Question 1

Table 5-1
Suppose a coffee shop faces the following demand schedule for coffee.   Price per coffee ($)   Quantity demanded 4.002003.006002.508002.0010001.5012001.001400\begin{array}{|c|c|}\hline 	ext { Price per coffee (\$)  } & 	ext { Quantity demanded } \\hline 4.00 & 200 \\hline 3.00 & 600 \\hline 2.50 & 800 \\hline 2.00 & 1000 \\hline 1.50 & 1200 \\hline 1.00 & 1400 \\hline\end{array} Price per coffee ($)  4.003.002.502.001.501.00​ Quantity demanded 200600800100012001400​​ 
-Referring to Table 5-1, if the shop increases the price from $3.00 to $4.00, the price elasticity of demand will (according to the mid-point method)  be:

Accepted Answer

A)  0.29 and inelastic
B)  0.29 and elastic
C)  3.5 and inelastic
D)  3.5 and elastic E) A) and D)
F) C) and D)

Question 2

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

Accepted Answer

A)  buyers tend to be much less sensitive to a change in price when given more time to react
B)  buyers will have substantially more income over a 10-year period
C)  buyers tend to be much more sensitive to a change in price when given more time to react
D)  none of these answers are correctE) C) and D)
F) A) and C)

Question 3

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

A) True 
 B)False

Question 4

A perfectly inelastic demand curve will be:

Accepted Answer

A)  vertical
B)  horizontal
C)  downward sloping to the right
D)  have an infinite elasticityE) None of the above
F) C) and D)

Question 5

The price of product X is reduced from $45 to $20 and, as a result, the quantity demanded increases from 20 to 25 units.From this we can conclude that the demand for X in this price range:

Accepted Answer

A)  has declined
B)  is of unit elasticity
C)  is inelastic
D)  is elasticE) A) and D)
F) C) and D)

Question 6

The concept of the slope is the best way to measure the responsiveness of demand to changes in its determinants.

Accepted Answer

A) True 
 B)False

Question 7

Economists use the concept of price elasticity of demand to measure how much:

Accepted Answer

A)  sellers respond to changes in the price of the good
B)  worse off consumers are when the price of the good rises
C)  demand responds to changes in buyers' incomes
D)  buyers respond to changes in the price of the goodE) None of the above
F) C) and D)

Question 8

The concept of elasticity is used to:

Accepted Answer

A)  analyse how much the economy is capable of expanding
B)  analyse supply and demand with greater precision
C)  determine the level of government invention in the economy
D)  calculate consumer credit purchasesE) A) and D)
F) A) and B)

Question 9

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Accepted Answer

A) True 
 B)False

Question 10

Last year, Amy bought two lenses for her SLR camera.Her income was $30 000.This year her income is $40 000.She has bought four new lenses for her camera.All else being constant it is obvious:

Accepted Answer

A)  Amy prefers to photograph with an SLR camera
B)  Amy considers lenses to be a normal good
C)  Amy considers SLR cameras to be an inferior good
D)  Amy considers lenses to be an inferior goodE) None of the above
F) B) and C)

Question 11

Supply curves tend to be:

Accepted Answer

A)  perfectly elastic in the long run, because consumer demand will have sufficient time to adjust fully to changes in supply
B)  more elastic in the long run, because there is time for firms to enter or leave the industry and to change the size of factories
C)  perfectly inelastic in the long run, because the law of scarcity imposes absolute limits upon production
D)  less elastic in the long run, because there is time for firms to enter or leave an industryE) C) and D)
F) A) and B)

Question 12

The price elasticity of supply measures how responsive:

Accepted Answer

A)  buyers are to a change in income
B)  sellers are to a change in price
C)  buyers are to a change in price
D)  sellers are to a change in buyers' incomeE) None of the above
F) All of the above

Question 13

In the 1970s OPEC generated high prices for oil but could not sustain this in the mid-80s and 90s.The reason was that both the supply and demand elasticity for oil is less elastic in the short run than in the long run.

Accepted Answer

A) True 
 B)False

Question 14

Graph 5-2  
-Refer to Graph 5-2.If there is a four per cent decrease in the price of a good and this leads to a 12 per cent increase in the quantity demanded then the price elasticity is:

Accepted Answer

A)  3 and elastic
B)  3 and inelastic
C)  0.3 and elastic
D)  0.3 and inelasticE) All of the above
F) A) and C)

Question 15

Graph 5-2  
-In Graph 5-2, the elasticity of demand from point A to point B, using the midpoint method, would be:

Accepted Answer

A)  1
B)  1.5
C)  2
D)  2.5E) A) and B)
F) B) and C)

Question 16

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand.If the producer's objective is to increase total revenue, she should:

Accepted Answer

A)  increase the price charged to customers with the price elastic demand and decrease the price charged to customers with the price inelastic demand
B)  decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand
C)  charge the same price to both groups of customers
D)  increase the price for both groups of customersE) C) and D)
F) All of the above

Question 17

In which of the following cases will total revenue increase?

Accepted Answer

A)  price falls and demand is inelastic
B)  price falls and supply is elastic
C)  price rises and demand is inelastic
D)  price rises and demand is elasticE) A) and B)
F) C) and D)

Question 18

Holding all other forces constant, if raising the price of a good results in less total revenue, the demand for the good must be:

Accepted Answer

A)  elastic
B)  inelastic
C)  unit elastic
D)  perfectly inelasticE) B) and D)
F) A) and C)

Exam 5: Elasticity and Its Application

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

Correct Answer
verified

Holding all other forces constant, if raising the price of a good results in less total revenue, the demand for the good must be:

Correct Answer
verified

Last year, Amy bought two lenses for her SLR camera.Her income was $30 000.This year her income is $40 000.She has bought four new lenses for her camera.All else being constant it is obvious:

Correct Answer
verified

In the 1970s OPEC generated high prices for oil but could not sustain this in the mid-80s and 90s.The reason was that both the supply and demand elasticity for oil is less elastic in the short run than in the long run.

Correct Answer
verified

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct Answer
verified

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand.If the producer's objective is to increase total revenue, she should:

Correct Answer
verified

Correct Answer
verified

Supply curves tend to be:

Correct Answer
verified

In which of the following cases will total revenue increase?

Correct Answer
verified

Graph 5-2 -In Graph 5-2, the elasticity of demand from point A to point B, using the midpoint method, would be:

Correct Answer
verified

Economists use the concept of price elasticity of demand to measure how much:

Correct Answer
verified

Graph 5-2 -Refer to Graph 5-2.If there is a four per cent decrease in the price of a good and this leads to a 12 per cent increase in the quantity demanded then the price elasticity is:

Correct Answer
verified

A perfectly inelastic demand curve will be:

Correct Answer
verified

The price elasticity of supply measures how responsive:

Correct Answer
verified

The price of product X is reduced from $45 to $20 and, as a result, the quantity demanded increases from 20 to 25 units.From this we can conclude that the demand for X in this price range:

Correct Answer
verified

The concept of elasticity is used to:

Correct Answer
verified

The concept of the slope is the best way to measure the responsiveness of demand to changes in its determinants.

Correct Answer
verified

A government program that reduces land under cultivation hurts farmers but helps consumers.

Correct Answer
verified

Exam 5: Elasticity and Its Application

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

Correct AnswerverifiedShow Answer

Holding all other forces constant, if raising the price of a good results in less total revenue, the demand for the good must be:

Correct AnswerverifiedShow Answer

Last year, Amy bought two lenses for her SLR camera.Her income was $30 000.This year her income is $40 000.She has bought four new lenses for her camera.All else being constant it is obvious:

Correct AnswerverifiedShow Answer

In the 1970s OPEC generated high prices for oil but could not sustain this in the mid-80s and 90s.The reason was that both the supply and demand elasticity for oil is less elastic in the short run than in the long run.

Correct AnswerverifiedShow Answer

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

Correct AnswerverifiedShow Answer

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand.If the producer's objective is to increase total revenue, she should:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Supply curves tend to be:

Correct AnswerverifiedShow Answer

In which of the following cases will total revenue increase?

Correct AnswerverifiedShow Answer

Graph 5-2 -In Graph 5-2, the elasticity of demand from point A to point B, using the midpoint method, would be:

Correct AnswerverifiedShow Answer

Economists use the concept of price elasticity of demand to measure how much:

Correct AnswerverifiedShow Answer

Graph 5-2 -Refer to Graph 5-2.If there is a four per cent decrease in the price of a good and this leads to a 12 per cent increase in the quantity demanded then the price elasticity is:

Correct AnswerverifiedShow Answer

A perfectly inelastic demand curve will be:

Correct AnswerverifiedShow Answer

The price elasticity of supply measures how responsive:

Correct AnswerverifiedShow Answer

The price of product X is reduced from $45 to $20 and, as a result, the quantity demanded increases from 20 to 25 units.From this we can conclude that the demand for X in this price range:

Correct AnswerverifiedShow Answer

The concept of elasticity is used to:

Correct AnswerverifiedShow Answer

The concept of the slope is the best way to measure the responsiveness of demand to changes in its determinants.

Correct AnswerverifiedShow Answer

A government program that reduces land under cultivation hurts farmers but helps consumers.

Correct AnswerverifiedShow Answer

Correct Answer
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