Question 1

The price-elasticity of demand coefficient, Ed, is measured in terms of

Accepted Answer

A)   dollar change in price and unit change in quantity demanded.
B)   dollar change in price and amount of shift in demand.
C)   percentage change in price and percentage change in quantity demanded.
D)   percentage change in price and unit change in demand.E) B) and C)
F) A) and D)

Question 2

Which product is most likely to be the most price elastic?

Accepted Answer

A)   milk
B)   housing
C)   clothing
D)   automobilesE) B) and C)
F) A) and D)

Question 3

The price-elasticity coefficients are 2.6, 0.5, 1.4, and 0.18 for four different demand schedules,D1, D2, D3, and D4, respectively. A 2-percent increase in price will result in an increase in total revenues in which of the following cases?

Accepted Answer

A)   D1 and D3
B)   D1 and D4
C)   D2 and D4
D)   D1, D2, and D3E) All of the above
F) None of the above

Question 4

If the coefficient of cross elasticity of demand is positive, the two products are complementary goods.

Accepted Answer

A) True 
 B)False

Question 5

The basic formula for the price elasticity of demand coefficient is

Accepted Answer

A)   absolute decline in quantity demanded/absolute increase in price.
B)   percentage change in quantity demanded/percentage change in price.
C)   absolute decline in price/absolute increase in quantity demanded.
D)   percentage change in price/percentage change in quantity demanded.E) C) and D)
F) A) and D)

Question 6

In the price range where demand is elastic, if the seller of the good raises its price, then total revenues will increase.

Accepted Answer

A) True 
 B)False

Question 7

A 3 percent increase in the price of tea causes a 6 percent increase in the demand for coffee. The cross elasticity of demand for coffee with respect to the price of tea is

Accepted Answer

A)   −0.5.
B)   +0.5.
C)   −2.0.
D)   +2.0.E) B) and C)
F) All of the above

Question 8

In which of the following instances will total revenue decline?

Accepted Answer

A)   Price rises and supply is elastic.
B)   Price falls and demand is elastic.
C)   Price rises and demand is inelastic.
D)   Price rises and demand is elastic.E) All of the above
F) A) and B)

Question 9

A firm can sell as much as it wants at a constant price. Demand is thus

Accepted Answer

A)   perfectly inelastic.
B)   perfectly elastic.
C)   relatively inelastic.
D)   relatively elastic.E) C) and D)
F) All of the above

Question 10

Cross elasticity of demand is

Accepted Answer

A)   negative for complementary goods.
B)   negative for substitute goods.
C)   unitary for inferior goods.
D)   positive for inferior goods.E) A) and B)
F) C) and D)

Question 11

If the price-elasticity coefficient for a good is 1.75, the demand for that good is described as

Accepted Answer

A)   normal.
B)   elastic.
C)   inferior.
D)   inelastic.E) A) and B)
F) A) and C)

Question 12

Answer the question based on the following table, which shows a demand schedule.  Total revenues will decrease if price rises from

Accepted Answer

A)   $1 to $2.
B)   $2 to $3.
C)   $3 to $4.
D)   $4 to $5.E) B) and C)
F) A) and D)

Question 13

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded

Accepted Answer

A)   increased by 7 percent.
B)   decreased by 7 percent.
C)   decreased by 9 percent.
D)   decreased by 1.75 percent.E) C) and D)
F) All of the above

Question 14

The law of supply suggests that the price-elasticity of supply is

Accepted Answer

A)   positive.
B)   negative.
C)   always greater than 1.
D)   always less than 1.E) B) and D)
F) A) and D)

Question 15

The more time consumers have to adjust to a change in price,

Accepted Answer

A)   the smaller will be the price elasticity of demand.
B)   the greater will be the price elasticity of demand.
C)   the more likely the product is a normal good.
D)   the more likely the product is an inferior good.E) All of the above
F) C) and D)

Question 16

When the price of candy bars decreased from $0.55 to $0.45, the quantity demanded changed from 19,000 per day to 21,000 per day. In this price range, the price-elasticity coefficient (based on the midpoint formula)  for candy bars is

Accepted Answer

A)   1.
B)   2.
C)   0.2.
D)   0.5.E) C) and D)
F) B) and C)

Question 17

In which price range of the accompanying demand schedule is demand elastic?

Accepted Answer

A)   $4-$3
B)   $3-$2
C)   $2-$1
D)   below $1E) A) and B)
F) A) and C)

Question 18

When demand is price-elastic, an increase in price will lead to increased total consumer spending for the product.

Accepted Answer

A) True 
 B)False

Question 19

Cross elasticity of demand measures the effect of a change in the price of one product on the quantity demanded of another product.

Accepted Answer

A) True 
 B)False

Question 20

Which type of goods is most adversely affected by recessions?

Accepted Answer

A)   Goods for which the income elasticity coefficient is relatively low or negative.
B)   Goods for which the income elasticity coefficient is relatively high and positive.
C)   Goods for which the cross elasticity coefficient is positive.
D)   Goods for which the cross elasticity coefficient is negative.E) A) and B)
F) All of the above

Exam 6: Elasticity

When demand is price-elastic, an increase in price will lead to increased total consumer spending for the product.

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In which of the following instances will total revenue decline?

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In the price range where demand is elastic, if the seller of the good raises its price, then total revenues will increase.

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Cross elasticity of demand measures the effect of a change in the price of one product on the quantity demanded of another product.

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The law of supply suggests that the price-elasticity of supply is

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Which type of goods is most adversely affected by recessions?

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The basic formula for the price elasticity of demand coefficient is

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A firm can sell as much as it wants at a constant price. Demand is thus

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The price-elasticity coefficients are 2.6, 0.5, 1.4, and 0.18 for four different demand schedules,D1, D2, D3, and D4, respectively. A 2-percent increase in price will result in an increase in total revenues in which of the following cases?

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Which product is most likely to be the most price elastic?

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When the price of candy bars decreased from $0.55 to $0.45, the quantity demanded changed from 19,000 per day to 21,000 per day. In this price range, the price-elasticity coefficient (based on the midpoint formula) for candy bars is

Correct AnswerverifiedShow Answer

The price-elasticity of demand coefficient, Ed, is measured in terms of

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If the price-elasticity coefficient for a good is 1.75, the demand for that good is described as

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Answer the question based on the following table, which shows a demand schedule. Total revenues will decrease if price rises from

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A 3 percent increase in the price of tea causes a 6 percent increase in the demand for coffee. The cross elasticity of demand for coffee with respect to the price of tea is

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Cross elasticity of demand is

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Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded

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If the coefficient of cross elasticity of demand is positive, the two products are complementary goods.

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In which price range of the accompanying demand schedule is demand elastic?

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The more time consumers have to adjust to a change in price,

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