an inferior good or a normal good. c) cause the value of the cross-price elasticity of demand to become smaller. d) cause the value of the cross-price elasticity of demand to become zero.

a. vertical; perfectly inelastic

The percent change in insulin demanded for any price change is zero. The demand curve for insulin is _____, and the price elasticity of demand is _____. a. vertical; perfectly elastic b. vertical; perfectly inelastic c. horizontal; perfectly elastic d. horizontal; perfectly inelastic

perfectly elastic.

The price elasticity of demand for a good with a horizontal demand curve is:

b) perfectly inelastic

The price elasticity of demand for a good with a vertical demand curve is: a) perfectly elastic. b) perfectly inelastic. c) inelastic. d) elastic.

c) 2.7

The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs? a) 0.37 b) 2 c) 2.7 d) 0.5

c. 0.48

The price of a dozen eggs rises from $3 to $4.70. In response to this price change, quantity supplied increases from 100,000 dozen eggs to 127,000 dozen eggs. What is the approximate price elasticity of supply for eggs? a. 1.86 b. 3.52 c. 0.48 d. 2.5

d. 0.17; inelastic

The price of a gallon of milk rises from $2 to $2.60. In response to this price change, the quantity demanded for milk falls by 5%. The absolute value of the price elasticity of demand for milk is _____, and the price elasticity of demand is _____. a. 6; elastic b. 6; inelastic c. 0.17; elastic d. 0.17; inelastic

c. 1.25; elastic

The price of chicken breast rises from $3.00 to $3.60 per pound. In response to the price change, the demand for chicken breast falls by 25%. The absolute value of the price elasticity of demand for chicken breast is _____, and the price elasticity of demand is _____. a. 0.8; elastic b. 0.8; inelastic c. 1.25; elastic d. 1.25; inelastic

c. 1.4

The price of chicken breast rises from $3.50 per pound to $4.25 per pound. In response to this price change, the quantity demanded for chicken breast falls by 30%. What is the price elasticity of demand for chicken breast? a. 0.83 b. -0.83 c. 1.4 d. -1.4

d) 0.67

The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk? a) -0.67 b) 1.5 c) -1.5 d) 0.67

c. 0.4

The price of milk at the local grocery store is cut by 25%. In response to this price cut, the quantity of milk demanded increases by 10%. What is the price elasticity of demand for milk? a. 2.5 b. -2.5 c. 0.4 d. -0.4

d) 2.5; elastic

The price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. The absolute value of the price elasticity of demand for milk is _____, and demand is _____. a) 0.4; inelastic b) 2.5; inelastic c) 0.4; elastic d) 2.5; elastic

c) -1.33; complements

The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. The cross-price elasticity of demand between product A and product B is _____, and they are _____. a) -1.25; complements b) 1.25; complements c) -1.33; complements d) -0.75; substitutes

c. -1; complements

The price of product A is cut by 50%. As a result, the quantity demanded of product B rises by 50%. The cross-price elasticity of demand between product A and product B is _____, and they are _____. a. -0.75; complements b. -1.25; complements c. -1; complements d. 1.25; complements

b) 2; substitutes

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____. a) 0.5; substitutes b) 2; substitutes c) 1.5; complements d) -2; substitutes

b) elastic.

When the absolute value of the price elasticity of demand is greater than 1, demand is: a) inelastic. b) elastic. c) perfectly inelastic. d) unit elastic.

b. inelastic; higher

If demand is _____, a higher price yields _____ total revenue. a. inelastic; lower b. inelastic; higher c. elastic; higher d. elastic; no change in

a. 2

If income rises by 10% and the quantity demanded of an item rises by 20%, the income elasticity of demand for this item is: a. 2. b. -2. c. 0.5. d. -0.5.

b) demand for one good is to a change in the price of another good.

The cross-price elasticity of demand measures how responsive the: a) supply of one good is to a change in the price of another good. b) demand for one good is to a change in the price of another good. c) demand for one good is to a change in the demand for another good. d) price of a good is to a change in the price of another good.

c. 2; substitutes

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____. a. -2; substitutes b. 0.5; substitutes c. 2; substitutes d. 1.5; complements

c. 3

Uber cuts the price of a ride in Los Angeles by 15%. Thereafter, the quantity of rides demanded rises by 45%. What is the price elasticity of demand for Uber rides? a. 0.33 b. -0.33 c. 3 d. -3

a) perfectly elastic

When the absolute value of the price elasticity of demand is infinite, demand is: a) perfectly elastic. b) elastic. c) inelastic. d) perfectly inelastic.

inelastic

When the absolute value of the price elasticity of demand is less than 1, demand is:

Shampoo

You are given data on four products — toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand?

orange juice

You are given some data for four different products — milk, eggs, beef, and orange juice. The absolute value of the price elasticity of demand for milk is 3. The absolute value of the price elasticity of demand for eggs is 1.2. The absolute value of the price elasticity of demand for beef is 0.9. The absolute value of the price elasticity of demand for orange juice is 3.5. Which product has the most elastic demand?