Question 1

Figure: Price Increase and Elasticity  Refer to the figure. If price increases from $10 to $20, total revenue will:
A) increase by $800 so the demand curve must be inelastic.
B) increase by $100 so the demand curve must be inelastic.
C) decrease by $800 so the demand curve must be elastic.
D) decrease by $100 so the demand curve must be elastic.

Accepted Answer

The answer of Figure: Price Increase and Elasticity  Refer...

Question 2

The fundamental determinant of the elasticity of demand for a good is:
A) the opportunity cost of producing the good.
B) the value that consumers place on one more unit of the good.
C) how easy it is to substitute the good for another.
D) the number of consumers in the market.

Accepted Answer

The elasticity of demand for a good depends on how easy it is to substitute the good for another. If there are many close substitutes available for a good, then the demand for the good will be more elastic. On the other hand, if there are few substitutes, then the demand for the good will be more inelastic. The opportunity cost of producing the good, the value that consumers place on one more unit of the good, and the number of consumers in the market may affect the demand for the good, but they are not the primary determinants of the elasticity of demand.

Question 3

What happens to total revenue when demand is unit elastic and the price changes?
A) Revenues increase when the price increases.
B) Revenues remain unchanged.
C) Revenues decrease when the price increases.
D) The change in revenues cannot be estimated.

Accepted Answer

When demand is unit elastic, it means that the percentage change in the quantity demanded is equal to the percentage change in price, resulting in no change in total revenue. Therefore, there is no increase or decrease in revenue when the price changes.

Question 4

When comparing two linear demand curves at a common point, the flatter curve is:
A) more normal.
B) less responsive.
C) more elastic.
D) less elastic.

Accepted Answer

The flatter curve is more elastic, meaning that a given percentage change in price will result in a larger percentage change in quantity demanded, indicating that the consumers are more responsive to changes in price.

Question 5

To examine how responsive consumers are to price changes, economists measure:
A) the elasticity of demand.
B) mean household income.
C) median household income.
D) key economic indicators such as unemployment, inflation, and economic growth.

Accepted Answer

The elasticity of demand measures how responsive consumers are to changes in price. It is a measure of the percentage change in quantity demanded divided by the percentage change in price. A higher elasticity of demand indicates that consumers are more responsive to price changes.

Question 6

The more quantity demanded responds to a change in the price of that good the _____ is for that good.
A) more elastic demand
B) less elastic demand
C) more elastic supply
D) less elastic supply

Accepted Answer

If the quantity demanded of a good responds significantly to a change in its price, then the demand for that good is said to be elastic. This means that consumers are very sensitive to changes in price and a small change in price results in a significant change in the quantity demanded. When the demand is elastic, an increase in price results in a decrease in total revenue, while a decrease in price results in an increase in total revenue. Therefore, if the quantity demanded responds to a change in price, the demand for the good is more elastic.

Question 7

The elasticity of demand measures:
A) how responsive price is to a change in the quantity demanded of a good or service.
B) how much value consumers place on each unit of the good or service.
C) the rate of change of demand in relation to supply.
D) how responsive quantity demanded is to a change in the price of a good or service.

Accepted Answer

The elasticity of demand measures how responsive quantity demanded is to a change in the price of a good or service.

Question 8

Which of the following probably has the least elastic demand?
A) cable television
B) prescription medications
C) eggs
D) McDonald's hamburgers

Accepted Answer

Prescription medications typically have limited substitutes and are necessary for treating health conditions. Therefore, consumers are less likely to reduce their demand for prescription drugs even if the price increases, making their demand inelastic.

Question 9

The elasticity of demand measures:
A) how responsive quantity demanded is to a change in price.
B) the percent change in quantity demanded.
C) the percent change in price.
D) the percent change in quantity supplied divided by the percent change in price.

Accepted Answer

The elasticity of demand measures how responsive quantity demanded is to a change in price. It reflects the extent to which the quantity demanded changes when there is a change in the price of a good or service.

Question 10

If the demand for a good is estimated to be _____, then firms producing the good will experience an increase in total revenue if prices fall.
A) .05
B) .75
C) 1
D) 2.5

Accepted Answer

If the demand is elastic (greater than 1), a decrease in price will lead to an increase in total revenue. A demand elasticity of 2.5 indicates elastic demand.

Question 11

If two linear demand (or supply) curves run through a common point, then at any given quantity, the curve that is steeper is more:
A) elastic.
B) inelastic.
C) responsive.
D) resilient.

Accepted Answer

A steeper curve indicates that a larger change in price is needed to change the quantity demanded or supplied, making it more inelastic.

Question 12

Over time, the demand for most goods becomes ______ elastic since we are able to ______.
A) more; develop more/better substitutes
B) less; develop more/better substitutes
C) more; produce more of the good or service
D) less; produce more of the good or service

Accepted Answer

As time goes on, consumers become more educated and are able to find substitutes for goods, making the demand for those goods more elastic. This means that even small price changes can have a large effect on demand.

Question 13

The demand for most goods tends to become ______ over time.
A) downward sloping
B) more vertical
C) more elastic
D) less elastic

Accepted Answer

Over time, consumers have more opportunities to find substitutes or adjust their consumption habits, making the demand for most goods more elastic.

Question 14

The manager of a company notices that the company's total revenue would increase if she raised the price of the company's product. Accordingly, the manager can assert that the demand for the company's product is:
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.

Accepted Answer

If the manager increases the price and sees the total revenue increase, it indicates that the demand for the product is inelastic. This means that even with an increase in price, consumers are willing to continue purchasing the product. If the demand were elastic, an increase in price would lead to a decrease in total revenue as consumers would switch to other substitute products.

Question 15

Which of the following probably has the most elastic demand?
A) gasoline
B) prescription medications
C) toilet paper
D) McDonald's hamburgers

Accepted Answer

McDonald's hamburgers likely have the most elastic demand because they are a non-essential good with many substitutes, making consumers more sensitive to price changes.

Question 16

The price of good X increases from $55 to $60, and quantity demanded decreases from 500 to 400. The price of good Y increases from $55 to $60, and quantity demanded decreases from 500 to 475. Given this information, the:
A) consumers who buy good X are less sensitive to price changes than consumers who buy good Y.
B) demand curve for good X is less elastic than the demand curve for good Y.
C) demand curve for good X is more elastic than the demand curve for good Y.
D) demand curves for good X and good Y violate the law of demand.

Accepted Answer

The demand for good X is more elastic than for good Y because the percentage change in quantity demanded for good X is greater than for good Y when the price increases by the same amount.

Question 17

If demand is inelastic then an increase in price would cause a _____ in the quantity demanded and a(n) _____ in total revenue:
A) decrease; increase
B) decrease; decrease
C) increase; increase
D) increase; decrease

Accepted Answer

When demand is inelastic, quantity demanded decreases with a price increase, but total revenue increases because the percentage change in quantity demanded is less than the percentage change in price.

Question 18

Figure: Price Decrease and Elasticity  Refer to the figure. If price decreases from $20 to $10, total revenue will:
A) decrease by $1,500, so the demand curve is inelastic.
B) decrease by $2,500, so the demand curve is inelastic.
C) increase by $1,500, so the demand curve is elastic.
D) increase by $2,500, so the demand curve is elastic.

Accepted Answer

The answer of Figure: Price Decrease and Elasticity  Refer...

Question 19

Table: Demand Curves

In the table, which demand curve is most price elastic over the range of prices considered?
A) demand curve A
B) demand curve B
C) demand curve C
D) demand curve D

Accepted Answer

Demand curve C is the most price elastic because it shows the largest change in quantity demanded in response to a change in price. As the price drops from $8 to $6, the quantity demanded increases from 12 to 18, indicating that consumers are highly responsive to changes in price for this good.

Question 20

The elasticity of demand measures:
A) whether consumers will buy more or less as the price increases.
B) how much less of a good or service consumers will buy when the price increases.
C) a supplier's estimate of market demand.
D) how consumers substitute across goods when the price of one good increases.

Accepted Answer

Elasticity of demand specifically measures the responsiveness of the quantity demanded to a change in price, indicating how much less of a good or service consumers will buy when the price increases.

Quiz 5: Elasticity and Its Applications

Figure: Price Increase and Elasticity Refer to the figure. If price increases from $10 to $20, total revenue will:

The fundamental determinant of the elasticity of demand for a good is:

What happens to total revenue when demand is unit elastic and the price changes?

When comparing two linear demand curves at a common point, the flatter curve is:

To examine how responsive consumers are to price changes, economists measure:

The more quantity demanded responds to a change in the price of that good the _____ is for that good.

The elasticity of demand measures:

Which of the following probably has the least elastic demand?

The elasticity of demand measures:

If the demand for a good is estimated to be _____, then firms producing the good will experience an increase in total revenue if prices fall.

If two linear demand (or supply) curves run through a common point, then at any given quantity, the curve that is steeper is more:

Over time, the demand for most goods becomes elastic since we are able to .

The demand for most goods tends to become ______ over time.

The manager of a company notices that the company's total revenue would increase if she raised the price of the company's product. Accordingly, the manager can assert that the demand for the company's product is:

Which of the following probably has the most elastic demand?

The price of good X increases from $55 to $60, and quantity demanded decreases from 500 to 400. The price of good Y increases from $55 to $60, and quantity demanded decreases from 500 to 475. Given this information, the:

If demand is inelastic then an increase in price would cause a _ in the quantity demanded and a(n) _ in total revenue:

Figure: Price Decrease and Elasticity Refer to the figure. If price decreases from $20 to $10, total revenue will:

Table: Demand Curves In the table, which demand curve is most price elastic over the range of prices considered?

The elasticity of demand measures: