Deck 4: Elasticity: A Measure of Responsiveness

Question 1

The quantity of TVs sold is 100 at the unit price $200. Suppose the price elasticity of demand for TVs by the initial value method is 2.0, and you would like to decrease the unit price for TVs to $150. Then the new quantity sold must be

A) 125.
B) 150.
C) 200.
D) 250.

Answer 1

150.

Question 2

If the price elasticity of demand is 2, this means that a ________ increase in price causes a ________ decrease in quantity demanded.

A) 15%; 100%
B) 15%; 10%
C) 20%; 40%
D) 30%; 20%

Answer 2

20%; 40%

Question 3

Table 4.2
Refer to Table 4.2. A change in the price of calculators caused the change in quantity demanded shown in the table. The price elasticity of demand for calculators, using the initial-value formula, is

A) 25.
B) 1.75.
C) 0.75.
D) 0.25.

Answer 3

0.75.

Question 4

The quantity of pencils sold is 1000 at the unit price $0.5. Suppose the price elasticity of demand for pencils by the initial value method is 2, and you would like to increase the quantity sold to 1200. Then the new price for pencils must be

A) $0.05.
B) $0.25.
C) $0.30.
D) $0.45.

Question 5

The price of apples increases from $1 to $1.10. At the same time, the quantity of apples demanded decreases from 100 to 90. The price elasticity of demand for apples (calculated using the initial value formula) is

A) 0.02.
B) 0.9.
C) 1.
D) 1.1.

Question 6

The ratio of the percentage change in quantity demanded to the percentage change in price is known as the

A) demand-side shift factor.
B) income elasticity of demand.
C) price elasticity of demand.
D) cross elasticity of demand.

Question 7

If the price elasticity of demand is 0.5, this means that a ________ increase in price causes a ________ decrease in quantity demanded.

A) 20%; 100%
B) 30%; 15%
C) 20%; 1%
D) 5%; 1%

Question 8

A good synonym for elasticity would be

A) change.
B) demand.
C) responsiveness.
D) stickiness.

Question 9

Suppose that in a month the price of milk increases from $2 to $3 a gallon. At the same time, the quantity of gallons of milk demanded decreases from 200 to 190. The price elasticity of demand for milk (calculated using the initial value formula) is

A) 0.1.
B) 0.2.
C) 1.
D) 10.

Question 10

The midpoint formula for elasticity of demand solves the problem of

A) whether elasticity of demand is really positive or negative.
B) whether to use quantity or price in the numerator.
C) which price or quantity to use as the initial value of the variable.
D) whether to use quantity demanded or supplied.

Question 11

Suppose that in a month the price of a dozen of eggs increases from $1.50 to $2. At the same time, the quantity of dozens of eggs demanded decreases from 200 to 150. The price elasticity of demand for dozens of eggs is

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

Question 12

Suppose that in a month the price of tulips increases from $1 to $1.50. At the same time, the quantity of tulips demanded decreases from 200 to 190. The price elasticity of demand for tulips (calculated using the initial value formula) is

A) 0.1.
B) 0.5.
C) 10.
D) 20.

Question 13

At Tony's Restaurant, the quantity of large pizzas sold is 200 at the unit price $15. Suppose the price elasticity of demand for pizzas by the initial value method is 1.5, and you would like to increase the quantity sold to 250. Then the new price must be

A) $13.
B) $12.50.
C) $11.50.
D) $11.25.

Question 14

Suppose that in a month the price of oranges increases from $.75 to $1. At the same time, the quantity of oranges demanded decreases from 100 to 80. The price elasticity of demand for oranges (calculated using the initial value formula) is

A) 0.75.
B) 0.6.
C) 0.25.
D) 20.

Question 15

Table 4.3
Refer to Table 4.3. A change in the price of computers caused the change in quantity demanded shown in the table. The price elasticity of demand (calculated using the initial value formula) is

A) 4.
B) 1.
C) 0.25.
D) 0.125.

Question 16

Table 4.3
Refer to Table 4.3. After calculating the price elasticity of demand for computers, we can say the demand for computers is

A) upward sloping.
B) inelastic.
C) unit elastic.
D) elastic.

Question 17

Table 4.1
Refer to Table 4.1. A change in the price of hamburgers caused the change in quantity demanded shown in the table. The price elasticity of demand for hamburgers (calculated using the initial value formula) is

A) 0.25.
B) 0.50.
C) 1.
D) 1.75.

Question 18

The price elasticity of demand is calculated by

A) the change in price divided by the change in quantity demanded.
B) the change in quantity demanded divided by the change in price.
C) the percentage change in price divided by the percentage change in quantity demanded.
D) the percentage change in quantity demanded divided by the percentage change in price.

Question 19

The price elasticity of demand reflects the responsiveness of

A) firms to changes in demand.
B) demand to a change in price of a substitute good.
C) demand to a change in price.
D) quantity demanded to a change in price.

Question 20

Suppose that Victoria and her friends are running a fundraiser by selling donuts. They want to know what will happen to their revenue if they increase the price of each donut from $0.80 to $1. What concept do they need to apply to find out their expected revenue?

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

Question 21

If the quantity demanded is infinitely responsive to any change in price, the demand curve is

A) upward sloping.
B) downward sloping.
C) horizontal.
D) vertical.

Question 22

Suppose that in a month the price of movie rentals decreases from $3.25 to $3. At the same time, the quantity of movie rentals demanded increases from 100 to 120. The price elasticity of demand for movie rentals (calculated using the midpoint formula) is

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

Question 23

If the price elasticity of demand for water is inelastic, which of the following could be a possible value of the elasticity?

A) 2
B) 1
C) 0.5
D) all of the above

Question 24

If Juan purchases the same number of gallons of gasoline per week regardless of changes in gasoline price, Juan's demand for gasoline is

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

Question 25

If demand is perfectly inelastic, the price elasticity of demand is equal to

A) 1.
B) 0.
C) infinity.
D) a negative number between 0 and infinity.

Question 26

Suppose that in a month the price of a cup of coffee increases from $1 to $1.50. At the same time, the quantity of cups of coffee demanded decreases from 200 to 190. The price elasticity of demand for cups of coffee (calculated using the midpoint formula) is

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

Question 27

If, regardless of price, the quantity demanded is a constant amount, then the demand curve is

A) horizontal.
B) vertical.
C) upward sloping.
D) downward sloping.

Question 28

The price of pens increases from $2 to $2.20. At the same time, the quantity of pens demanded decreases from 100 to 90. Demand for pens is

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

Question 29

If the price elasticity of demand is very elastic, which of the following could be a possible value of the elasticity?

A) 2
B) 1
C) 1/3
D) 0

Question 30

Suppose that in a month the price of pizza increases from $4 to $5. At the same time, the quantity of pizzas demanded decreases from 200 to 190. The price elasticity of demand for pizza (calculated using the midpoint formula) is

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

Question 31

If the demand curve is a vertical line, it means that

A) regardless of price, the quantity demanded is a constant amount.
B) regardless of quantity, the price is a constant amount.
C) the good is inferior.
D) the good has many substitutes.

Question 32

Suppose that David buys the same number of energy drinks every weekend no matter what happens to the price of the energy drinks. What does this suggest about David's demand for energy drinks?

A) It is elastic.
B) It is perfectly inelastic.
C) It is unit elastic.
D) It is not something that can be characterized without knowing the prices of the energy drinks.

Question 33

In the case of perfectly elastic demand, the demand curve is

A) upward sloping.
B) downward sloping.
C) vertical.
D) horizontal.

Question 34

Suppose that in a month the price of a gallon of milk increases from $2 to $2.50. At the same time, the quantity of gallons of milk demanded decreases from 100 to 80. The price elasticity of demand for gallons of milk (calculated using the midpoint formula) is approximately

A) 0.11.
B) 0.2.
C) 1.
D) 1.2.

Question 35

Suppose that in a month the price of a cup of coffee increases from $1 to $1.50. At the same time, the quantity of cups of coffee demanded decreases from 200 to 190. The price elasticity of demand for cups of coffee (calculated using the midpoint formula) is approximately

A) 0.13.
B) 0.5.
C) 7.8.
D) 20.

Question 36

Suppose that in a month the price of pizza increases from $4 to $5. At the same time, the quantity of pizzas demanded decreases from 200 to 190. The price elasticity of demand for pizza (calculated using the midpoint formula) is

A) 0.1.
B) 0.23.
C) 0.25.
D) 4.35.

Question 37

In the case of perfectly inelastic demand, the demand curve is

A) upward sloping.
B) downward sloping.
C) vertical.
D) horizontal.

Question 38

If the price elasticity of demand is infinite, demand is

A) upward sloping.
B) inelastic.
C) elastic.
D) perfectly elastic.

Question 39

If the price elasticity of demand is 1, demand is

A) upward sloping.
B) inelastic.
C) unit elastic.
D) elastic.

Question 40

If the price elasticity of demand is 1.3, demand is

A) upward sloping.
B) inelastic.
C) unit elastic.
D) elastic.

Question 41

Which of the following statements is INCORRECT?

A) The price elasticity of demand tends to be greater for a specific brand of a product than for a product in general.
B) The price elasticity of demand tends to be smaller when consumers have less time to adjust to price changes.
C) The price elasticity of demand tends to be greater when a product accounts for a smaller portion of the consumer's budget.
D) The price elasticity of demand tends to be greater for a product with more substitutes available.

Question 42

Which of the following products has the least elastic demand?

A) Raspberry Mocha Kona coffee blend at Starbuck's
B) Starbuck's coffee
C) coffee
D) all beverages

Question 43

Figure 4.1
In Figure 4.1 the demand curve along which price elasticity of demand changes as you move along it is on graph

A) A.
B) B.
C) C.
D) D.

Question 44

Which of the following products has the most elastic demand?

A) Coca Cola in 12 oz. cans
B) all cola drinks
C) all carbonated beverages
D) all beverages

Question 45

Which of the following products has the most elastic demand?

A) Ben and Jerry's Chunky Monkey ice cream in the pint container
B) all Ben and Jerry's ice cream
C) all premium ice cream
D) all ice cream

Question 46

If the demand curve facing a firm had a price elasticity of demand equal to zero and the firm raised its price, its total revenue would

A) decrease slightly.
B) fall to zero.
C) not change.
D) increase.

Question 47

Which of the following products has the most elastic demand?

A) Raspberry Mocha Kona coffee blend at Starbuck's
B) Starbuck's coffee
C) coffee
D) all beverages

Question 48

Ceteris paribus, if more alternative forms of energy become available, we would expect the demand for gasoline to become

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

Question 49

Figure 4.1
In Figure 4.1 the demand curve that is perfectly inelastic is on graph

A) A.
B) B.
C) C.
D) D.

Question 50

If a product is a necessity and has no substitutes at all, demand for the product is most likely to be

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

Question 51

Figure 4.1
In Figure 4.1 the demand curve that has an infinite elasticity is shown on graph

A) A.
B) B.
C) C.
D) D.

Question 52

If the price elasticity of demand is equal to zero and the price was to rise, the quantity demanded would

A) decrease slightly.
B) fall to zero.
C) not change.
D) increase.

Question 53

If consumers have a long time to respond to an increase in electricity prices their demand is likely to be ________ than if they are only given a short time.

A) no different
B) higher
C) more elastic
D) less elastic

Question 54

If a product has several good substitutes, demand for the product is most likely to be

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

Question 55

If the demand curve facing a firm had a price elasticity of demand equal to infinity and the firm raised its price, its total revenue would

A) decrease slightly.
B) fall to zero.
C) not change.
D) increase.

Question 56

If demand is perfectly elastic, the price elasticity of demand is equal to

A) 1.
B) 0.
C) infinity.
D) a positive number between 0 and infinity.

Question 57

Which of the following products has the least elastic demand?

A) Coca Cola in 12 oz. cans
B) all cola drinks
C) all carbonated beverages
D) all beverages

Question 58

If a product has only a few acceptable substitutes, demand for the product is most likely to be

A) very inelastic.
B) inelastic.
C) elastic.
D) very elastic.

Question 59

Figure 4.1
In Figure 4.1 the demand curve that is perfectly elastic is on graph

A) A.
B) B.
C) C.
D) D.

Question 60

Figure 4.1
In Figure 4.1 the demand curve that has a zero elasticity is show in graph

A) A.
B) B.
C) C.
D) D.

Question 61

Which of the following goods is likely to have the most inelastic demand?

A) restaurant meals
B) air travel
C) movies
D) cigarettes

Question 62

The demand for a product tends to be less elastic as the product accounts for a larger fraction of a consumer's budget.

Question 63

If we are on the upper portion of the market demand curve and the price increases by 10%, the quantity demanded will decrease by more than 10%.

Question 64

Demand for low budget items, such as candy, is generally ________ than demand for large budget items, such as automobiles.

A) higher
B) lower
C) more elastic
D) less elastic

Question 65

Which of the following products has an elastic demand?

A) water
B) coffee
C) cars
D) all ice cream

Question 66

Recall the Application regarding the elasticity of demand for gasoline varying over time to answer the following question(s).
The price elasticity of demand measures the responsiveness of changes in price to the quantity demanded.

Question 67

If a 10% increase in price decreases the quantity demanded by 12%, the price elasticity of demand is 1.2.

Question 68

In general, the demand for a product is more elastic in the long run than in the short run.

Question 69

Which of the following factors would indicate an inelastic demand?

A) The good is a necessity, rather than a luxury.
B) The good represents a small fraction of the budget.
C) Demand is measured over a shorter period of time.
D) all of the above

Question 70

Suppose that the price elasticity of demand for bagels is 1.60, a 10% increase in price will decrease the quantity demanded by 6%.

Question 71

Recall the Application regarding the elasticity of demand for gasoline varying over time to answer the following question(s).
According to the Application, the demand for gasoline is

A) less elastic in the long run because consumers have less opportunity to change their behavior.
B) more elastic in the long run because consumers have time to respond to changes in price.
C) inelastic in the long run and in the short run.
D) elastic in the short run.

Question 72

Which of the following goods is likely to have the most elastic demand?

A) movie
B) cigarettes
C) electricity
D) gasoline

Question 73

In wealthy countries such as the United States, the price elasticity of the demand for food is ________ it is in poorer countries.

A) greater than
B) less than
C) the same as
D) None of the above; it is not possible to make international comparisons of price elasticity.

Question 74

Which of the following factors would indicate a less elastic demand?

A) The good represents a large fraction of the budget.
B) Demand is measured over a longer period of time.
C) There are few substitutes.
D) The price of the good is high.

Question 75

Demand for items people do not really need for their survival, such as cars, is generally ________ than demand for items such as water.

A) higher
B) lower
C) more elastic
D) less elastic

Question 76

The price elasticity of demand for a good is relatively elastic if

A) there are a large number of substitutes.
B) the consumer has more time to make decisions about purchasing the good.
C) the good is less of a necessity.
D) all of the above

Question 77

Demand for a particular brand of clothing is likely to be less elastic than demand for all clothing.

Question 78

Which of the following factors would indicate a more elastic demand?

A) The good is a necessity, rather than a luxury.
B) The good represents a small fraction of the budget.
C) Demand is measured over a longer period of time.
D) There are few substitutes for the good.

Question 79

The price elasticity of demand for business travel tends to be greater than that of leisure travel.

Question 80

Which of the following factors would indicate a less elastic demand?

A) The good represents a large fraction of the budget.
B) Demand is measured over a shorter period of time.
C) The price of the good is low.
D) New substitutes are created.