Deck 4: Elasticity

Question 1

The price elasticity of demand is typically expressed as a positive number because:

A)price and quantity move in the same direction.
B)the demand curve has a positive slope.
C)it's convenient to use absolute values.
D)both the numerator and the denominator are negative, so the formula yields a positive number.

Answer 1

it's convenient to use absolute values.

Question 2

The demand for a good is inelastic with respect to price if the price elasticity of demand is:

A)equal to one.
B)greater than one.
C)less than one.
D)equal to negative one.

Answer 2

less than one.

Question 3

The demand for a good is unit elastic with respect to price if the price elasticity of demand is:

A)equal to one.
B)greater than one.
C)less than one.
D)greater than negative one.

Answer 3

equal to one.

Question 4

The price elasticity of demand for a good measures the responsiveness of:

A)demand to a 1 percent change in price of that good.
B)price to a 1 percent change in the demand for that good.
C)quantity demanded to a 1 percent change in price of that good.
D)price to a 1 percent change in the quantity demanded of that good.

Question 5

The demand for a good is elastic if the price elasticity of demand is:

A)equal to one.
B)greater than one.
C)less than one.
D)equal to zero.

Question 6

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is:

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

Question 7

If 20 percent increase in the price of a good leads to a 60 percent decrease in the quantity demanded, then what is the price elasticity of demand?

A)30.
B)3.
C)1/3.
D)1/6.

Question 8

If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to:

A)30.
B)0.30.
C)0.333.
D)3.

Question 9

If a 10 percent decrease in the price of a good leads to a 20 percent increase in the quantity demanded, then what is the price elasticity of demand?

A)0.5
B)2
C)10
D)20

Question 10

The price elasticity of demand is a measure of:

A)the change in quantity demanded of a good that results from a change in its price.
B)the change in price of a good that results from a change in its quantity demanded.
C)the demand for a good.
D)how consumers respond to excess demand.

Question 11

If the price elasticity of demand for pineapples is 0.75, then a 4 percent increase in the price of pineapples will lead to a:

A)3 percent decrease in the quantity of pineapples demanded.
B)3 percent increase in the quantity of pineapples demanded.
C)0.75 percent decrease in the quantity of pineapples demanded.
D)0.75 percent increase in the quantity of pineapples demanded.

Question 12

If the price elasticity of demand for food is 0.03, then a 6 percent increase in the price of food will lead to a ________ decrease in quantity demanded.

A)0.018 percent
B)0.18 percent
C)1.8 percent
D)18 percent

Question 13

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then the price elasticity of demand is equal to:

A)0.05.
B)0.5.
C)2.
D)5.

Question 14

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by:

A)0.55 percent.
B)5.5 percent.
C)55 percent.
D)550 percent.

Question 15

The percentage change in quantity demanded that results from a 1 percent change in price is known as the:

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

Question 16

If the price elasticity of demand for chicken is 2, then a 20 percent decrease in the price of chicken will lead to a:

A)10 percent decrease in the quantity demanded of chicken.
B)10 percent increase in the quantity demanded of chicken.
C)40 percent decrease in the quantity demanded of chicken.
D)40 percent increase in the quantity demanded of chicken.

Question 17

If the price elasticity of demand for a good is greater than one, then the demand for that good is:

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

Question 18

If the absolute value of the price elasticity of demand for tickets to a football game is 2, then if the price increases by 1 percent, quantity demanded decreases by:

A)0.5 percent.
B)1 percent.
C)2 percent.
D)4 percent.

Question 19

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1 percent, quantity demanded would:

A)increase by 0.33 percent.
B)decrease by 0.33 percent.
C)increase by 3 percent.
D)decrease by 3 percent.

Question 20

When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically:

A)greater than one.
B)positive.
C)less than one.
D)negative.

Question 21

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. They then notice that they are selling approximately 15 percent fewer sodas. The price elasticity of demand for sodas from the campus vending machines, therefore, is:

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

Question 22

Suppose the price of a Snickers candy bar is $2.00 at both the airport and the grocery store. The price elasticity of demand for a Snickers candy bar at an airport is likely to be ________ the price elasticity of demand for a Snickers candy bar at the grocery store.

A)less than
B)equal to
C)greater than
D)the reciprocal of

Question 23

If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:

A)there was excess demand at the original price.
B)there was excess supply at the original price.
C)the price elasticity of demand at the original price was greater than one.
D)the price elasticity of demand at the original price was less than one.

Question 24

If the percentage change in the price of a good is equal to the percentage change in the quantity demanded of that good, then the demand for that good is:

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

Question 25

Suppose a 10% increase in the price of aspirin leads to a 5% decrease in the quantity demanded of aspirin. The demand for aspirin, therefore, is

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

Question 26

If the demand for a good is highly elastic, that good is likely to have:

A)many close complements.
B)few close complements.
C)many close substitutes.
D)few close substitutes.

Question 27

If the percentage change in the price of a good is less than the resulting percentage change in the quantity demanded of that good, then the demand for that good is:

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

Question 28

When the price of hot dogs is $1.50 each, 500 hot dogs are sold every day. After the price falls to $1.35 each, 510 hot dogs are sold every day. At the original price, what is the price elasticity of demand for hot dogs?

A)66.67
B)5
C)2
D)0.2

Question 29

Which of the following is likely to have the highest price elasticity of demand?

A)Shoes
B)Running shoes
C)Nike running shoes
D)The price elasticity of demand will be the same for all of the answers listed.

Question 30

Satellite TV is a close substitute for cable TV. In the 1990's, small satellite TV units were developed that made it less costly for individual consumers to subscribe to satellite TV service. This caused the price elasticity of demand for cable TV service to:

A)become more inelastic.
B)become less elastic.
C)become more elastic.
D)shift to the left.

Question 31

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. If they then still sell almost the same number of sodas per day, this suggests:

A)students do not have good nutritional information.
B)soda purchases represent a large fraction of students' budgets.
C)there are few other places to purchase soda on campus.
D)the price elasticity of demand for soda is equal to 1.

Question 32

All else equal, the price elasticity of demand tends to be higher when:

A)a good has many substitutes.
B)the time horizon is relatively short.
C)people spend a small fraction of their budget on the good.
D)supply increases.

Question 33

When the demand for a good is inelastic, that good is likely to have:

A)many close complements.
B)few close complements.
C)many close substitutes.
D)few close substitutes.

Question 34

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:

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

Question 35

When the price of NBA tickets is $25 each, 30,000 tickets are sold. After the price rises to $30 each, 20,000 tickets are sold. At the original price, the demand for NBA ticket is:

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

Question 36

For which of the following products is demand likely to be least elastic with respect to price?

A)Food
B)Vegetables
C)Green vegetables
D)Green beans

Question 37

Jeans in general have fewer close substitutes than a specific brand of jeans. Therefore, the demand for jeans in general will be ________ than the demand for a specific brand of jeans.

A)more elastic
B)less elastic
C)more unit elastic
D)less inelastic

Question 38

All else equal, the price elasticity of demand for a good tends to be lower:

A)if the good has few close substitutes.
B)if the good represents a large share of a consumer's budget.
C)in the long run.
D)if the good has many close substitutes.

Question 39

If the price elasticity of demand for a good equals one, then the demand for that good is:

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

Question 40

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

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

Question 41

If the quantity demanded of a good is Q when the price for the good is P, the price elasticity of demand for that good at that point is:

A)(P/Q)× (1/slope)
B)(Q/P)× (1/slope)
C)(P/Q)× (slope)
D)Q × P × (1/slope)

Question 42

If the elasticity of demand for the latest American Idol album is 1.4, this means

A)few substitutes for the American Idol album exist.
B)a 1 percent increase in the price leads to a 14 percent decrease in quantity demanded.
C)a 10 percent decrease in the price leads to a 140 percent increase in quantity demanded.
D)a 5 percent increase in the price leads to a 7 percent decrease in quantity demanded.

Question 43

Demand tends to be ________ in the short run than in the long run.

A)more elastic
B)less elastic
C)more variable
D)less important

Question 44

The accompanying graph depicts demand. At point A, demand is:

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

Question 45

The accompanying graph depicts demand. The price elasticity of demand at point B is:

A)3/4.
B)4/3.
C)3.
D)1/3.

Question 46

Suppose that the short-run price elasticity of demand for electricity is 0.03, and the long-run price elasticity of demand is 1.2. One would classify the short-run elasticity as being ________ and the long-run elasticity as being ________.

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

Question 47

The reason a brand name item (e.g., Tyson chicken)has a larger price elasticity than a class of items (e.g., chicken)is that:

A)there are fewer substitutes for Tyson chicken than for chicken generally.
B)it takes a lot of time to adjust to a substitute brand of chicken.
C)the share of income spent on "chicken" is larger than spent on "Tyson Chicken".
D)there are fewer substitutes for chicken generally than for Tyson chicken.

Question 48

If the absolute value of slope of the demand curve is 2.5, price is $6 per unit, and the quantity demanded is 8 units, then the price elasticity of demand is:

A)0.3.
B)0.533.
C)1.6.
D)1.875.

Question 49

You would expect the price elasticity of demand for transportation generally to be:

A)the same as price elasticity of the demand for bus tickets.
B)greater than price elasticity of the demand for bus tickets.
C)less than price elasticity of the demand for bus tickets.
D)greater than price elasticity of the demand for bus tickets when bus tickets are expensive, but less than price elasticity of the demand for bus tickets when the prices of bus tickets fall.

Question 50

All else equal, compared to small-budget items such as paper towels, the price elasticity of demand for big-ticket items such as refrigerators is:

A)higher.
B)lower.
C)very low.
D)equal.

Question 51

Suppose that the demand for electricity has been found to be price inelastic. The most likely explanation for this finding is that:

A)electricity is a luxury good.
B)the fraction of income spent on electricity is large.
C)few substitutes for electricity exist.
D)electricity is sold in a monopoly market.

Question 52

Suppose you have one hour to catch a flight to Miami for spring break, and it takes 45 minutes to drive to the airport. Your car is almost out of gas and the price of gas at the closest gas station is higher than at other gas stations that are much farther away. To you, the price elasticity of demand for gas is likely to be ________ than it would be if you had several hours before the flight.

A)higher
B)lower
C)more variable
D)no different

Question 53

Economists have found that the price elasticity of demand for water is higher in the summer than in the winter. Why is this likely to be so?

A)Winter is longer than summer, and price elasticity is lower over longer time horizons.
B)Summer is longer than winter, and price elasticity is higher over longer time horizons.
C)Winter water use tends to be for necessities such as cleaning and cooking, and summer water use tends to be for both necessities and non-necessities such as gardening and recreation.
D)People take more vacations in the summer and so use less water at home.

Question 54

If the absolute value of the slope of the demand curve is 0.25, price is $8 per unit, and quantity demanded is 12 units, then demand for this good is:

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

Question 55

Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will:

A)increase because the Internet offers more substitutes.
B)decrease because the Internet offers more substitutes.
C)remain the same, but the quantity demanded will decrease as more people shop online.
D)remain the same, but the demand will decrease as more people shop online.

Question 56

All else equal, the price elasticity of demand for small-budget items such as soap tends to be ________ than the price elasticity of demand for big-ticket items such as flat-screen TVs.

A)higher
B)lower
C)very high
D)the same

Question 57

The accompanying graph depicts demand. The price elasticity of demand at point A is:

A)5/2.
B)5/8.
C)2/5.
D)8/5.

Question 58

Suppose you learn that in 1,900, households spent about 40 percent of their budget on food, and today, they spend about 10 percent of their budget of food. All else equal, this suggests that the price elasticity of demand for food:

A)is probably negative.
B)has always been very high.
C)is probably lower now than it was in 1,900.
D)is probably higher now than it was in 1,900.

Question 59

Assume the price of gasoline doubles tonight and remains at that price for the next two years. Compared with the long-run price elasticity of demand for gasoline, the short-run price elasticity of demand for gasoline will be ________.

A)higher
B)more variable
C)the same
D)lower

Question 60

The accompanying graph depicts demand.  
The slope of the demand curve (ignoring the negative sign)is:

A)2.
B)1.5.
C)1.
D)0.5.

Question 61

At the midpoint of a straight-line demand curve, the price elasticity of demand is:

A)greater than one.
B)less than one.
C)equal to one.
D)zero.

Question 62

Refer to the accompanying graph. What is the price elasticity of demand when the price of rice is $3 per pound?

A)0.5
B)0.67
C)0.75
D)2

Question 63

Refer to the accompanying figure. At P = 8 and Q = 4, D1 is ________ elastic than D2, which is shown graphically as D1 being ________ D2.

A)more; flatter than
B)more; steeper than
C)less; flatter than
D)less; steeper than

Question 64

Refer to the accompanying figure. At P = 4, how does the price elasticity of demand for D1 compare to that for D2?

A)It will be equal for D1 and D2.
B)It will be greater for D1 than for D2.
C)It will be lower for D1 than D2.
D)The price elasticity of demand for both D1 and D2 will be greater than one.

Question 65

As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), demand:

A)becomes more elastic.
B)increases.
C)decreases.
D)becomes less elastic.

Question 66

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be ________ the flatter curve.

A)more elastic than
B)less elastic than
C)as elastic as
D)more likely to be unit elastic than

Question 67

Suppose the price P on a given demand curve results in a price elasticity of demand equal to 1. Any price higher than P will lie on the ________ part of the demand curve, and any price lower than P will lie on the ________ part of the demand curve.

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

Question 68

Refer to the accompanying figure. The absolute value of the slope of the demand curve D1 is ________, and the absolute value of the slope of demand curve D2 is ________.

A)1/2; 2
B)2; 1/2
C)5/4; 4/5
D)4/5; 5/4

Question 69

The price elasticity of demand equals 1:

A)whenever the slope of a straight-line demand curve is greater than 1 in absolute value.
B)at the midpoint of a straight-line demand curve.
C)whenever the slope of a straight-line demand curve is less than 1 in absolute value.
D)whenever the slope of a straight-line demand curve equals zero.

Question 70

Refer to the accompanying figure. When P = 4, the price elasticity of demand for the demand curve D1 is ________ and D2 is ________.

A)3; 3
B)2/3; 1/3
C)1/3; 3
D)1/3; 2/3

Question 71

The accompanying graph depicts demand.  The price elasticity of demand at point D is:

A)5/2.
B)1/2.
C)2/5.
D)2.

Question 72

If consumers completely cease purchasing a product when its price increases by any amount, then demand is:

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

Question 73

Refer to the accompanying graph. What is the price elasticity of demand at point A?

A)3
B)2
C)0.33
D)0.2

Question 74

Refer to the accompanying figure. For demand curve D1, what is the price elasticity of demand when P = 12?

A)12
B)6
C)4
D)3

Question 75

If the demand curve is horizontal, then demand is:

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

Question 76

On a given linear demand curve, as price increases demand becomes:

A)more elastic.
B)less elastic.
C)more negative.
D)more variable.

Question 77

The accompanying graph depicts demand.   At point D, demand is:

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

Question 78

Refer to the accompanying figure. When the price is equal to 8, the price elasticity of demand for the demand curve D1 is ________ and for D2 the price elasticity of demand is ________.

A)4; 1
B)1; 4
C)4; 4
D)2; 4

Question 79

Refer to the accompanying figure. What is the price elasticity of demand when the price of rice is $6 per pound?

A)0.5
B)0.67
C)2
D)3

Question 80

The accompanying graph depicts demand. The price elasticity of demand at point C is:

A)3/16.
B)16/3.
C)3/4.
D)3/8.