Econ 160 Chapter 6

As a price change persists over a long period of time, we should expect the demand elasticity to fall.

False

As one moves down a straight-line demand curve, the elasticity increases.

False

A demand curve with an elasticity of 1.0 is a unit-elastic demand curve.

True

A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity demanded.

True

A negative cross-elasticity indicates that two goods are compliments.

True

If demand is elastic, an increase in price will decrease total revenue.

True

Necessities such as food and shelter have an inelastic demand.

True

Perfectly inelastic demand schedules are vertical.

True

After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross-elasticity of demand between Coke and Pepsi. A successful campaign would be indicated if the cross-elasticity went from _____. a) -0.9 to -1.5. b) 0.9 to 0.5. c) 0.9 to 1.5. d) -0.5 to -0.2.

b) 0.9 to 0.5.

At $6 per steak, consumers are willing to buy 2 steaks. At a price of $2, consumers are willing to buy 6 steaks. The elasticity of the market demand curve between P = $6 and P = $2 is _____. a) 2 b) 1 c) 4 d) 0.33

b) 1

A craze for apples in Riverside increases the quantity demanded at every price by 5 bushels. Between any two prices, the new demand curve will be _______ the old demand curve. a) equal in elasticity to b) more elastic than c) less elastic than d) More information is needed to predict the relationship

c) less elastic than

Chicken and fish are substitutes. Therefore, the cross-elasticity of demand between chicken and fish is _____. a) zero b) negative c) positive d) any answer is possible

c) positive

Along a perfectly elastic demand curve, a) the price elasticity of demand is infinite. b) consumer purchases will not respond at all to a reduction in price. c) the slope is always zero. d) All of the other answers are correct.

d) All of the other answers are correct.

Demand is said to be price elastic at a point on the demand curve if _____. a) a1% rise in price reduces the quantity demanded by more than 10%. b) a 10% rise in price reduces the quantity demanded by less than 10%. c) a 1% rise in price reduces the quantity demanded by less than 1%. d) a 1% rise in price reduces the quantity demanded by more than 1%.

d) a 1% rise in price reduces the quantity demanded by more than 1%.

Along the inelastic portion of a demand curve, _____. a) the change in price will always be more than the change in quantity demanded. b) the percentage change in price will be less than the percentage change in quantity demanded. c) the change in price will always be less than the change in quantity demanded. d) the percentage change in price will be more than the percentage change in quantity demanded.

d) the percentage change in price will be more than the percentage change in quantity demanded.