Deck 4: Elasticity

Question 1

Elasticity is:

A) a measure of changing market conditions brought on by a recession.
B) a measure of the sensitivity or responsiveness of one variable to another in response to price or income changes.
C) a function of price in an expanding economy.
D) a measure of sensitivity to demand in an expanding economy when income increases.

Answer 1

B

Question 2

A measure of the sensitivity or responsiveness of one variable to another is:

A) price.
B) demand.
C) supply.
D) elasticity.

Answer 2

D

Question 3

_____ is an economic variable.

A) Price
B) Size
C) Color
D) Age

Answer 3

A

Question 4

The economic variable in the numerator of the elasticity of demand equation is:

A) size.
B) color.
C) quantity.
D) price.

Question 5

The economic variable in the numerator of the elasticity of demand equation is:

A) size.
B) color.
C) quantity.
D) price.

Question 6

What is being measured when the impact of an economic variable (such as price) on quantity is measured?

A) Elasticity
B) Demand
C) Supply
D) Price

Question 7

If the quantity demanded is not very responsive to a price change, then the demand curve would be:

A) unit elastic.
B) elastic.
C) inelastic.
D) vertical.

Question 8

If the quantity demanded is very responsive to a price change, then the demand curve would be:

A) unit elastic.
B) elastic.
C) inelastic.
D) vertical.

Question 9

The demand for a luxury good such as a designer handbag tends to be:

A) unit elastic.
B) elastic.
C) inelastic.
D) vertical.

Question 10

Which of the following product pairs could best be considered substitute goods?

A) Peanut butter and jelly
B) Bagels and muffins
C) Hot dogs and buns
D) Steak and applesauce

Question 11

The price elasticity of demand for a good is lower when:

A) there are few substitutes.
B) there are complement products.
C) there are a lot of substitutes.
D) the good is a luxury good.

Question 12

The more _____ a product is defined, the more substitutes are likely to be available, and the more price _____ it will be.

A) narrowly; elastic
B) narrowly; inelastic
C) broadly; elastic
D) broadly; unit elastic

Question 13

Generally, demand is more _____ in the _____ because consumers can fully adjust to price changes.

A) elastic; short run
B) elastic; long run
C) unit elastic; long run
D) inelastic; short run

Question 14

An example of a substitute good for steak is:

A) hamburger.
B) cereal.
C) cake.
D) jelly beans.

Question 15

Which one of the following factors influences the price elasticity of demand?

A) the slope of the supply curve
B) the recession number of buyers
C) inflation
D) the time frame

Question 16

Which good is the most elastic because it represents a large share of a consumer's budget?

A) salt
B) napkins
C) cotton balls
D) televisions

Question 17

Demand for more expensive items tend to be more price _____ because they take up a large share of consumer budgets.

A) inelastic
B) unit elastic
C) zero elastic
D) elastic

Question 18

Consumers are less responsive to price increases when a good is a:

A) large share of their budget.
B) frequently advertised item.
C) necessity.
D) branded good.

Question 19

(Figure: The Market for Ford Mustangs) The price elasticity of demand for Ford Mustangs is:

A) .60
B) .67
C) 1.67
D) .40

Question 20

To overcome ambiguity related to the direction of the price change, economists use what is known as the _____ method to estimate the percentages of changes when calculating elasticities.

A) integral
B) percentage
C) estimation
D) midpoint

Question 21

(Figure: The Price Elasticity of Demand) Using the midpoint formula, calculate the price elasticity of demand between points a and b.
‪

A) .007
B) 4.33
C) 1.32
D) .23

Question 22

(Figure: The Price Elasticity of Demand) Using the midpoint formula, calculate the price elasticity of demand between points a and c
‪

A) .33
B) 3.00
C) 2.94
D) .02

Question 23

(Figure: The Price Elasticity of Demand) Using the midpoint formula, calculate the price elasticity of demand between points b and c
‪

A) .18
B) .40
C) .45
D) 2.20

Question 24

Price elasticity is often expressed in terms of absolute value. Absolute value is:

A) a positive number with no real meaning.
B) a whole number that is less than zero.
C) a negative number that is less than zero.
D) the distance from zero in either direction.

Question 25

(Table: The Price of a Movie Ticket) Using the midpoint formula, what is the price elasticity of the demand for movie tickets?
$\begin{array}{|l|l|}\hline \text { Price } & \text { Quantity } \\\hline \$ 10 & 750 \\\hline \$ 20 & 450 \\\hline\end{array}$

A) 10
B) 3.33
C) .75
D) 1.32

Question 26

(Table: The Price of a Hamburger) Using the midpoint formula, what is the price elasticity of the demand for hamburgers?
$\begin{array}{|l|l|}\hline \text { Price } & \text { Quantity } \\\hline \$ 3 & 750 \\\hline \$ 5 & 450 \\\hline\end{array}$

A) .5
B) 1
C) 2.5
D) .01

Question 27

If the price elasticity of demand is 1.9, then price is relatively:

A) absolute.
B) unit elastic.
C) inelastic.
D) elastic.

Question 28

If the price elasticity of demand is 0.6, then price is relatively:

A) absolute.
B) unit elastic.
C) inelastic.
D) elastic.

Question 29

If the price elasticity of demand is 2.7, then price is relatively:

A) absolute.
B) unit elastic.
C) inelastic.
D) elastic.

Question 30

If the price elasticity of demand is 0.2, then price is relatively:

A) absolute.
B) unit elastic.
C) inelastic.
D) elastic.

Question 31

A price elasticity of 2.25 means that if price changes by 1%, then quantity will change by:

A) 2.25%.
B) .225%.
C) 22.5%.
D) 1.25%.

Question 32

A price elasticity of 1.25 means that if price changes by 10%, then quantity will change by:

A) 1.25%.
B) .125%.
C) 12.5%.
D) -1.25%.

Question 33

A price elasticity of .25 means that if price changes by 1%, then quantity will change by:

A) 2.25%.
B) .025%.
C) 0.25%.
D) 1.25%.

Question 34

A price elasticity of 0.25 means that if price changes by 10%, then quantity will change by:

A) 2.5%.
B) .125%.
C) 2.25%.
D) 1.25%.

Question 35

Demand for gasoline is less price elastic in the short run than in the long run because in the long run:

A) there is a lack of substitutes.
B) consumers have more time to adjust.
C) gasoline's share of a budget is unimportant.
D) gasoline is a luxury good.

Question 36

Which price elasticity factor explains why inexpensive items (such as toothpicks) tend to have less elastic demand than expensive goods (like foreign air travel)?

A) availability of substitutes
B) share of budget
C) definition of a market
D) necessities

Question 37

Which price elasticity factor explains why nonbranded goods (such as store-brand bleach) tend to have less elastic demand than branded goods (like Clorox bleach)?

A) time to adjust
B) share of budget
C) definition of a market
D) necessities

Question 38

Which price elasticity factor explains why items such as a patented medicine tend to have less elastic demand than aspirin?

A) availability of substitutes
B) share of budget
C) deferred consumption
D) variety of uses

Question 39

Economists refer to a firm's unit sales as:

A) total revenue.
B) total sales.
C) quantity demanded.
D) demand.

Question 40

Economists refer to a firm's profit as:

A) total revenue.
B) total sales.
C) quantity demanded.
D) revenue minus costs.

Question 41

Evan and Elaine sold 40 cups of lemonade at their neighborhood lemonade stand. Their total revenue equaled $120. What was the price per cup?

A) $1.20
B) $4.00
C) $3.50
D) $3.00

Question 42

The formula for calculating total revenue is:

A) TR = P ÷ Q
B) TR = P × Q
C) TR = Q ÷ P
D) TR = P + Q

Question 43

When the price elasticity of demand is _____, a price increase would result in _____ in total revenue.

A) elastic; an increase
B) inelastic; an increase
C) absolute; an increase
D) absolute; a decrease

Question 44

In general, when the price elasticity of demand is greater than 1 and a firm wants to increase total revenue, the firm should:

A) decrease prices.
B) increase prices.
C) advertise less.
D) advertise more.

Question 45

In general, when the price elasticity of demand is less than 1 and a firm wants to increase total revenue, a firm should:

A) decrease prices.
B) increase prices.
C) advertise less.
D) advertise more.

Question 46

If a firm raises its price and total revenue increases, then the price elasticity is:

A) elastic.
B) unit elastic.
C) inelastic.
D) absolute.

Question 47

(Figure: Total Revenue) At which point is total revenue maximized?

A) a
B) b
C) c
D) d

Question 48

(Figure: Total Revenue) At which point is demand elastic?

A) a
B) c
C) d
D) e

Question 49

(Figure: Total Revenue) At which point is demand inelastic?

A) a
B) c
C) b
D) e

Question 50

The money that a business receives from the sale of a product, which is calculated as the price of the good times the quantity sold, is known as:

A) profit.
B) sales.
C) margin.
D) total revenue.

Question 51

If electricity prices rise substantially but quantity demanded does not decrease very much, then electricity is probably:

A) elastic.
B) inelastic.
C) unit elastic.
D) absolute.

Question 52

If prices rise substantially on peanut butter and total revenue decreases significantly, then peanut butter is probably:

A) elastic.
B) inelastic.
C) unit elastic.
D) absolute.

Question 53

If prices fall substantially on grapefruit juice and total revenue increases significantly, then grapefruit juice is probably:

A) elastic.
B) inelastic.
C) unit elastic.
D) absolute.

Question 54

If prices rise substantially on milk and total revenue does not change significantly, then milk is probably:

A) elastic.
B) inelastic.
C) unit elastic.
D) absolute.

Question 55

Demand tends to be more price elastic at _____ prices and more price inelastic at _____ prices.

A) lower; lower
B) lower; higher
C) higher; higher
D) higher; lower

Question 56

Demand tends to be more price inelastic at _____ prices and more price elastic at _____ prices.

A) lower; lower
B) lower; higher
C) higher; higher
D) higher; lower

Question 57

Total revenue maximized at the point of:

A) elasticity.
B) inelasticity.
C) unit elasticity.
D) absolute elasticity.

Question 58

Total revenue minus total cost is:

A) revenue.
B) profit.
C) sales.
D) net sales.

Question 59

As income rises, the demand for inferior goods:

A) increases.
B) decreases.
C) remains the same.
D) is absolute.

Question 60

As income rises, the demand for hamburger (an inferior good) _____, and the demand for steak (a normal good) ______.

A) increases; decreases
B) decreases; increases
C) remains the same; increases
D) increases; remains the same

Question 61

As income rises, the demand for normal goods:

A) increases.
B) decreases.
C) remains the same.
D) is absolute.

Question 62

As incomes decline, which of the following would likely see an increase in demand?

A) luxury cars
B) dollar stores
C) designer handbags
D) second homes

Question 63

As incomes increase, which of the following would likely see the largest increase in demand?

A) gum
B) luxury cars
C) hot dogs
D) thrift store purchases

Question 64

An example of an income elastic good is:

A) popcorn.
B) a movie ticket.
C) a hot dog.
D) a first-class airline ticket.

Question 65

A good for which demand increases as incomes increase and for which demand decreases as incomes decrease is:

A) a normal good.
B) an inferior good.
C) a complement good.
D) a substitute good.

Question 66

Galina is a struggling college student. She likes to eat lobster, but because she cannot afford it, she substitutes spam for the lobster. For Galina, spam is:

A) a normal good.
B) an inferior good.
C) a complement good.
D) a luxury good.

Question 67

For a good to be classified as a luxury good, the quantity demanded must:

A) increase.
B) be inelastic.
C) increase less rapidly than income increases.
D) increase more rapidly than income increases.

Question 68

Electricity is an example of an:

A) income inelastic inferior good.
B) income elastic inferior good.
C) income inelastic normal good.
D) income elastic normal good.

Question 69

Gasoline is an example of an:

A) income inelastic inferior good.
B) income elastic inferior good.
C) income inelastic normal good.
D) income elastic normal good.

Question 70

A yacht is an example of an:

A) income inelastic inferior good.
B) income elastic inferior good.
C) income inelastic normal good.
D) income elastic normal good.

Question 71

Price changes have little impact on the quantity demanded of:

A) substitute goods.
B) inferior goods.
C) normal goods.
D) necessities.

Question 72

Income inelastic demand means that the income elasticity of demand is:

A) between 0 and 1.
B) below 0.
C) between 1 and 2
D) at 0.

Question 73

Income elastic demand means that the income elasticity of demand is:

A) between 0 and 1.
B) below 0.
C) above 1.
D) at 0.

Question 74

When incomes fall, which of the following would most likely occur?

A) Demand for luxury cars increases.
B) Demand for air travel increases.
C) Demand for expensive restaurants increases.
D) Demand for public transportation increases.

Question 75

_____ elasticity of demand is a measure of how responsive the quantity demanded of one good is to changes in the price of another product.

A) Price
B) Income
C) Cross-price
D) Cross-income

Question 76

If the price of hot dogs falls and the demand for buns rises, then the relationship between hot dogs and buns can be described as _____ goods.

A) substitute
B) complement
C) inferior
D) normal

Question 77

Complement goods have a _____ cross-price elasticity of demand.

A) negative
B) positive
C) absolute
D) zero

Question 78

Substitute goods have a _____ cross-price elasticity of demand.

A) negative
B) positive
C) absolute
D) zero

Question 79

_____ is a measure of how responsive the quantity supplied is to price changes.

A) Cross-price elasticity of demand
B) Price elasticity of demand
C) Cross-price elasticity of supply
D) Price elasticity of supply

Question 80

Supply will tend to be more price elastic when a:

A) factory has spare capacity.
B) factory is running at capacity.
C) fast-food restaurant is facing falling demand.
D) fast-food restaurant loses an oven.