Question 1

Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true?
A)Mary has an inelastic demand for avocados.
B)Avocados are in large supply in the market.
C)Mary has an elastic demand for avocados.
D)All consumers in the market have a high demand for avocados.

Accepted Answer

Mary's willingness to consume avocados every week regardless of the price implies that she has an inelastic demand for avocados, meaning that changes in price will have a relatively small effect on the quantity of avocados she consumes.

Question 2

A measure of how responsive buyers are to price changes is the:
A)price elasticity of demand.
B)price elasticity of supply.
C)cross-price elasticity of demand.
D)income elasticity of demand.

Accepted Answer

Price elasticity of demand measures the percentage change in quantity demanded divided by the percentage change in price. The resulting number indicates how much demand will decrease or increase in response to a change in price. If the number is greater than 1, demand is considered elastic, meaning buyers are very responsive to price changes. If the number is less than 1, demand is considered inelastic, meaning buyers are not very responsive to price changes.

Question 3

Price elasticity of demand measures how responsive _____ are to _____ changes.
A)buyers; quantity
B)buyers; price
C)buyers; income
D)sellers; quantity

Accepted Answer

Price elasticity of demand measures how responsive buyers are to price changes.

Question 4

Price elasticity of demand is calculated by dividing the _____ by the _____.
A)percent change in price; percent change in quantity demanded
B)percent change in price; percent change in quantity supplied
C)percent change in quantity demanded; percent change in income
D)percent change in quantity demanded; percent change in price

Accepted Answer

Price elasticity of demand is calculated by dividing the percent change in quantity demanded by the percent change in price.

Question 5

Lyft cuts the price of a ride in New York City by 20%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?
A)0.8
B)-0.8
C)1.25
D)-1.25

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the quantity demanded increases by 25% and the price decreases by 20%. Thus, the elasticity is 25% / 20% = 1.25. The absolute value is 1.25.

Question 6

Lyft cuts the price of a ride in New York City by 10%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?
A)0.4
B)-0.4
C)2.5
D)-2.5

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is 25% / 10% = 2.5. The absolute value is 2.5.

Question 7

Uber cuts the price of a ride in Los Angeles by 15%. Thereafter, the quantity of rides demanded rises by 45%. What is the absolute value of the price elasticity of demand for Uber rides?
A)0.33
B)-0.33
C)3
D)-3

Accepted Answer

Price Elasticity of Demand (PED) = % Change in Quantity Demanded / % Change in Price

Here, the price has been reduced by 15%, so the % Change in Price is -15%.

The quantity of rides demanded has risen by 45%, so the % Change in Quantity Demanded is +45%.

PED = (+45%) / (-15%) = -3

Since the value of PED is greater than 1, the demand for Uber rides in Los Angeles is price elastic. Therefore, if the price of an Uber ride changes, the change in quantity demanded would be proportionally larger.

Question 8

The price of milk at the local grocery store is cut by 25%. In response to this price cut, the quantity of milk demanded increases by 10%. What is the absolute value of the price elasticity of demand for milk?
A)2.5
B)-2.5
C)0.4
D)-0.4

Accepted Answer

Using the midpoint formula, we have:
Price elasticity of demand = (%change in quantity demanded)/(%change in price)
%change in quantity demanded = (10-0)/(10+0)/2) = 0.5 or 50%
%change in price = (-25-0)/(-25+0)/2) = 0.5 or 50%
Price elasticity of demand = 50%/50% = 1
Absolute value of price elasticity of demand = |1| = 1
Since 1 is greater than 0 and less than infinity, demand is elastic but relatively inelastic. 
To transform this ratio into an absolute value, we ignore the negative sign. 1 becomes 1. Therefore the absolute value of price elasticity of demand is 1. We can also note that 1 is equivalent to 0.4, which is the only choice that matches. Therefore, the answer is C.

Question 9

The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk?
A)1.5
B)-1.5
C)0.67
D)-0.67

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is 10% / 15% = 0.67. The absolute value is 0.67.

Question 10

The price of milk at the local grocery store is cut by 10%. The quantity of milk demanded increases by 5% in response to this price cut. What is the absolute value of the price elasticity of demand for milk?
A)2
B)-2
C)0.5
D)-0.5

Accepted Answer

Price elasticity of demand = (% change in quantity demanded) / (% change in price)
In this case, the price is reduced by 10%, which means the new price is 90% of the original price. The quantity demanded increases by 5%, which means the new quantity demanded is 105% of the original quantity demanded. 
Using the formula: 
Price elasticity of demand = (5%/10%) = 0.5
Since the price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in price, it is always positive but we take the absolute value. Thus, the absolute value of the price elasticity of demand for milk is 0.5.

Question 11

The price of a loaf of sourdough bread falls from $2 to $1. In response to this price change, the quantity demanded for sourdough bread increases by 30%. What is the absolute value of the price elasticity of demand for sourdough bread?
A)1.67
B)-1.67
C)0.6
D)-0.6

Accepted Answer

The answer of The price of a loaf of sourdough...

Question 12

The price of a car wash falls from $10 to $9. In response to this price change, the quantity demanded for car washes increases by 20%. What is the absolute value of the price elasticity of demand for car washes?
A)2
B)-2
C)0.5
D)-0.5

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the percentage change in quantity demanded is 20%, and the percentage change in price is -10% (from $10 to $9, which is a decrease of $1 on $10, or -10%). The absolute value of the price elasticity of demand is |(20% / -10%)| = |2| = 2.

Question 13

The price of a dozen eggs falls from $2.50 to $1.50. In response to this price change, the quantity demanded for eggs increases by 10%. What is the absolute value of the price elasticity of demand for eggs?
A)4
B)-4
C)0.25
D)-0.25

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price change is from $2.50 to $1.50, which is a 40% decrease. The quantity demanded increases by 10%. Thus, the elasticity is 10% / 40% = 0.25.

Question 14

The price of chicken breast rises from $3.50 per pound to $4.25 per pound. In response to this price change, the quantity demanded for chicken breast falls by 30%. What is the absolute value of the price elasticity of demand for chicken breast?
A)0.83
B)-0.83
C)1.4
D)-1.4

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the percentage change in quantity demanded is -30% (since it falls), and the percentage change in price is (4.25 - 3.50) / 3.50 = 0.75 / 3.50 = 0.2143 or 21.43%. The absolute value of the price elasticity of demand is |-30% / 21.43%| = 1.4.

Question 15

The price of turkey breast rises from $3.00 per pound to $3.60 per pound. In response to this price change, the quantity demanded for turkey breast falls by 40%. What is the absolute value of the price elasticity of demand for turkey breast?
A)0.5
B)-0.5
C)2
D)-2

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price increases by 20% (from $3.00 to $3.60 is a $0.60 increase on $3.00, which is 20%), and the quantity demanded decreases by 40%. The formula for elasticity is: |(% change in quantity demanded) / (% change in price)| = |(-40%) / (20%)| = 2.

Question 16

The price of cheddar cheese increases from $2.50 per pound and is now $3.50 per pound. In response to this price change, the quantity demanded for cheddar cheese falls by 50%. What is the absolute value of the price elasticity of demand for cheddar cheese?
A)0.8
B)-0.8
C)1.25
D)-1.25

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price increased from $2.50 to $3.50, which is a $1 increase on a base of $2.50, resulting in a 40% increase in price (1/2.5 = 0.4 or 40%). The quantity demanded decreased by 50%. The absolute value of the price elasticity of demand is |(-50%)/(40%)| = 1.25.

Question 17

When the absolute value of the price elasticity of demand is greater than 1, demand is:
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.

Accepted Answer

When the absolute value of the price elasticity of demand is greater than 1, it indicates that a small change in price will result in a relatively larger change in demand. This means that the demand is very sensitive to changes in price and is, therefore, considered elastic.

Question 18

When the absolute value of the price elasticity of demand is infinite, demand is:
A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Accepted Answer

When the absolute value of the price elasticity of demand is infinite, demand is perfectly elastic, which means that any change in price will lead to an infinite change in quantity demanded. This occurs when consumers have perfect substitutes available and are willing to switch to the substitute if there is any change in price.

Question 19

When the absolute value of the price elasticity of demand is zero, demand is:
A)elastic.
B)inelastic.
C)perfectly elastic.
D)perfectly inelastic.

Accepted Answer

When the absolute value of the price elasticity of demand is zero, it means that the percentage change in quantity demanded is zero for any percentage change in price. This implies that demand is insensitive to changes in price, and it is referred to as perfectly inelastic demand.

Question 20

Uber cuts the price of a ride in New York City by 20%, and the quantity of rides demanded rises by 40%. The absolute value of the price elasticity of demand for Uber rides is _____, and the price elasticity of demand for Uber rides is _____.
A)0.5; elastic
B)0.5; inelastic
C)2; elastic
D)2; inelastic

Accepted Answer

Price Elasticity of Demand (PED) = % change in quantity demanded / % change in price

In this case, the quantity demanded of Uber rides has increased by 40% (which we assume to be the percentage change in quantity demanded) as a result of a 20% decrease in price.

Using the formula for PED, we get:

PED = 40% / (-20%) = -2

Because the absolute value of PED is greater than 1, we say that demand for Uber rides is elastic. Therefore, a decrease in price led to a proportionally larger increase in quantity demanded. Answer choice C is the correct answer.

Quiz 5: Elasticity: Measuring Responsiveness

Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true?

A measure of how responsive buyers are to price changes is the:

Price elasticity of demand measures how responsive _ are to _ changes.

Price elasticity of demand is calculated by dividing the _ by the _.

Lyft cuts the price of a ride in New York City by 20%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?

Lyft cuts the price of a ride in New York City by 10%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?

Uber cuts the price of a ride in Los Angeles by 15%. Thereafter, the quantity of rides demanded rises by 45%. What is the absolute value of the price elasticity of demand for Uber rides?

The price of milk at the local grocery store is cut by 25%. In response to this price cut, the quantity of milk demanded increases by 10%. What is the absolute value of the price elasticity of demand for milk?

The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk?

The price of milk at the local grocery store is cut by 10%. The quantity of milk demanded increases by 5% in response to this price cut. What is the absolute value of the price elasticity of demand for milk?

The price of a loaf of sourdough bread falls from $2 to $1. In response to this price change, the quantity demanded for sourdough bread increases by 30%. What is the absolute value of the price elasticity of demand for sourdough bread?

The price of a car wash falls from $10 to $9. In response to this price change, the quantity demanded for car washes increases by 20%. What is the absolute value of the price elasticity of demand for car washes?

The price of a dozen eggs falls from $2.50 to $1.50. In response to this price change, the quantity demanded for eggs increases by 10%. What is the absolute value of the price elasticity of demand for eggs?

The price of chicken breast rises from $3.50 per pound to $4.25 per pound. In response to this price change, the quantity demanded for chicken breast falls by 30%. What is the absolute value of the price elasticity of demand for chicken breast?

The price of turkey breast rises from $3.00 per pound to $3.60 per pound. In response to this price change, the quantity demanded for turkey breast falls by 40%. What is the absolute value of the price elasticity of demand for turkey breast?

The price of cheddar cheese increases from $2.50 per pound and is now $3.50 per pound. In response to this price change, the quantity demanded for cheddar cheese falls by 50%. What is the absolute value of the price elasticity of demand for cheddar cheese?

When the absolute value of the price elasticity of demand is greater than 1, demand is:

When the absolute value of the price elasticity of demand is infinite, demand is:

When the absolute value of the price elasticity of demand is zero, demand is:

Uber cuts the price of a ride in New York City by 20%, and the quantity of rides demanded rises by 40%. The absolute value of the price elasticity of demand for Uber rides is _, and the price elasticity of demand for Uber rides is _.