Deck 5: Elasticity

Question 1

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.00 and $1.75?

A) -2.33
B) -3.00
C) -4.00
D) none of the above

Answer 1

-3.00

Question 2

The price elasticity of demand is measured by:

A) dividing the percentage change in price by the percentage change in quantity demanded.
B) dividing the percentage change in quantity demanded by the percentage change in price.
C) subtracting the percentage change in price from the percentage in quantity demanded.
D) adding the percentage change in price to the percentage change in quantity demanded.

Answer 2

dividing the percentage change in quantity demanded by the percentage change in price.

Question 3

Using the method of arc elasticity to calculate price elasticity of demand eliminates the problem of:

A) different elasticities, depending on whether price decreases or increases.
B) different elasticities, because price and quantity are inversely related on the demand curve.
C) total revenue falling when price falls and demand is inelastic.
D) total revenue increasing when price falls and demand is elastic.

Answer 3

different elasticities, depending on whether price decreases or increases.

Question 4

If the price of a good is increased by 15 percent and the quantity demanded changes by 20 percent, then the price elasticity of demand is equal to:

A) 0.75.
B) approximately -0.33
C) approximately -1.33.
D) -1.

Question 5

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $1.50 and $1.25?

A) -1.00
B) -1.22
C) -1.50
D) -1.75

Question 6

The price elasticity of demand can be found by:

A) examining only the slope of the demand curve.
B) measuring absolute changes in price and quantity demanded.
C) examining the relative percentage change in quantity demanded to the relative percentage change in price.
D) knowing that when price changes, the quantity demanded goes in the opposite direction.

Question 7

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.25 and $2.00?

A) -4.00
B) -5.67
C) -9.00
D) -17.6

Question 8

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.50 and $2.25?

A) -9
B) -19
C) indeterminate
D) none of the above

Question 9

Elasticity is:

A) the change in a dependent variable divided by the change in an independent variable.
B) the ratio of the percentage change in a dependent variable to the percentage change in an independent variable.
C) the price of a good divided by its quantity.
D) the quantity of a good divided by its price.

Question 10

The ratio of the percentage change in the quantity demanded to the percentage change in price, all other things unchanged, is:

A) price elasticity of demand.
B) quantity elasticity of demand.
C) income elasticity of demand.
D) cross price elasticity of demand.

Question 11

The ratio of the percentage change in a dependent variable to the percentage change in an independent variable , all other things unchanged, is:

A) total revenue.
B) production possibilities.
C) elasticity.
D) slope.

Question 12

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $1.75 and $1.50?

A) -0.42
B) -1.5
C) -1.86
D) none of the above

Question 13

Assuming the law of demand holds for a good, its price elasticity of demand is:

A) positive.
B) greater than 1.
C) equal to 1.
D) negative.

Question 14

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $1.25 and $1.00?

A) -0.60
B) -0.82
C) -1.0
D) -1.6

Question 15

Price elasticity of demand measures the responsiveness of the change in:

A) quantity demanded to a change in price.
B) price to a change in quantity demanded.
C) slope of the demand curve to a change in price.
D) slope of the demand curve to a change in quantity demanded.

Question 16

When price goes down, the quantity demanded goes up. Price elasticity measures:

A) how much the price goes down.
B) how much the quantity goes up.
C) how responsive the price change is in relation to the quantity change.
D) how responsive the quantity change is in relation to the price change.

Question 17

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. Hence, the absolute value of the price elasticity of demand is:

A) greater than zero but less than 1.
B) equal to 1.
C) greater than 1 but less than 3.
D) greater than 3.

Question 18

Suppose at a price of $10 the quantity demanded is 100. When price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between the prices of $10 and $8 is approximately:

A) -1.17.
B) -1.50.
C) -0.85.
D) -1.00.

Question 19

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $1.00 and $0.75?

A) -0.54
B) -0.66
C) -0.75
D) -1.0

Question 20

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $0.75 and $0.50?

A) -0.25
B) -0.33
C) -0.43
D) -0.52

Question 21

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment CD is:

A) greater than 1 (absolute value).
B) -1.
C) -0.71.
D) -0.29.

Question 22

The arc price elasticity of demand method is best used for:

A) small changes in price.
B) large changes in quantity demanded.
C) large changes in both price and quantity demanded.
D) infinitely large changes in price.

Question 23

The price elasticity of a demand curve with a constant slope:

A) is equal to the slope.
B) is greater than the slope.
C) is less than the slope.
D) increases in absolute value as the price rises.

Question 24

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment DE is:

A) greater than 1 (absolute value).
B) -1.
C) -0.7.
D) -0.3.

Question 25

Calculating percentage changes relative to the average value of each variable between two points is:

A) slope elasticity.
B) arc elasticity.
C) median elasticity.
D) differential elasticity.

Question 26

If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from 180 bags to 220 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

A) -0.5.
B) -1.
C) -2.
D) greater than 2 (absolute value).

Question 27

Price elasticity of demand is computed as the arc elasticity by:

A) dividing the slope of the demand curve by the average value of each variable between two points.
B) dividing the slope of the demand curve by the average value of each variable at one point.
C) calculating percentage changes relative to the value of one variable at one point.
D) calculating percentage changes relative to the average value of each variable between two points.

Question 28

The concept of price elasticity of demand is most closely related to:

A) the law of demand.
B) the equilibrium price.
C) the equilibrium quantity.
D) a shift in the demand curve.

Question 29

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment EF is:

A) -1.3.
B) -1.
C) -0.7.
D) -0.33.

Question 30

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

A) 0.
B) -0.5.
C) -1.
D) -2.

Question 31

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment FG is:

A) 0.
B) 0.09.
C) -0.5.
D) greater than 1 (absolute value).

Question 32

The price elasticity of a demand curve with a constant slope:

A) is equal to the slope.
B) is greater than the slope.
C) is less than the slope.
D) decreases in absolute value as quantity demanded rises.

Question 33

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 180 bags to 220 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

A) 0.
B) -0.5.
C) -1.
D) -2.

Question 34

The concept of price elasticity of demand is most closely related to:

A) the equilibrium price.
B) the equilibrium quantity.
C) a movement along the demand curve.
D) a shift in the demand curve.

Question 35

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment AB is:

A) -13.
B) -11.
C) -0.91.
D) -0.1.

Question 36

Suppose the demand curve has a slope equal to negative 1. The price elasticity of demand at any point on this demand curve is:

A) infinite.
B) equal to zero.
C) greater than 1, but less than infinite.
D) not described by any of the above.

Question 37

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, this indicates that, if other things are unchanged, the price elasticity of demand is:

A) 0.
B) -0.5.
C) -1.
D) -2.

Question 38

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt. Hence, the absolute value of the price elasticity of demand is:

A) greater than zero but less than 1.
B) equal to 1.
C) greater than 1 but less than 3.
D) greater than 3.

Question 39

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment BC is:

A) greater than 3.33 (absolute value).
B) -3.33.
C) -3.
D) -0.33.

Question 40

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

A) -0.5.
B) -1.
C) -2.
D) greater than 2 (absolute value).

Question 41

A linear demand curve will have which of the following properties?

A) a slope that is constant and price elasticity that varies
B) constant slope and constant price elasticity
C) constant price elasticity and varying slope
D) varying slope and varying elasticity

Question 42

(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points A and B is:

A) elastic, since total revenue falls when price falls from $8 to $6.
B) elastic, since total revenue increases when price falls from $8 to $6.
C) inelastic, since the percentage change in quantity is less than the percentage change in price when price falls from $8 to $6.
D) positive, because the slope is negative.

Question 43

Along the upper half of a linear demand curve, the price elasticity of demand will be:

A) price inelastic.
B) price elastic.
C) unit price elastic.
D) positive.

Question 44

(Exhibit: Demand and Price Elasticity 2) From the graph it can be seen that, along a given segment of the demand curve, if price falls and total revenue _________, then demand is price elastic.

A) increases
B) decreases
C) stays the same
D) decreases at first and then increases

Question 45

(Exhibit: Demand and Price Elasticity 2) Price elasticity of demand for small changes in price in the neighborhood of point C:

A) is 4.
B) is -4.
C) is -1.
D) cannot be determined.

Question 46

(Exhibit: Demand and Price Elasticity 2) Going from point B to C, the demand curve is:

A) price inelastic.
B) unit price elastic.
C) price elastic.
D) both price elastic and price inelastic.

Question 47

A linear demand curve will have a price elasticity of demand whose absolute value:

A) increases as price decreases.
B) decreases as price decreases.
C) is constant.
D) is -1 at all prices.

Question 48

(Exhibit: Demand and Price Elasticity 2) The demand curve going from point D to E:

A) is price inelastic.
B) is price elastic.
C) has a slope of +1.
D) has a slope of -2.

Question 49

Assuming a linear demand curve, lower prices would result in:

A) less price elastic demand.
B) more price elastic demand.
C) an increase in demand.
D) none of the above.

Question 50

An upward movement along a linear demand curve from lower prices to higher prices will result in:

A) constant price elasticity.
B) lower price elasticity.
C) increasing price elasticity.
D) unit price elasticity along the entire curve.

Question 51

(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points B and C is:

A) -1.0.
B) -1.67.
C) -3.0.
D) none of the above.

Question 52

Given a linear demand curve, we would expect that as we move down the curve from left to right that:

A) total revenue will fall throughout.
B) total revenue will rise throughout.
C) total revenue will change depending on the price elasticity, which changes along the curve.
D) total revenue will equal zero at the midpoint of the curve.

Question 53

Suppose the price elasticity of demand for oranges is -1.8. If a fall frost destroys one-third of the nation's orange crop, how will that affect total expenditures on oranges, all other things unchanged?

A) total expenditures will rise
B) total expenditures will fall
C) total expenditures will remain unchanged
D) not enough information is given to answer the question

Question 54

Suppose that the price elasticity of demand for grapefruit is -2.8. The introduction of a new variety that is cheaper to grow should cause consumer expenditures for grapefruit to:

A) rise.
B) fall.
C) remain unchanged.
D) it is not possible to answer with the information given.

Question 55

A linear demand curve:

A) has a constant price elasticity of demand.
B) has price elasticity of demand equal to one.
C) has price elasticity of demand that is positive.
D) can have both elastic and inelastic price elasticity of demand.

Question 56

(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points B and A is:

A) -7.
B) -0.143
C) cannot be calculated since quantity is zero at the price of $8.
D) 1, since total revenue is zero at the price of $8 and $12 at the price of $6.

Question 57

Along the lower half of a linear demand curve, the price elasticity of demand will be:

A) price inelastic.
B) price elastic.
C) unit price elastic.
D) positive.

Question 58

(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points C and D is:

A) -.33
B) -.60
C) -1.0
D) -1.3

Question 59

A linear demand curve will have absolute values of the coefficient of price elasticity that:

A) exist only for a portion of the curve; on some portions elasticity cannot be measured.
B) are all less than 1.
C) are all equal to 1.
D) range from less than 1 to greater than 1.

Question 60

(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points D and E is:

A) -.14
B) -.29
C) -.33
D) -.37

Question 61

If the price elasticity of demand is found to be -6, then demand is:

A) price inelastic.
B) price elastic.
C) unit price elastic.
D) horizontal.

Question 62

The price elasticity of demand for soft drinks has been estimated to be -0.55. If the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacture and bottling), how will that affect total expenditures on soft drinks, all other things unchanged?

A) total expenditures will remain unchanged
B) total expenditures will fall
C) total expenditures will rise
D) people will buy Pepsi instead of Coke

Question 63

The price elasticity of demand for lettuce has been estimated to be -2.58. If an insect infestation destroys 10 percent of the nation's lettuce crop, how will that affect total expenditures on lettuce, all other things unchanged?

A) total expenditures will remain unchanged
B) total expenditures will fall
C) total expenditures will rise
D) not enough information is given to answer the question

Question 64

The price elasticity of demand for cabbage has been estimated to be -0.25. If an insect infestation destroys 20 percent of the nation's cabbage crop, how will that affect total expenditures on cabbage, all other things unchanged?

A) total expenditures will rise
B) total expenditures will fall
C) total expenditures will remain unchanged
D) not enough information is given to answer the question

Question 65

If the percentage change in quantity demanded divided by the percentage change in price is:

A) positive, demand is price elastic.
B) negative, demand is price inelastic.
C) less than 1 (absolute value), demand is price elastic.
D) greater than 1 (absolute value), demand is price elastic.

Question 66

If total revenue goes up when price falls, the price elasticity of demand is said to be:

A) price inelastic.
B) unit price elastic.
C) price elastic.
D) positive.

Question 67

Demand is price inelastic if:

A) the price of the good responds slightly to a quantity change.
B) the demand curve shifts very little when a demand shifter changes.
C) the percentage change in quantity demanded is relatively small in response to a relatively large percentage change in price.
D) all of the above are true.

Question 68

The price elasticity of demand for fresh tomatoes has been estimated to be -2.22. If a new insecticide and fertilizer treatment yields a 20 percent increase in the nation's fresh tomato crop, how will that affect total expenditures on fresh tomatoes, all other things unchanged?

A) total expenditures will remain unchanged
B) total expenditures will fall
C) total expenditures will rise
D) not enough information is given to answer the question

Question 69

If the absolute value of price elasticity is greater than 1, this means the demand curve in that region is:

A) price elastic.
B) price inelastic.
C) unit price elastic.
D) upward sloping.

Question 70

When the percentage change in quantity demanded is larger than the percentage change in price, demand is said to be:

A) price inelastic.
B) unit price elastic.
C) price elastic.
D) perfectly inelastic.

Question 71

Which of the following is not true regarding a price elastic demand curve?

A) Total revenue increases when price falls.
B) The absolute value of price elasticity is a fraction less than 1.
C) The absolute value of price elasticity is greater than 1.
D) The percentage changes in quantity exceed the percentage changes in price for any small change in price.

Question 72

If the price elasticity of demand is found to be -3/4, then demand is:

A) price inelastic.
B) price elastic.
C) unit price elastic.
D) positively sloped.

Question 73

The price elasticity of demand for ground beef has been estimated to be -1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on hamburger, all other things unchanged?

A) total expenditures will remain unchanged
B) total expenditures will fall by more than 1 percent
C) demand will fall by 1 percent, but total expenditures will fall by less than 1 percent
D) total expenditures will rise

Question 74

The price elasticity of demand for gasoline in the long run has been estimated to be -1.5. If an extended war in the Middle-East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things unchanged?

A) total expenditures would rise
B) total expenditures would fall
C) total expenditures would remain unchanged
D) not enough information is given to answer the question

Question 75

The price elasticity of demand for gasoline in the short run has been estimated to be -0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things unchanged?

A) demand will stay the same, but total expenditures will fall
B) demand will decrease, but total expenditures will rise
C) total expenditures will remain unchanged
D) demand will not change, but total expenditures will rise

Question 76

The price elasticity of demand for milk has been estimated to be somewhere between -0.49 and -0.63. If a new system of feeding and milking cows yields a 15 percent increase in the production of milk throughout the country, how will that affect total expenditures on milk, all other things unchanged?

A) total expenditures will remain unchanged
B) total expenditures will fall
C) total expenditures will rise
D) not enough information is given to answer the question

Question 77

The price elasticity of demand for peanuts has been estimated to be -0.38. If an insect infestation destroys 20 percent of the nation's peanut crop, how will that affect total expenditures on peanuts, all other things unchanged?

A) total expenditures will remain unchanged
B) total expenditures will fall
C) total expenditures will rise
D) not enough information is given to answer the question

Question 78

When the percentage change in quantity demanded is less than the percentage change in price:

A) demand is price elastic.
B) demand is price inelastic.
C) an increase in price will result in lower total revenue.
D) total revenue will be zero at the midpoint of a linear demand curve.

Question 79

If the price of a good is increased by 15 percent and the quantity demanded falls by 20 percent, the price elasticity of demand is:

A) price elastic.
B) price inelastic.
C) unit price elastic.
D) normal.

Question 80

Determining whether the price elasticity of demand is price elastic, unit price elastic, or price inelastic is done by:

A) comparing the percentage change in quantity demanded to the percentage change in price.
B) examining the ratio of the change in quantity to the change in price.
C) examining the slope of the demand curve.
D) examining the ratio of the change in price to the change in quantity