Chapter 4 Quiz Microeconomics

If a 1% increase in the price of gummy bears causes gummy bear sales to decline by 0.4%, then the price elasticity of demand is:

0.4

As the price of bananas fell from $0.60 to $0.40 per pound, the quantity demanded rose from 300 pounds of bananas bought to 500 pounds. The price elasticity of demand (using the midpoint method) is:

A. 1.25.

If the price of a product falls by 15%, and the quantity supplied falls by 25%, the elasticity of supply is:

A. 1.67.

The price elasticity of demand measures the:

A. percentage change in quantity demanded divided by the percentage change in price.

If a product's price rises by 6%, and its quantity demanded falls by 8%, then we can say that demand for this product is:

B. elastic.

Products with many close substitutes tend to have _____ demand, and products considered to be luxury goods tend to have ____ demand.

B. elastic; elastic

If the cross elasticity of demand for two goods is negative, that means that they are:

C. complementary goods.

If a store deals in a good with a highly elastic demand, then a decrease in the price would lead to:

D. an increase in total revenue.

If the price elasticity of demand is greater than one, then economists say that:

D. demand is elastic.

A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:

cross-price elasticity of demand for iced tea is 2.

If income increases by 12% and the quantity demanded of a good decreases by 10%, the good is a(n) ______ good.

inferior

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

rise and the equilibrium quantity to stay the same.

Which of the following might be considered a primary determinant of price elasticity of supply?

time available to make changes to production