ECON CH 5

For a good that is a necessity, demand A. tends to be inelastic. B.tends to be elastic. C. has unit elasticity. D.cannot be represented by a demand curve in the usual way.

A

If the cross-price elasticity of two goods is positive, then the two goods are A.substitutes. B. complements. C. normal goods. D.inferior goods.

A

2.9 For a good that is a luxury, demand A. tends to be inelastic. B.tends to be elastic. C.has unit elasticity. D.cannot be represented by a demand curve in the usual way.

B

2.15 The price elasticity of demand measures how much A.quantity demanded responds to a change in price. B.quantity demanded responds to a change in income. C.price responds to a change in demand. D. demand responds to a change in supply.

A

2.23 Goods with many close substitutes tend to have A. more elastic demands. B.less elastic demands. C.price elasticities of demand that are unit elastic. D.income elasticities of demand that are negative.

A

2.25 To determine whether a good is considered normal or inferior, one could examine the value of the A. income elasticity of demand for that good. B. price elasticity of demand for that good. C. price elasticity of supply for that good. D.cross-price elasticity of demand for that good.

A

Total revenue when the price is P1 is represented by the area(s) A.B + D. B.A + B. C.C + D. D. D.

A

2.11 Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is A. 2.33, and hot dogs are a normal good. B. -2.33, and hot dogs are an inferior good. C. 0.43, and hot dogs are a normal good. D.-0.43, and hot dogs are an inferior good.

B

2.16 Total revenue when the price is P2 is represented by the area(s) A.B + D. B.A + B. C.C + D. D. D.

B

2.17 If the cross-price elasticity of two goods is negative, then the two goods are A.necessities. B.complements. C.normal goods. D.inferior goods.

B

Which of the following is likely to have the most price inelastic demand? A.strawberry-banana milk shakes B. gasoline in the short run C. diamond earrings D. box seats at a major league baseball game

B

Which of the following is likely to have the most price inelastic demand? A.yoga mats B.prescription medicine C.protein powder D.gym memberships

B

2.1 Which of the following statements is not correct? A. Supply curve A is perfectly inelastic. B. Supply curve B is perfectly elastic. C. Supply curve C is unit elastic. D.Supply curve D is more elastic than supply curve C.

C

2.10 If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a A. 0.2 percent decrease in the quantity demanded. B. 5 percent decrease in the quantity demanded. C. 20 percent decrease in the quantity demanded. D. 40 percent decrease in the quantity demanded.

C

2.19 If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about A.0.67%. B.0.83%. C.1.20%. D.2.70%.

C

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the A. cross-price elasticity of demand is negative. B. price elasticity of demand is elastic. C. income elasticity of demand is negative. D. income elasticity of demand is positive.

C

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is A.0.35. B.0.43. C.2.33. D.2.89.

C

Using the midpoint method, what is the price elasticity of supply between points C and D? A. 0.21 B. 0.29 C. 0.73 D. 1.36

C

Which of the following is likely to have the most price inelastic demand? A.tablet computers B.leather boots C. lightbulbs D. optional textbooks

C

2.13 The supply of a good will be more elastic, the A.more the good is considered a luxury. B.broader is the definition of the market for the good. C.larger the number of close substitutes for the good. D.longer the time period being considered.

D

Which demand curve is unit elastic? A.A B.B C.D D.None of the above.

D

2.22 When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is A.inelastic. B.elastic. C.unit elastic. D.perfectly inelastic.

A

2.7 Income elasticity of demand measures how A.the quantity demanded changes as consumer income changes. B. consumer purchasing power is affected by a change in the price of a good. C. the price of a good is affected when there is a change in consumer income. D.many units of a good a consumer can buy given a certain income level.

A

2.8 Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve A.A. B.B. C.C. D.D.

A

A key determinant of the price elasticity of supply is the A. time horizon. B. income of consumers. C. price elasticity of demand. D. importance of the good in a consumer's budget.

A

The price elasticity of demand measures A.buyers' responsiveness to a change in the price of a good. B.the extent to which demand increases as additional buyers enter the market. C.how much more of a good consumers will demand when incomes rise. D.the movement along a supply curve when there is a change in demand.

A

The price elasticity of supply measures how responsive A.sellers are to a change in price. B. sellers are to a change in buyers' income. C.buyers are to a change in production costs. D. equilibrium price is to a change in supply.

A

To determine whether a good is considered normal or inferior, one could examine the value of the A.income elasticity of demand for that good. B.price elasticity of demand for that good. C.price elasticity of supply for that good. D. cross-price elasticity of demand for that good.

A

Which demand curve is perfectly inelastic? A.A B.B C.C D.D

A

2.18 For which of the following goods is the income elasticity of demand likely highest? A.water B.diamonds C.hamburgers D. housing

B

For a good that is a necessity, A.quantity demanded tends to respond substantially to a change in price. B.demand tends to be inelastic. C.the law of demand does not apply. D.All of the above are correct.

B

Frequently, in the short run, the quantity supplied of a good is A.impossible, or nearly impossible, to measure. B.not very responsive to price changes. C.determined by the quantity demanded of the good. D.determined by psychological forces and other non-economic forces.

B

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be A. unit elastic. B. inelastic. C. elastic. D. None of the above is correct because a price decrease never leads to an decrease in total revenue.

B

If the quantity supplied responds only slightly to changes in price, then A.supply is said to be elastic. B. supply is said to be inelastic. C.an increase in price will not shift the supply curve very much. D. even a large decrease in demand will change the equilibrium price only slightly.

B

2.12 Cross-price elasticity of demand measures how A. the price of one good changes in response to a change in the price of another good. B. the quantity demanded of one good changes in response to a change in the quantity demanded of another good. C. the quantity demanded of one good changes in response to a change in the price of another good. D. strongly normal or inferior a good is.

C

2.2 If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a A. 0.1 percent decrease in the quantity demanded. B. 1 percent decrease in the quantity demanded. C. 2.5 percent decrease in the quantity demanded. D. 10 percent decrease in the quantity demanded.

C

2.20 If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a A. 0.015 percent increase in the quantity demanded. B. 0.6 percent increase in the quantity demanded. C.6 percent increase in the quantity demanded. D. 66 percent increase in the quantity demanded.

C

2.21 Holding all other forces constant, if decreasing the price of a good leads to an increase in total revenue, then the demand for the good must be A.unit elastic. B.inelastic. C.elastic. D.None of the above is correct because a price decrease never leads to an increase in total revenue.

C

2.24 Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is A.0.82, and basketball tickets are a normal good. B.0.82, and basketball tickets are an inferior good. C.1.22, and basketball tickets are a normal good. D.1.22, and basketball tickets are an inferior good.

C

2.3 The demand curve representing the demand for a luxury good with several close substitutes is A. A. B. B. C. C. D. D.

C

2.4There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be A. elastic. B. unit elastic. C. inelastic. D. highly responsive to changes in income as well as changes in prices.

C

2.5Demand is said to be inelastic if A. buyers respond substantially to changes in the price of the good. B. demand shifts only slightly when the price of the good changes. C. the quantity demanded changes only slightly when the price of the good changes. D. the price of the good responds only slightly to changes in demand.

C

2.6 Which of the following is likely to have the most price inelastic demand? A. white chocolate chip with macadamia nut cookies B. hardback novels C. salt D. box seats at a major league baseball game

C

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is A. 0.82, and basketball tickets are a normal good. B. 0.82, and basketball tickets are an inferior good. C. 1.22, and basketball tickets are a normal good. D. 1.22, and basketball tickets are an inferior good.

C

The value of the price elasticity of demand for a good will be relatively large when A. there are no good substitutes available for the good. B. the time period in question is relatively short. C. the good is a luxury rather than a necessity. D. All of the above are correct.

C

2.14 Which demand curve is perfectly elastic? A.A B.B C.C D.D

D

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about A.0.45 B.0.90 C.1.11 D.2.20

D

Demand is said to be price elastic if A. the price of the good responds substantially to changes in demand. B. demand shifts substantially when income or the expected future price of the good changes. C.buyers do not respond much to changes in the price of the good. D.buyers respond substantially to changes in the price of the good.

D

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a A. 0.5 percent decrease in the quantity demanded. B. 2 percent decrease in the quantity demanded. C. 5 percent decrease in the quantity demanded. D. 50 percent decrease in the quantity demanded.

D

The cross-price elasticity of demand can tell us whether goods are A.normal or inferior. B.elastic or inelastic. C.luxuries or necessities. D.complements or substitutes.

D