Question 1

Which of the following is more likely be the price elasticity of demand for anti-venom?
A)highly inelastic
B)unit elastic
C)elastic
D)perfectly elastic

Accepted Answer

The demand for anti-venom is likely to be highly inelastic because it is a life-saving medication with no close substitutes. Therefore, consumers are willing to pay a high price for it regardless of price changes. Additionally, the demand for anti-venom is unlikely to be highly responsive to changes in price because it is not a product that is purchased frequently or for luxury purposes.

Question 2

A study of New York City (NYC) tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives.Manufacturers are more mobile and may move to avoid higher taxes.This means that
A)nonmanufacturing firms have a more elastic demand for NYC locations.
B)manufacturing firms have an inelastic demand for the NYC locations.
C)nonmanufacturing firms have relatively inelastic demand for the NYC locations.
D)nonmanufacturing demand for NYC locations is perfectly elastic.

Accepted Answer

The answer of A study of New York City (NYC)...

Question 3

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller.The airlines base the policy on the assumption that
A)consumers are not aware of airline prices.
B)consumer demand is unrelated to prices.
C)consumer demand becomes more elastic as departure time approaches.
D)consumer demand becomes less elastic as departure time approaches.

Accepted Answer

The airline's policy assumes that as the departure time approaches, consumers become more desperate to make the trip and are willing to pay more, indicating that consumer demand becomes less elastic.

Question 4

In 1975, New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase a like amount.The taxi commission believed taxi demand was
A)unit elastic.
B)inelastic.
C)elastic.
D)perfectly inelastic.

Accepted Answer

The answer of In 1975, New York City increased regulated...

Question 5

The relationship between a change in consumer income and a resulting change in demand for a good is
A)demand elasticity.
B)income elasticity of demand.
C)cross elasticity of income demand.
D)supply elasticity.

Accepted Answer

The relationship between a change in consumer income and a resulting change in demand for a good is referred to as income elasticity of demand. This is because the measure of how much the quantity demanded for a good changes as a result of a change in consumer income is known as the income elasticity of demand.

Question 6

Which of the following goods will have the most elastic demand at any time?
A)coffee
B)gasoline
C)restaurant meals
D)insulin

Accepted Answer

Restaurant meals are considered a luxury item, meaning that they are not a necessary product for survival. Consumers have alternative choices to eat meals at home and therefore can easily reduce their consumption of restaurant meals. Therefore, restaurant meals have a high price elasticity of demand, making it the most elastic of the options given.

Question 7

When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that
A)the United States' elasticity of demand for imported oil is greater than one.
B)the United States' elasticity of demand for imported oil is less than one.
C)imported oil and domestically produced oil are complementary goods.
D)the short-run elasticity of demand for oil is greater than the long-run elasticity.

Accepted Answer

When OPEC raises the price of petroleum, American expenditures on oil imports increase, which means the demand for imported oil is relatively inelastic, as buyers are willing to pay higher prices to maintain their level of consumption.

Question 8

A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami.The elasticity of demand for rice is
A)greater in Miami than in Gainesville, even taking into account the population difference.
B)greater in Gainesville than in Miami in spite of the population difference.
C)equal in Gainesville and Miami regardless of the population difference.
D)impossible to compare because of the population difference.

Accepted Answer

The percentage change in quantity demanded is the same in both cities (25%), and the percentage change in price is also the same (20%). Therefore, the elasticity of demand, which is the percentage change in quantity demanded divided by the percentage change in price, is equal in both cities regardless of the population difference.

Question 9

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely
A)increase the purchase of meals by 10 percent.
B)increase the purchase of meals by less than 10 percent.
C)decrease the purchase of meals by more than 10 percent.
D)decrease the purchase of meals by less than 10 percent.

Accepted Answer

The answer of A 10 percent increase in the cost...

Question 10

Which of the following goods will have the most inelastic demand at any time?
A)jewelry
B)Big Macs
C)electricity
D)pork chops

Accepted Answer

Electricity is a necessity for most people and does not have many substitutes. Therefore, the demand for electricity is typically inelastic.

Question 11

A relatively large increase in the cost of electricity would likely
A)result in a large increase in the use of gas for home use immediately.
B)cause an immediate large decline in the use of electricity.
C)increase the use of gas and decrease the use of electricity after a time lapse.
D)cause an equal reduction in the use of electricity immediately.

Accepted Answer

When the cost of electricity increases, people may switch to using gas for home use which will increase the use of gas. However, this switch may not happen immediately due to the cost of installing gas appliances and infrastructure. Therefore, there may be a time lapse before the use of gas increases. At the same time, the increase in the cost of electricity will discourage people from using and consuming as much electricity. Therefore, in the long run, the use of gas may increase and the use of electricity may decrease. Thus, option C is the best choice.

Question 12

Figure 6-9 
-In 1983, government price supports raised the price of sugar above its equilibrium value.Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?
A)1
B)2
C)3
D)4

Accepted Answer

Graph 3 shows an increase in the price of sugar, which would lead to an increase in the demand for sugar substitutes like fructose. This is illustrated by the rightward shift of the demand curve for fructose, resulting in a higher equilibrium quantity and price for fructose.

Question 13

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other.These goods are
A)complements.
B)substitutes.
C)luxury goods.
D)competing goods.

Accepted Answer

Complements are goods that are consumed together, such as coffee and cream. An increase in the price of one complement, such as coffee, will decrease the quantity demanded of the other complement, cream. Therefore, the statement in the question refers to the relationship between complementary goods.

Question 14

The demand for a new effective drug for the cure of AIDS would most likely be
A)elastic.
B)unit elastic.
C)perfectly elastic.
D)highly inelastic.

Accepted Answer

The demand for a new effective drug for the cure of AIDS would most likely be highly inelastic because patients in need of the drug would be willing to pay almost any price to obtain it, indicating that changes in price would have little effect on the quantity demanded.

Question 15

The price elasticity of demand for widgets at any particular price is determined by
A)whether widgets are luxuries or necessities.
B)how much of their budgets consumers spend on widgets.
C)whether there are any good substitutes for widgets.
D)All of the above are correct.

Accepted Answer

The price elasticity of demand for widgets is determined by all of the factors mentioned in options A, B, and C. The demand for luxuries is more elastic than necessities, and the more consumers spend on a product, the more elastic the demand is likely to be. Additionally, the availability of substitutes affects the elasticity of demand, as consumers are more likely to switch to substitutes if the price of widgets increases. Therefore, all of the options are correct.

Question 16

The elasticity of supply is calculated by
A)determining the slope of the supply curve.
B)dividing the absolute change in quantity supplied by the absolute change in price.
C)dividing the percentage change in quantity supplied by the percentage change in price.
D)dividing the percentage change in price by the percentage change in quantity demanded.

Accepted Answer

The elasticity of supply is calculated by dividing the percentage change in quantity supplied by the percentage change in price. This formula considers the responsiveness of quantity supplied with respect to changes in price, which is the basis of elasticity.

Question 17

The demand for potatoes at current prices is likely to be
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly elastic.

Accepted Answer

The demand for potatoes is likely to be inelastic as they are considered a basic necessity and consumers are not likely to significantly change their purchasing behavior even if the price changes.

Question 18

A good will tend to be more price elastic if it
A)is a luxury good.
B)has no close substitutes.
C)is a small part of the household budget.
D)is a necessity.

Accepted Answer

Luxury goods are typically more sensitive to changes in price because consumers have alternatives to choose from. They can either buy a cheaper substitute or simply choose to do without the good altogether. Necessities, on the other hand, tend to be less price elastic because consumers have to purchase them regardless of the price.

Question 19

The price elasticity of new automobile purchases is about 1.2.This implies that an increase of $1,000 on a $10,000 automobile will
A)reduce the number of autos sold by approximately 1.2 percent.
B)increase the consumer expenditures on autos by approximately 1.2 percent.
C)reduce the number of autos sold by approximately 12 percent.
D)increase consumer expenditures on autos by approximately 12 percent.

Accepted Answer

The price elasticity of 1.2 means that a 1% increase in price leads to a 1.2% decrease in quantity demanded. So, a $1,000 increase on a $10,000 automobile is a 10% increase in price, which would lead to a 12% decrease in quantity demanded (1.2 x 10). Therefore, the number of autos sold would reduce by approximately 12%.

Question 20

If both matches and automobile prices increase by 10 percent, consumers will likely buy
A)fewer matches and approximately the same quantity of automobiles.
B)approximately the same quantity of matches and fewer automobiles.
C)fewer matches and fewer automobiles.
D)approximately the same quantity of both matches and automobiles.

Accepted Answer

Matches are generally considered a necessity with a low price elasticity of demand, meaning consumers will buy about the same quantity even if the price increases. Automobiles, being more expensive and not an immediate necessity, have a higher price elasticity of demand, so consumers are likely to buy fewer when prices increase.

Quiz 6: Demand and Elasticity

Which of the following is more likely be the price elasticity of demand for anti-venom?

A study of New York City (NYC) tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives.Manufacturers are more mobile and may move to avoid higher taxes.This means that

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller.The airlines base the policy on the assumption that

In 1975, New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase a like amount.The taxi commission believed taxi demand was

The relationship between a change in consumer income and a resulting change in demand for a good is

Which of the following goods will have the most elastic demand at any time?

When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that

A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami.The elasticity of demand for rice is

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely

Which of the following goods will have the most inelastic demand at any time?

A relatively large increase in the cost of electricity would likely

Figure 6-9 -In 1983, government price supports raised the price of sugar above its equilibrium value.Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?

Certain goods are related such that an increase in the price of one good decreases the quantity demanded of the other.These goods are

The demand for a new effective drug for the cure of AIDS would most likely be

The price elasticity of demand for widgets at any particular price is determined by

The elasticity of supply is calculated by

The demand for potatoes at current prices is likely to be

A good will tend to be more price elastic if it

The price elasticity of new automobile purchases is about 1.2.This implies that an increase of $1,000 on a $10,000 automobile will

If both matches and automobile prices increase by 10 percent, consumers will likely buy