Question 1

Grape juice prices increased by 20 percent in 2007. Suppose in response grape growers did not increase or decrease their grape production. The elasticity of supply is best described as
A) perfectly inelastic.
B) perfectly elastic.
C) inelastic.
D) elastic.

Accepted Answer

If grape growers did not change their grape production levels in response to a 20 percent increase in the price of grape juice, this means that the elasticity of supply is zero. In other words, the quantity supplied of grapes did not respond at all to the change in price, indicating a perfectly inelastic supply curve.

Question 2

Specialty chocolate bars with a high cocoa content have been drawing a lot of attention in gourmet circles in 2008 but the price of cocoa beans has increased more than 44 percent in this time period. In response to the increase in the price of cocoa beans, Rogue Chocolatier has increased the price of their gourmet chocolate bars by 20 percent. Rogue observes the quantity of their bars sold decreased by 15 percent. This means the price elasticity of demand for gourmet chocolate bars is ________.
A) elastic
B) inelastic
C) undefined
D) unit elastic

Accepted Answer

The answer of Specialty chocolate bars with a high cocoa...

Question 3

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPod music player. CEO Steve Jobs also unveiled cheaper models of its Touch music player, a touchscreen-only device. An 8-gigabyte version now costs $230, down from $300. A 32-gigabyte model costs $400, down from $500. Calculate the price elasticity of demand for a 32 gigabyte Touch player if the quantity demanded increases from 850,000 to 950,000 the month after the price decrease.
A) 0.5
B) 1.5
C) 1
D) 0.75

Accepted Answer

The answer of Apple, the consumer electronics giant, on Tuesday...

Question 4

Specialty chocolate bars with a high cocoa content have been drawing a lot of attention in gourmet circles in 2008 but the price of cocoa beans has increased more than 44 percent in this time period. In response to the increase in the price of cocoa beans, Rogue Chocolatier has increased the price of their gourmet chocolate bars by 20 percent. Rogue notices their firm's total revenue increased after the price increase. We can determine that the demand for Rogue's bars is ________.
A) inelastic
B) elastic
C) perfectly inelastic
D) unit elastic

Accepted Answer

The fact that Rogue's total revenue increased after the price increase suggests that the demand for their bars is inelastic, meaning that consumers are willing to pay the higher price for the specialty chocolate bars. If the demand were elastic, then the price increase would have resulted in a decrease in total revenue.

Question 5

California is the sole producer of almonds in the United States. Suppose the price for a pound of almonds has increased during the past year. It is also predicted that almond prices will remain high. Over time, we predict that the
A) elasticity of supply will increase.
B) elasticity of supply will decrease.
C) elasticity of supply will remain constant.
D) elasticity of supply will increase and then decrease.

Accepted Answer

The answer of California is the sole producer of almonds...

Question 6

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." Calculate Jennika's price elasticity of demand for pork if she decreases her consumption by 4 percent.
A) 1.25
B) 1
C) 0.75
D) 0.66

Accepted Answer

The answer of "The Department of Agriculture came out today...

Question 7

In Brazil, the income elasticity of demand for dairy is 0.7 and for fruit and vegetables it is 0.5. These elasticities mean that if the income of Brazilians decreases, they will purchase ________ dairy and ________ fruits and vegetables.
A) less; less
B) more; more
C) more; less
D) less; more

Accepted Answer

The answer of In Brazil, the income elasticity of demand...

Question 8

Propecia was developed to treat mild to moderate male pattern hair loss in men. Marco has hair loss and he is willing to pay any amount of money to be able to buy this drug each month. Marco's price elasticity of demand is ________.
A) perfectly inelastic
B) perfectly elastic
C) elastic
D) inelastic

Accepted Answer

The answer of Propecia was developed to treat mild to...

Question 9

Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. The CFO of Redbox wants to identify how responsive consumers are to an increase or decrease in the daily price of a rental. The economic concept the CFO wants to understand is
A) price elasticity of demand.
B) elasticity of supply.
C) changes in demand.
D) changes in supply.

Accepted Answer

The economic concept the CFO wants to understand is price elasticity of demand. This measures the responsiveness of quantity demanded to a change in price. By identifying the price elasticity of demand, the CFO can determine whether a change in price will result in a significant change in revenue for Redbox.

Question 10

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPhone. The CEO decided to decrease the price of iPhones in an attempt to increase total revenue from iPhone sales. One of his employees, Jess, disagrees and suggests that an iPhone price increase will increase total revenue. Who is CORRECT?
A) The CEO is correct if demand is price elastic.
B) The CEO is correct if demand is price inelastic.
C) Jess is correct if demand is price elastic.
D) Jess is correct if demand is unit elastic.

Accepted Answer

The answer of Apple, the consumer electronics giant, on Tuesday...

Question 11

Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. In 2007, each kiosk averaged about 50 rentals per day. Suppose Redbox increases their daily price to $1.50. What is the price elasticity of demand if rentals decrease by 20 per day?
A) 1.25
B) 1.33
C) 1
D) 0.8

Accepted Answer

The answer of Redbox rents DVDs for $1 per day...

Question 12

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." Suppose a cattle producer increased the quantity of beef he supplies by 2 percent when the price of beef increased by 3 percent. His elasticity of supply is
A) inelastic.
B) elastic.
C) perfectly elastic.
D) perfectly inelastic.

Accepted Answer

The answer of "The Department of Agriculture came out today...

Question 13

The price elasticity of demand for movies is approximately 1 and 500,000 tickets are sold per day. If the average price of a movie ticket increases by 20 percent, the number of tickets sold each day decreases to ________.
A) 400,000
B) 300,000
C) 420,000
D) 475,000

Accepted Answer

The answer of The price elasticity of demand for movies...

Question 14

The cost of basics like milk, bread, potatoes and bananas has jumped in the past year, forcing families to nix luxuries, steer away from organic goods and buy more house brands. What does customer Elize Joseph mean when she said, "You can cut back on buying clothes and shoes, but you can't do that with food; you have to eat"?
A) The price elasticity of demand for food is higher than for clothes.
B) The price elasticity of demand for food is lower than for clothes.
C) Income elasticity of demand for food is positive.
D) Income elasticity of demand for food is negative.

Accepted Answer

Elize Joseph is stating that food is a necessity that cannot be completely cut out of a household budget, unlike non-essential goods such as clothes and shoes. This suggests that the price elasticity of demand for food is lower than for clothes, as people are less likely to reduce their food consumption even in the face of higher prices.

Question 15

Netflix is the largest online DVD rental service offering flat rate online streaming to customers in the United States. Currently, there are approximately 8 million subscribers. Suppose Netflix decreases its flat rate rental by 10 percent and an additional 1 million people subscribe. This information means that Netflix's demand is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.

Accepted Answer

If the decrease in price leads to a significant increase in the number of subscribers, it indicates that the demand for Netflix is quite sensitive to changes in price, making it elastic. Additionally, the fact that 1 million new subscribers joined after the price decrease further suggests that the price cut had a considerable impact on demand.

Question 16

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPad tablet. Suppose when the price of an iPad decreases by 20 percent, the number of songs downloaded on iTunes increases by 30 percent. Based on this information iTunes are
A) a normal good.
B) an inferior good.
C) substitutes for iPads.
D) complements to iPads.

Accepted Answer

The fact that a decrease in the price of iPads leads to an increase in the number of songs downloaded on iTunes suggests that iTunes are complements to iPads. In other words, as the price of iPads becomes more affordable, people are more likely to buy them and also purchase more songs on iTunes to use on their new device.

Question 17

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." If Raul's demand for dairy products is unit elastic, his expenditure on dairy will
A) not change.
B) increase less than 10 percent.
C) decrease by 10 percent.
D) increase by 10 percent.

Accepted Answer

If Raul's demand for dairy products is unit elastic, it means that a percentage increase in price will result in an equal percentage decrease in the quantity demanded. Therefore, if the price of dairy products increases by 10%, Raul will decrease his quantity demanded by 10%, resulting in no change in his expenditure on dairy products.

Question 18

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." Suppose the price elasticity of demand for beef is elastic. Consumption would then
A) decrease by greater than 3 percent.
B) increase by greater than 3 percent.
C) decrease by less than 3 percent.
D) increase by less than 3 percent.

Accepted Answer

If the price elasticity of demand for beef is elastic, then a 3 percent increase in price will result in a greater than 3 percent decrease in consumption. This is because consumers are very responsive to changes in price and will decrease their quantity demanded significantly as the price goes up. Therefore, consumption will decrease by greater than 3 percent.

Question 19

Of the following items, which has the most inelastic demand?
A) food
B) fruit
C) apples
D) Gala apples

Accepted Answer

The answer of Of the following items, which has the...

Question 20

Netflix is the largest online DVD rental service offering flat rate online streaming to customers in the United States. Currently, there are approximately 8 million subscribers. Suppose Netflix increases their average flat rate by 10 percent and observe their total revenues increase. Based on this information, the
A) price elasticity of demand for Netflix subscription is inelastic.
B) price elasticity of demand for Netflix subscription is elastic.
C) price elasticity of demand for Netflix subscription is unit elastic.
D) income elasticity of demand for Netflix subscription is elastic.

Accepted Answer

The increase in total revenue following a price increase indicates that the demand is inelastic, as consumers are not significantly reducing their quantity demanded in response to the price change.

Quiz 4: Elasticity

Grape juice prices increased by 20 percent in 2007. Suppose in response grape growers did not increase or decrease their grape production. The elasticity of supply is best described as

California is the sole producer of almonds in the United States. Suppose the price for a pound of almonds has increased during the past year. It is also predicted that almond prices will remain high. Over time, we predict that the

In Brazil, the income elasticity of demand for dairy is 0.7 and for fruit and vegetables it is 0.5. These elasticities mean that if the income of Brazilians decreases, they will purchase dairy and fruits and vegetables.

Propecia was developed to treat mild to moderate male pattern hair loss in men. Marco has hair loss and he is willing to pay any amount of money to be able to buy this drug each month. Marco's price elasticity of demand is ________.

Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. The CFO of Redbox wants to identify how responsive consumers are to an increase or decrease in the daily price of a rental. The economic concept the CFO wants to understand is

Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. In 2007, each kiosk averaged about 50 rentals per day. Suppose Redbox increases their daily price to $1.50. What is the price elasticity of demand if rentals decrease by 20 per day?

The price elasticity of demand for movies is approximately 1 and 500,000 tickets are sold per day. If the average price of a movie ticket increases by 20 percent, the number of tickets sold each day decreases to ________.

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPad tablet. Suppose when the price of an iPad decreases by 20 percent, the number of songs downloaded on iTunes increases by 30 percent. Based on this information iTunes are

Of the following items, which has the most inelastic demand?