# Quiz 4: Elasticity

Business

Q 1Q 1

What is the effect on total revenue if demand is inelastic and price rises?
A) Total revenue will fall.
B) Total revenue will rise.
C) Total revenue may rise or fall depending on the size of the price increase.
D) Elasticity is not relevant, since total revenue always rises if price increases.

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Multiple Choice

B

Q 2Q 2

What is the term for the responsiveness of quantity demanded to a change in price?
A) Elastic demand.
B) The elasticity coefficient.
C) Unitary elasticity.
D) Price elasticity of demand.

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Multiple Choice

D

Q 3Q 3

What is price elasticity of demand?
A) The responsiveness of price to a change in the quantity demanded.
B) The responsiveness of quantity demanded to a change in price.
C) Price divided by quantity demanded.
D) Price multiplied by quantity demanded.

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Multiple Choice

B

Q 4Q 4

What is total revenue?
A) It is the profits from doing business.
B) It is the total value of sales less cost.
C) It is elasticity multiplied by quantity sold.
D) It is price multiplied by quantity sold.

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Multiple Choice

Q 5Q 5

What is the term for the total amount of income a firm receives from its sales?
A) Total profit.
B) Total revenue.
C) Revenue coefficient.
D) Total demand.
E) Sales maximizing.

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Multiple Choice

Q 6Q 6

What measures the responsiveness of quantity demanded to a change in price?
A) Total revenue.
B) Equilibrium price.
C) Price elasticity of demand.
D) Income elasticity.
E) Inelasticity.

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Multiple Choice

Q 7Q 7

What does the elasticity coefficient refer to?
A) It is price multiplied by the quantity of the product sold.
B) It indicates the responsiveness of quantity demanded to a change in price.
C) It is the responsiveness of price to a change in quantity demanded.
D) It is quantity demanded at any given price.

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Multiple Choice

Q 8Q 8

What term is used to describe quantities demanded that do not change much in response to a change in price?
A) Inelastic demand.
B) Elastic demand.
C) Unitary elasticity.
D) Price elasticity of demand.
E) The elasticity coefficient.

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Multiple Choice

Q 9Q 9

What does the term elastic demand mean?
A) Quantities demanded which are not very responsive to a change in price.
B) The responsiveness of quantity demanded to a change in price.
C) An elasticity coefficient which is equal to one.
D) Quantities demanded which are quite responsive to a change in price.
E) The responsiveness of price to a change in quantity demanded.

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Multiple Choice

Q 10Q 10

What is unitary elasticity?
A) An elasticity coefficient which is negative.
B) An elasticity coefficient which is equal to zero.
C) An elasticity coefficient which is equal to one.
D) A percentage change in quantity which is exactly equal to the percentage change in demand.
E) Where elasticity and inelasticity are balanced.

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Multiple Choice

Q 11Q 11

When is the percentage change in quantity exactly equal to the percentage change in price?
A) When there is unitary elasticity.
B) When demand is inelastic.
C) When demand is elastic.
D) When demand does not change.

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Multiple Choice

Q 12Q 12

Under which of the following situations will total revenue fall?
A) If elasticity is > 1 and price falls.
B) If elasticity is > 1 and price rises.
C) If elasticity is < 1 and price rises.
D) If elasticity is = 1 and price falls.

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Multiple Choice

Q 13Q 13

What will happen to the quantity demanded if the price elasticity of demand is 2 and price increases by 10%?
A) It increases by 10%.
B) It decreases by 5%.
C) It decreases by 20%.
D) It increases by 20%.

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Multiple Choice

Q 14Q 14

What has happened to price if the price elasticity of demand is 2 and quantity demanded increases by 10%?
A) It increases by 10%.
B) It decreases by 5%.
C) It decreases by 20%.
D) It increases by 20%.

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Multiple Choice

Q 15Q 15

All of the following statements except one are correct concerning a product which has an elastic demand. Which is the exception?
A) Any relative change in price is greater than the relative change in quantity.
B) Buyers are relatively sensitive to price changes.
C) The elasticity coefficient is greater than one.
D) Total revenue rises if price decreases.

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Multiple Choice

Q 16Q 16

The Dean of Arts recently announced a 20% increase in tuition and explained that the increase was needed to raise the university's revenue. Which of the following might the Dean be assuming about the elasticity of demand for education at her school?
A) It is elastic.
B) It is inelastic.
C) It is perfectly elastic.
D) It could be either elastic or perfectly elastic.

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Multiple Choice

Q 17Q 17

What is the formula used to calculate the price elasticity of demand?
A) Change in price divided by change in quantity demanded.
B) Change in quantity demanded divided by change in price.
C) Percentage change in price divided by percentage change in quantity demanded.
D) Percentage change in quantity demanded divided by percentage change in price

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Multiple Choice

Q 18Q 18

Suppose that the price of a product increased from $18 to $22, and the quantity demanded decreased from 63 to 57. What is the value of the price elasticity of demand?
A) 0.43.
B) 0.5.
C) 1.5.
D) 2.0.
E) 2.3.

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Multiple Choice

Q 19Q 19

Suppose that the price of a product increased from $1.90 to $2.10, and the quantity demanded decreased from 24 to 16. What is the value of the price elasticity of demand?
A) 0.5.
B) 0.58.
C) 1.0.
D) 1.73.
E) 4.0.

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Multiple Choice

Q 20Q 20

Suppose that the price of a product decreased from $6.50 to $5.50, and the quantity demanded increased from 55 to 65. What is the value of the price elasticity of demand?
A) 0.5.
B) 0.85.
C) 1.0.
D) 1.18.
E) 2.0.

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Multiple Choice

Q 21Q 21

Suppose that the value of the price elasticity of demand for a product is 2 and its price increases by 16%. What will happen to the quantity demanded?
A) It will increase by 8%.
B) It will increase by 32%.
C) It will decrease by 8%.
D) It will decrease by 32%.
E) It cannot be determined without further information.

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Multiple Choice

Q 22Q 22

Suppose that the value of the price elasticity of demand for a product is 0.5 and its price decreases by 10%. What will happen to the quantity demanded?
A) It will increase by 5%.
B) It will increase by 20%.
C) It will decrease by 5%.
D) It will decrease by 20%.
E) It cannot be determined without further information.

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Multiple Choice

Q 23Q 23

-Refer to the information above to answer this question. At what price is the seller's total revenue maximized?
A) $1.
B) $10.
C) $5 or $6.
D) $4 or $7.
E) $5.

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Multiple Choice

Q 24Q 24

-Refer to the information above to answer this question. Which of the following statements is correct?
A) Demand is inelastic between the prices of $1 and $5.
B) Demand is inelastic between the prices of $4 and $7.
C) Demand is inelastic between the prices of $6 and $10.
D) No comment on elasticity can be made from the above information.

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Multiple Choice

Q 25Q 25

-Refer to the information above to answer this question. Which of the following statements is correct?
A) Demand is inelastic if the price changes from $5 to $7.
B) Demand is inelastic if the price changes from $4 to $7.
C) Demand is inelastic if the price changes from $6 to $10.
D) Demand is unitary elastic if the price changes from $1 to $10.
E) None of the choices are correct.

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Multiple Choice

Q 26Q 26

-Refer to the information above to answer this question. What are the elasticity coefficients for the price ranges $1 to $2 and $9 to $10, respectively?
A) 0.22 and 2
B) 2 and 0.22
C) 0.16 and 6.33
D) 6.33 and 0.15

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Multiple Choice

Q 27Q 27

-Refer to the information above to answer this question. What is the elasticity of demand in the $14 to $16 range?
A) 0.02.
B) 0.7.
C) 1.4.
D) 2.1.

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Multiple Choice

Q 28Q 28

-Refer to the information above to answer this question. What is the elasticity of demand in the $20 to $22 range?
A) 0.02.
B) 0.7.
C) 1.4.
D) 2.1.
E) 3.33.

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Multiple Choice

Q 29Q 29

-Refer to the information above to answer this question. What is the elasticity of demand in the $16 to $20 range?
A) 0.02.
B) 0.7.
C) 1.4.
D) 1.
E) 2.1.

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Multiple Choice

Q 30Q 30

-Refer to the information above to answer this question. At what price is total revenue maximized?
A) $14.
B) $16.
C) $18.
D) $20.
E) $22.

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Multiple Choice

Q 31Q 31

-Refer to the information above to answer this question. Over what price range is demand elastic?
A) $14 to $16.
B) $14 to $20.
C) $16 to $18.
D) $16 to $20.
E) $18 to $22.

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Multiple Choice

Q 32Q 32

-Refer to the information above to answer this question. Over what price range is demand inelastic?
A) $14 to $16.
B) $14 to $18.
C) $16 to $18.
D) $18 to $20.
E) $18 to $22.

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Multiple Choice

Q 33Q 33

A manufacturer of ginseng tea found that when it lowered the price of a can of its product from $8 to $7, total revenue declined and when it raised the price from $8 to $9 and total sales revenue again declined. Given this information, which of the following statements is correct?
A) The demand for the product is elastic in the $7 to $8 price range.
B) The demand for the product is inelastic in the $8 to $9 price range.
C) $8 cannot be an equilibrium price for this product.
D) The demand for the product is inelastic in the $7 to $8 range.

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Multiple Choice

Q 34Q 34

If the price of Digestive Fire herbal tablets increases from $35 to $45 a bottle and, as a result, the seller's total revenue increases from $77,000 to $94,500 per month, what is the elasticity of demand?
A) 0.08.
B) 0.19.
C) 0.82.
D) 1.26.
E) 2.14.

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Multiple Choice

Q 35Q 35

If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue increases from $6,000 to $7,500, what is the elasticity of demand?
A) 0.22.
B) 0.55.
C) 1.22.
D) 1.67.
E) 2.2.

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Multiple Choice

Q 36Q 36

If the price of Moonlight massage oil decreases from $3 to $2.50 and, as a result, total revenue of $6,000 does not change, what is the elasticity of demand?
A) 0.22.
B) 0.55.
C) 1.
D) 1.2.
E) 1.67.

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Multiple Choice

Q 37Q 37

If a product has few substitutes, which of the following statements is correct?
A) It is likely that its income elasticity is high.
B) It is likely that it is an inferior product.
C) It is likely that its supply elasticity is high.
D) It is likely that its price elasticity of demand is low.

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Multiple Choice

Q 38Q 38

What do products such as household electricity, tobacco and toothpicks have in common?
A) They are all inferior goods.
B) They all are likely to have incomes elasticities greater than one.
C) The demand for all three goods is elastic.
D) The demand for all three goods is inelastic.
E) They all have a large number of substitute goods.

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Multiple Choice

Q 39Q 39

What do products such as movies, tomatoes and restaurant meals have in common?
A) They are all inferior goods.
B) They all are likely to have incomes elasticities less than one.
C) The demand for all three goods is price elastic.
D) The demand for all three goods is price inelastic.
E) They all have a small number of substitute goods.

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Multiple Choice

Q 40Q 40

Which of the following is the most likely explanation for the fact that the price elasticity of demand for celery is high?
A) The average household spends a large percentage of its income on celery.
B) There are a large number of substitute products available.
C) The time needed to produce this product is short.
D) The typical price of this product is low.

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Multiple Choice

Q 41Q 41

The world's price of oil increased dramatically in 1973. Which of the following statements was most valid in 2012?
A) The price elasticity of demand for oil for the 40 year period would be lower than for a shorter period.
B) The price elasticity of demand for oil for the 40 year period would be higher than for a shorter period.
C) The income elasticity for oil was much lower in 2012 than in 1973 because of the price increase.
D) The supply elasticity of oil was much lower in 2012 than in 1973 because of the price increase.

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Multiple Choice

Q 42Q 42

Which of the following statements is true about the price elasticity of demand?
A) It is higher in the short run than in the long run because people's habits change slowly.
B) It is higher in the long run than the short run because people have more time to find substitute products.
C) It is the same in the short run and the long run.
D) It is higher in the short run because markets adjust slowly to changes.

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Multiple Choice

Q 43Q 43

Which of the following products has the most inelastic demand?
A) Restaurant meals.
B) Tomatoes.
C) Movie theatre admissions.
D) Eggs.
E) Ocean cruises.

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Multiple Choice

Q 44Q 44

What is true about the price elasticity of demand for products such as sugar, salt and household electricity?
A) It is perfectly elastic.
B) It is perfectly inelastic.
C) It is relatively elastic.
D) It is relatively inelastic.

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Multiple Choice

Q 45Q 45

If the short-run price elasticity of demand for petroleum is 0.8, which of the following statements is most likely to be true for the long run?
A) The price elasticity of demand will be less than 0.8.
B) The price elasticity of demand will be greater than 0.8.
C) The price elasticity of demand will be 0.8.
D) No generalization can be made about the differences between the short run and the long run.

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Multiple Choice

Q 46Q 46

Which of the following statements is most likely true about the price elasticity of demand for beer?
A) It is perfectly elastic.
B) It is perfectly inelastic.
C) It is more elastic than the demand for Labatt's Blue.
D) It is less elastic than the demand for Molson's Canadian.

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Multiple Choice

Q 47Q 47

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand curve that is parallel to the vertical axis?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 48Q 48

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand curve that is parallel to the horizontal axis?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 49Q 49

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand curve that forms a rectangular hyperbola?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 50Q 50

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand when the elasticity coefficient is less than 1 but greater than 0?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 51Q 51

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand when the elasticity coefficient is greater than 1?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 52Q 52

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand when a change in quantity leaves total revenue unchanged?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 53Q 53

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand when an increase in price raises total revenue?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 54Q 54

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand when a decrease in price increases total revenue?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 55Q 55

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand when a firm can sell either more or less of a product at a constant price?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 56Q 56

The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Sayre - Chapter 04
-Refer to the information above to answer this question. What is a demand when a firm can sell a constant amount at either a higher or a lower price?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.

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Multiple Choice

Q 57Q 57

The graph below illustrates three demand curves.
-Refer to the graph above to answer this question. Which of the following statements is correct?
A) Demand curve D

_{3}is the most inelastic demand. B) Equilibrium price must be $50. C) If price is $30 and demand is D_{3}then the quantity demanded is 720 units per day. D) Demand curve D_{1}is more inelastic than D_{3}. E) Demand curve D_{1}is perfectly elastic.Free

Multiple Choice

Q 58Q 58

The graph below illustrates three demand curves.
-Refer to the graph above to answer this question. Which of the following statements is correct?
A) The price elasticity of demand between points A and B on D

_{2}is 0.5. B) D1 illustrates an inferior good. C) The slope of all three demand curves is constant. D) The shift from D_{1}to D_{2}could illustrate a change in the quantity demanded for a product as a result of a decrease in the price of a substitute good.Free

Multiple Choice

Q 59Q 59

The graph below illustrates three demand curves.
-Refer to the graph above to answer this question. Which of the following statements is correct?
A) The price elasticity of demand between points A and C on D

_{3}is 0.267. B) The price elasticity of demand between points A and C on D_{3}is 0.375. C) The demand between points A and C on D_{3}is elastic. D) The slope of demand curve D_{1}and its price elasticity are the same.Free

Multiple Choice

Q 60Q 60

The graph below illustrates three demand curves.
-Refer to the graph above to answer this question. Between the price range of $50 and $60, which of the three demand curves is the most elastic?
A) D

_{1}. B) D_{2}. C) D_{3}. D) Cannot be determined.Free

Multiple Choice

Q 61Q 61

The graph below illustrates three demand curves.
-Refer to the graph above to answer this question. In the $50 to $60 price range, which of the following statements is correct?
A) D

_{1}and D_{2}are both elastic. B) D_{1}and D_{2}are both perfectly inelastic. C) D_{2}is the most inelastic. D) D_{3}is the most inelastic. E) D_{1}is the most inelastic.Free

Multiple Choice

Q 62Q 62

-Refer to the graph above to answer this question. Which of the following statements is correct?
A) Demand curve D

_{1}is the inelastic portion of a curve that could be extended downward to the right. B) Demand curve D_{1}is the elastic portion of a curve that could be extended downward to the right. C) Demand curve D_{1}is more inelastic than D_{2}. D) Demand curve D_{1}is perfectly elastic.Free

Multiple Choice

Q 63Q 63

-Refer to the graph above to answer this question. Which of the following statements is correct?
A) Demand curve D

_{2}is the inelastic portion of a curve that could be extended upward to the left. B) Demand curve D_{1}is the elastic portion of a curve that could be extended upward to the left. C) Demand curve D_{2}is more elastic than D_{1}. D) Demand curve D_{2}is perfectly inelastic.Free

Multiple Choice

Q 64Q 64

-Refer to the graph above to answer this question. Which of the following statements is correct?
A) The demand curves in graphs I, II and III are, respectively, perfectly elastic, inelastic and perfectly inelastic.
B) The demand curves in graphs I, II and III are, respectively, perfectly inelastic, inelastic and perfectly elastic.
C) The demand curves in graphs I, II and III are, respectively, perfectly inelastic, unitary elastic and perfectly elastic.
D) All three demand curves have an elastic and an inelastic portion to them.

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Multiple Choice

Q 65Q 65

-Refer to the graph above to answer this question. Which of the following statements is correct?
A) The demand curve in I is perfectly elastic.
B) The demand curve is II is unitary elastic.
C) The demand curve in III is perfectly inelastic.
D) The demand curve in I is unitary elastic.

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Multiple Choice

Q 66Q 66

How will the imposition of a sales tax shift the supply curve?
A) The supply curve will shift to the left.
B) The supply curve will shift to the right.
C) The supply curve might shift to the right or to the left depending on whether the tax was a flat rate tax or a percentage tax.
D) Imposing a sales tax will have no effect on the supply curve.

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Multiple Choice

Q 67Q 67

If the government puts a $2 excise tax on a product and as a result, price rises by $0.75, which of the following statements is correct?
A) The sellers pay more of the tax than the buyers.
B) The buyers pay more of the tax than the sellers.
C) The government's tax revenue falls.
D) The quantity demanded of the product falls by 37.5%.
E) The quantity demanded of the product rises by 37.5%.

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Multiple Choice

Q 68Q 68

What is the effect on tax revenue if the government increases the excise tax on a product that has an elastic demand?
A) It will rise.
B) It will fall.
C) It may rise or fall depending on whether the tax is a flat rate or a percentage of the price of the product.
D) It is totally unpredictable.

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Multiple Choice

Q 69Q 69

Graphically, what is the effect of imposing an excise tax on a product?
A) It will shift both the supply and the demand curve for the product to the left.
B) It will shift the supply curve for the product to the left.
C) It will shift the supply curve for the product to the right.
D) It will shift both the supply and the demand curve for the product to the right.
E) It will shift the supply curve for the product to the left and the demand curve to the right.

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Multiple Choice

Q 70Q 70

If a sales tax is imposed on a product, which of the following statements is correct?
A) If the demand for the product is inelastic, the seller will pay a larger percentage of the tax than will the consumer.
B) If the demand for the product is elastic, the seller will pay a smaller percentage of the product than will the consumer.
C) The consumer will pay 100% of the tax.
D) If the demand for the product is inelastic, the consumer will pay a larger percentage of the tax than will the seller.

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Multiple Choice

Q 71Q 71

-Refer to the information above to answer this question. All of the following statements except one are correct. Which is the exception?
A) The equilibrium price and quantity are $9 and 60.
B) At a price of $7, there is a surplus of 40.
C) At a price of $10, there is a surplus of 20.
D) At a price of $8, there is a shortage of 20.

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Multiple Choice

Q 72Q 72

-Refer to the information above to answer this question. What will be the equilibrium price and quantity if a $2 per unit excise tax is imposed on this product?
A) $11 and 40.
B) $11 and 80.
C) $10 and 50.
D) $10 and 70.
E) $7 and 40.

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Multiple Choice

Q 73Q 73

-Refer to the information above to answer this question. If the government imposes a $2 per unit sales tax on this product, how much of that tax will consumers pay and how much will sellers pay?
A) Consumers will pay all $2 of the tax.
B) Consumers will pay $1.50 and sellers $.50.
C) Consumers and sellers will each pay $1.
D) Consumers will pay $.50 and seller $1.50.
E) Sellers will pay all $2 of the tax.

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Multiple Choice

Q 74Q 74

If the government increases the excise tax on cigarettes by 10%, which of the following statements is correct?
A) The government's tax revenue will fall since the demand for cigarettes is inelastic.
B) The quantity demanded of cigarettes will fall by more than 10% because the demand is inelastic.
C) Both the quantity demanded and supplied of cigarettes will fall by more than 10% because the demand is inelastic.
D) Since the demand for cigarettes is highly inelastic, the subsequent increase in price will be greater than the decrease in quantity demanded.

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Multiple Choice

Q 75Q 75

What is the most likely effect of a government reducing the supply of illegal drugs?
A) The total amount spent on illegal drugs will decrease.
B) The total amount spent on illegal drugs will increase.
C) The quantity of illegal drugs consumed will remain unchanged.
D) The demand for illegal drugs will fall.
E) The demand for illegal drugs will increase.

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Multiple Choice

Q 76Q 76

Why do some people argue that attempts to reduce much of the crime in our society by governments "getting tough" on crime will not be successful?
A) Because much of the crime in our society is drug related and the supply of illegal drugs is very inelastic.
B) Because much of the crime in our society is drug related and the supply of illegal drugs is very elastic.
C) Because much of the crime in our society is drug related and the demand for illegal drugs is very elastic.
D) Because much of the crime in our society is drug related and the demand for illegal drugs is very inelastic.

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Multiple Choice

Q 77Q 77

On what type of products do governments impose "sin" taxes?
A) On products with elastic demand such as candy.
B) On products with inelastic demand such as alcohol.
C) On illegal products.
D) On consumer goods but not capital goods.

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Multiple Choice

Q 78Q 78

Below is a graphical representation of the wheat market in the distant land of Nod.
-Refer to the graph above to answer this question. At equilibrium, what is the total expenditure by consumers on wheat?
A) $5.
B) $40 million.
C) $200 million.
D) Cannot be determined.

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Multiple Choice

Q 79Q 79

Below is a graphical representation of the wheat market in the distant land of Nod.
-Refer to the graph above to answer this question. If supply was increased by 30 million bushels, what would be the new equilibrium price and quantity?
A) $3 and 20 million bushels.
B) $3 and 50 million bushels.
C) $3 and 70 million bushels.
D) $7 and 30 million bushels.
E) $7 and 60 million bushels.

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Multiple Choice

Q 80Q 80

Below is a graphical representation of the wheat market in the distant land of Nod.
-Refer to the graph above to answer this question. What is the price elasticity of demand between the original equilibrium and the new equilibrium after the increase in supply of 30 million bushels?
A) 0.44.
B) 0.5.
C) 2.
D) 2.25.

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Multiple Choice

Q 81Q 81

Why might a good harvest be bad news for farmers?
A) Because the demand for many basic agricultural products is very inelastic.
B) Because the demand for many basic agricultural products is very elastic.
C) Because prices would likely rise.
D) Because much of the crop would spoil due to the lack of sales.

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Multiple Choice

Q 82Q 82

Suppose that the price of a product increased from $18 to $22, and the quantity supplied increased from 200 to 240. What is the value of the supply elasticity?
A) 0.28.
B) 0.91.
C) 1.0.
D) 1.1.
E) 3.6.

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Multiple Choice

Q 83Q 83

Suppose that the value of the price of a product decreased from $2.10 to $1.90, and the quantity supplied decreased from 24 to 16. What is the value of supply elasticity?
A) + 0.25.
B) - 0.25.
C) + 3.47.
D) - 4.0.
E) + 4.0.

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Multiple Choice

Q 84Q 84

Suppose that the value of the supply elasticity of a product is 2 and its price decreases by 14%. What will happen to the quantity supplied?
A) It will increase by 7%.
B) It will increase by 28%.
C) It will decrease by 7%.
D) It will decrease by 28%.
E) It cannot be determined without further information.

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Multiple Choice

Q 85Q 85

What is the formula used to calculate elasticity of supply?
A) Change in price divided by change in quantity supplied
B) Change in quantity supplied divided by change in price
C) Percentage change in price divided by percentage change in quantity supplied
D) Percentage change in quantity supplied divided by percentage change in price

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Multiple Choice

Q 86Q 86

What is meant by the term supply elasticity?
A) The responsiveness of the change in the quantity demanded to a change in price of a product.
B) The change in quantity supplied as a percentage of the change in the quantity demanded.
C) The change in the price of a product as a result of a change in the quantity supplied.
D) The responsiveness of a change in the quantity supplied of a product as a result of a change in price.

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Multiple Choice

Q 87Q 87

Alfred Marshall recognized time in the determination of supply elasticity. His 'momentary market period' is shown through a short-run supply curve which is:
A) perfectly elastic.
B) elastic.
C) inelastic.
D) perfectly inelastic.
E) It could either be elastic or have unitary elasticity.

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Multiple Choice

Q 88Q 88

The graph below shows the supply and demand for tickets to a Raptors basketball game.
-Refer to the graph above to answer this question. Which of the following statements is correct?
A) If demand is D

_{3}, then all the tickets could not be sold. B) If demand in D_{2}, then there would be a shortage of tickets. C) If the price of a ticket is $40 and demand is D_{2}, then ticket scalping would result. D) If the price of a ticket is $40 and demand is D_{3}, then ticket scalping would result. E) The supply curve is perfectly elastic and the demand curves are inelastic.Free

Multiple Choice

Q 89Q 89

The graph below shows the supply and demand for tickets to a Raptors basketball game.
-Refer to the graph above to answer this question. All of the statements below, except one are correct. Which is the exception?
A) If the price of a ticket is $40 and demand is D

_{3}, then there will be 5,000 unsold tickets. B) If the price of a ticket is $60 and demand is D_{2}, then there is a shortage of 2,500 seats. C) If the price of a ticket is $20 and demand is D_{1}, then 5,000 people who would like to attend the game will not be able to unless they are able to buy a ticket from a scalper. D) Any price under $40 will result in all the tickets being sold regardless of which of the three demand curves is considered.Free

Multiple Choice

Q 90Q 90

The graph below shows the supply and demand for tickets to a Raptors basketball game.
-Refer to the graph above to answer this question. Which of the following statements is correct regarding the change in the demand curve from D

_{1}to D_{2}? A) Demand has decreased by 7,500. B) Demand has increased by 7,500. C) Demand has decreased by 20. D) Demand has increased by 20. E) None of the choices are correct.Free

Multiple Choice

Q 91Q 91

The graph below shows the supply and demand for tickets to a Raptors basketball game.
-Refer to the graph above to answer this question. What is the supply elasticity in the $30 to $40 range?
A) 0.
B) 0.26.
C) 2.33.
D) 3.9.

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Multiple Choice

Q 92Q 92

-Refer to the graph above to answer this question. What is the supply elasticity of S

_{1}in the $2.50 to $4.00 range? A) 0.23. B) 0.92. C) 1.08. D) 2.17.Free

Multiple Choice

Q 93Q 93

-Refer to the graph above to answer this question. What is the supply elasticity of S

_{2}in the $2.50 to $4.00 range? A) 1.15. B) 2.17. C) It is higher than the supply elasticity of S_{1}in the same price range. D) It is lower than the supply elasticity of S_{1}in the same price range. E) None of the choices are correct.Free

Multiple Choice

Q 94Q 94

What is the formula used to calculate income elasticity?
A) Change in income divided by change in quantity.
B) Percentage change in income divided by percentage change in quantity.
C) Change in quantity divided by change in income.
D) Percentage change in quantity divided by percentage change in income.
E) Percentage change in price divided by percentage change in income.

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Multiple Choice

Q 95Q 95

Suppose that average incomes increased from $30,000 to $34,000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand?
A) +0.625.
B) +0.74.
C) -1.0.
D) +1.36.
E) +1.6.

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Multiple Choice

Q 96Q 96

Suppose that average incomes increased from $30,000 to $34,000, and the quantity demanded of a product increased from 45 to 55. What type of product must this be?
A) Substitute product.
B) Inferior product.
C) Luxury product.
D) Necessity.
E) Superior product.

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Multiple Choice

Q 97Q 97

Suppose that average incomes decreased from $38,000 to $36,000, and the quantity demanded of a product increased from 45 to 55. What is the value of the income elasticity of demand?
A) -0.27
B) -3.7
C) -1.0
D) +0.27
E) +3.7

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Multiple Choice

Q 98Q 98

Suppose that average incomes decreased from $38,000 to $36,000, and the quantity demanded of a product increased from 45 to 55. What type of product must this be?
A) Substitute product.
B) Inferior product.
C) Luxury product.
D) Necessity.
E) Superior product.

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Multiple Choice

Q 99Q 99

Suppose that the value of the income elasticity of demand for a product is 2 and average incomes increase by 16%. What will happen to the quantity demanded?
A) It will increase by 8%.
B) It will increase by 32%.
C) It will decrease by 8%.
D) It will decrease by 32%.
E) It cannot be determined without further information.

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Multiple Choice

Q 100Q 100

Suppose that the value of the income elasticity of demand for a product is -2 and average incomes decrease by 10%. What will happen to the quantity demanded?
A) It will increase by 5%.
B) It will increase by 20%.
C) It will decrease by 5%.
D) It will decrease by 20%.
E) It cannot be determined without further information.

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Multiple Choice

Q 101Q 101

What is the effect of a rise in income on the quantity demanded of a product?
A) It will rise if it is an inferior good.
B) It will rise if it is a normal good.
C) It will fall if it has many substitute goods.
D) It will fall if price elasticity of demand is zero.

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Multiple Choice

Q 102Q 102

Below is some information on the demand for products K, L and M.
-Refer to the information above to answer this question. What is the income elasticity of product K?
A) 0.15.
B) 15.
C) approximately 14.
D) approximately 1.4.
E) approximately 0.7.

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Multiple Choice

Q 103Q 103

Below is some information on the demand for products K, L and M.
-Refer to information above to answer this question. What is the income elasticity of product L?
A) approximately 12.
B) approximately 1.2.
C) greater than the income elasticity of product K.
D) approximately 0.8.
E) 8.

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Multiple Choice

Q 104Q 104

Below is some information on the demand for products K, L and M.
-Refer to the information above to answer this question. Which of the following is correct about product M?
A) It has an income elasticity of approximately 6.7.
B) It has an income elasticity of approximately 0.2.
C) It has an income elasticity of approximately 0.6.
D) It is a normal good.
E) It is an inferior good.

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Multiple Choice

Q 105Q 105

What is a normal good?
A) It is a good whose income elasticity of demand is < 1.
B) It is a good whose quantity demanded will rise as income rises.
C) It is a good which has many substitutes.
D) It is a good whose income elasticity is > 1.

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Multiple Choice

Q 106Q 106

What is income elasticity?
A) The change in the quantity supplied as a result of a change in price.
B) The responsiveness of the change in the quantity demanded to a change in the price of a product.
C) The change in the price of a product as a result of a change in supply.
D) The responsiveness of the quantity demanded to a given change in income.

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Multiple Choice

Q 107Q 107

Which of the two following pairs of product categories are income inelastic?
A) Food and shelter.
B) Furniture and clothing.
C) Recreation and restaurant meals.
D) Education and textbooks.

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Multiple Choice

Q 108Q 108

Which of the two following pairs of product categories are income elastic?
A) Food and housing.
B) Public transport and household operation.
C) Tobacco and alcohol.
D) Education and textbooks.

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Multiple Choice

Q 109Q 109

Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208. What is the value of the cross elasticity?
A) + 0.2.
B) + 0.4.
C) + 1.0.
D) + 2.5.
E) + 5.0.

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Multiple Choice

Q 110Q 110

Suppose that the price of Product A increased from $9 to $11 and the quantity demanded of Product B increased from 192 to 208. What can be said about the products?
A) They both have elastic demands.
B) They both have inelastic demands.
C) They are inferior products.
D) They are complementary products.
E) They are substitute products.

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Multiple Choice

Q 111Q 111

Suppose that the cross elasticity of demand for Product A and Product B is -1.6 and the price of Product A decreased by 20 per cent. What will happen to the quantity demanded of Product B?
A) It will increase by 3.2%.
B) It will increase by 32%.
C) It will decrease by 3.2%.
D) It will decrease by 32%.
E) The quantity will be unaffected but the price of Product B will increase by 32%.

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Multiple Choice

Q 112Q 112

What is the term for the responsiveness of the change in the quantity demanded of product A to a change in the price of product B?
A) Income elasticity.
B) Cross elasticity of demand.
C) Price elasticity of demand.
D) Supply elasticity.

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Multiple Choice

Q 113Q 113

What is the relationship between goods A and B if an increase in the price of A leads to an increase in the quantity demanded of B?
A) A and B are complementary goods.
B) A and B are substitute goods.
C) A must be an inferior good while B must be a normal good.
D) B must be an inferior good while A must be a normal good.

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Multiple Choice

Q 114Q 114

What is the significance of a positive cross-elasticity coefficient between products X and Y?
A) The demand for both products must be elastic.
B) The demand for both products must be inelastic.
C) Products X and Y must be substitutes.
D) Products X and Y must be complements.
E) There is no significance since all calculations of cross elasticity are positive.

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Multiple Choice

Q 115Q 115

Suppose that a 10% increase in the price of product A results in a 12% decrease in the quantity demanded of product
A) The cross elasticity of demand coefficient between the two products is negative and the products are substitutes.
B) The cross elasticity of demand coefficient between the two products is negative and the products are complements.
B) Which of the following statements is correct?
C) The cross elasticity of demand coefficient between the two products is positive and the products are complements.
D) The cross elasticity of demand coefficient between the two products is positive and the products are substitutes.

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Multiple Choice

Q 116Q 116

-Refer to the graphs above to answer this question. Suppose that the price of orange juice increases from P

_{1}to P_{2}and the demand curve for apple juice shifts to the right from D_{1}to D_{2}. What is the relationship between orange juice and apple juice? A) The demand for both types of juices must be elastic. B) Orange juice and apple juice must be substitutes. C) The demand for both types of juices must be inelastic. D) Orange juice and apple juice must be complements. E) There is no relationship between the two types of juices.Free

Multiple Choice

Q 117Q 117

-Refer to the graphs above to answer this question. Suppose that the price of orange juice increases from P

_{1}to P_{2}and the demand curve for apple juice shifts to the right from D_{1}to D_{2}. What can be said about the cross-elasticity of demand for the two juices and their relationship? A) The cross elasticity of demand coefficient between the two juices is negative and the juices are substitutes. B) The cross elasticity of demand coefficient between the two juices is negative and the juices are complements. C) The cross elasticity of demand coefficient between the two juices is positive and the juices are complements. D) The cross elasticity of demand coefficient between the two juices is positive and the juices are substitutes.Free

Multiple Choice

Q 118Q 118

-Refer to the graphs above to answer this question. Suppose that the price of orange juice increases from P

_{1}to P_{2}and the demand curve for apple juice shifts to the right from D_{1}to D_{2}. What is the effect to total revenue from the sale of apple juice? A) Total revenue will not change since the cross-elasticity coefficient is not known. B) Total revenue will rise. C) Total revenue may rise or fall depending on the size of the price increase. D) Total revenue will fall. E) Total revenue will not change since there is no change in the price of apple juice.Free

Multiple Choice

Q 119Q 119

-Refer to the graphs above to answer this question. Suppose that the price of nuts decreases from P

_{1}to P_{2}and the demand curve for chocolates shifts to the right from D_{1}to D_{2}. What is the relationship between nuts and chocolates? A) The demand for nuts and chocolates must be unit elastic. B) Nut and chocolates must be substitutes. C) The cross-elasticity coefficient of demand for both nuts and chocolates must be positive. D) Nuts and chocolates must be complements. E) There is no relationship between nuts and chocolates.Free

Multiple Choice

Q 120Q 120

-Refer to the graphs above to answer this question. Suppose that the price of nuts decreases from P

_{1}to P_{2}and the demand curve for chocolates shifts to the right from D_{1}to D_{2}. What can be said about the cross-elasticity of demand for nuts and chocolates and their relationship? A) The cross-elasticity of demand coefficient between nuts and chocolates is negative and nuts and chocolates are substitutes. B) The cross-elasticity of demand coefficient between nuts and chocolates is negative and nuts and chocolates are complements. C) The cross-elasticity of demand coefficient between nuts and chocolates is positive and nuts and chocolates are complements. D) The cross-elasticity of demand coefficient between nuts and chocolates is positive and nuts and chocolates are substitutes.Free

Multiple Choice

Q 121Q 121

-Refer to the graphs above to answer this question. Suppose that the price of nuts decreases from P

_{1}to P_{2}and the demand curve for chocolates shifts to the right from D_{1}to D_{2}. What is the effect to total revenue from the sale of both nuts and chocolates? A) Total revenue will not change since the cross-elasticity coefficient is not known. B) Total revenue from the sale of chocolates will rise but not the total revenue from nuts. C) Total revenue may rise or fall depending on the size of the price decrease of nuts. D) Total revenue from the sale of both nuts and chocolates will fall. E) Total revenue from the sale of both nuts and chocolates will rise.Free

Multiple Choice

Q 122Q 122

Below are some data on price, income and demand for five different time periods.
-Refer to the information above to answer this question. What is the price elasticity of demand for product X between years 1 and 2?
A) 0.31.
B) 1.0.
C) 3.2.
D) 22.2.

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Multiple Choice

Q 123Q 123

Below are some data on price, income and demand for five different time periods.
-Refer to the information above to answer this question. What is the price elasticity of demand for product Y between years 2 and 3?
A) 0.18.
B) 0.24.
C) 3.00.
D) 4.09.
E) Infinity.

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Multiple Choice

Q 124Q 124

Below are some data on price, income and demand for five different time periods.
-Refer to the information above to answer this question. What is the income elasticity for product X between years 3 and 4?
A) + 0.78.
B) + 1.05.
C) + 1.29.
D) + 2.6.

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Multiple Choice

Q 125Q 125

Below are some data on price, income and demand for five different time periods.
-Refer to the information above to answer this question. What is the cross price elasticity of demand of product X for Y between years 2 and 3?
A) - 0.52
B) - 0.88
C) + 1.25
D) - 1.91
E) None of the choices are correct.

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Multiple Choice

Q 126Q 126

Below are some data on price, income and demand for five different time periods.
-Refer to the information above to answer this question. What is the cross price elasticity of demand of product X for Y between years 4 and 5?
A) - 0.89.
B) + 3.0.
C) - 3.42.
D) Cannot be determined.

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Multiple Choice

Q 127Q 127

Below are some data on price, income and demand for five different time periods.
-Refer to the information above to answer this question. What is the price elasticity of demand for product Y between years 3 and 4?
A) 0.89.
B) 1.13.
C) 2.67.
D) None of the choices are correct.

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Multiple Choice

Q 128Q 128

Below are some data on price, income and demand for five different time periods.
-Refer to the information above to answer this question. What is the income elasticity for product Y between years 3 and 4?
A) + 0.38.
B) + 0.60.
C) + 1.67.
D) + 2.45.
E) None of the choices are correct.

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Multiple Choice

Q 129Q 129

Below are some data on price, income and demand for five different time periods.
-Refer to the information above to answer this question. Between years 4 and 5, both the price and the quantity demanded of X increased. What is the best possible explanation of this?
A) Graphically, the demand curve for X must be upward sloping.
B) Product Y is a complement of product X.
C) Product X is a substitute for product Y.
D) Graphically, the demand curve for product X must have shifted leftwards.
E) None of the choices are correct.

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Multiple Choice

Q 130Q 130

What is the effect on total revenue if demand is elastic and price rises?
A) Total revenue will fall.
B) Total revenue will rise.
C) Quantity demanded will rise.
D) Supply will rise.

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Multiple Choice

Q 131Q 131

What is the effect of a rise in income on the demand for a product?
A) It will rise if the product is an inferior product.
B) It will rise if the product is a normal product.
C) It will fall if the product is a normal product.
D) It will fall in both cases of a normal or inferior product.

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Multiple Choice

Q 132Q 132

What is the effect of the imposition of a sales tax?
A) The supply curve will shift to the left.
B) The supply curve will shift to the right.
C) The demand curve will shift to the left.
D) The demand curve will shift to the right.

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Multiple Choice

Q 133Q 133

What is the elasticity of supply of seats for a one-night concert in an auditorium?
A) It is elastic.
B) It is inelastic.
C) It is perfectly inelastic.
D) It is perfectly elastic.

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Multiple Choice

Q 134Q 134

What is the effect on tax revenue if the government increases the excise tax on a product that has an inelastic demand?
A) Tax revenue will rise.
B) Tax revenue will fall.
C) The price of the product will rise but the quantity traded will remain unchanged.
D) The price of the product will rise and the quantity traded will rise.

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Multiple Choice

Q 135Q 135

What is a normal good?
A) It is a good whose income elasticity of demand is less than zero.
B) It is a good whose demand will rise as income rises.
C) It is a good that has many substitutes.
D) It is a necessity.

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Multiple Choice

Q 136Q 136

Under which of the following situations will total revenue rise?
A) If elasticity is > 1 and price falls.
B) If elasticity is > 1 and price rises.
C) If elasticity is < 1 and price falls.
D) If elasticity is = 1 and price falls.

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Multiple Choice

Q 137Q 137

If a product has many substitutes, which of the following statements is correct?
A) Its income elasticity is high.
B) It is likely that it is an inferior product.
C) Its supply elasticity is high.
D) Its price elasticity of demand is high.

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Multiple Choice

Q 138Q 138

If people spend a large percentage of their income on a particular product, which of the following statements is true?
A) The product has a large number of substitutes.
B) The price elasticity of demand for the product is high.
C) The income elasticity of demand for the product is low.
D) The elasticity of supply for the product is low.

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Multiple Choice

Q 139Q 139

What will cause the price elasticity of demand for a product to be high?
A) A low percentage of income is spent on the product.
B) There are a small number of available substitutes.
C) The elasticity of supply for the product is high.
D) A long time period is used to measure elasticity.

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Multiple Choice

Q 140Q 140

How is a firm's total revenue calculated?
A) Price times average revenue.
B) Price times quantity sold.
C) Average revenue times quantity produced.
D) Quantity demanded times quantity supplied.

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Multiple Choice

Q 141Q 141

What is the price elasticity of demand coefficient?
A) A number that measures the responsiveness of quantity demanded to a change in price.
B) A number that measures the responsiveness of quantity demanded to a change in demand.
C) A number that measures the responsiveness of price to a change in the quantity demanded.
D) A number that measures the responsiveness of price to a change in demand.

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Multiple Choice

Q 142Q 142

Below are two sets of prices and their related quantities demanded?
-Refer to Table 4.10 to answer this question. What is the price elasticity for the product represented by Set I?
A) 0.002.
B) 0.5.
C) 2.3.
D) 400.

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Multiple Choice

Q 143Q 143

Below are two sets of prices and their related quantities demanded?
-Refer to Table 4.10 to answer this question. What is the price elasticity for the product represented by Set II?
A) 0.16.
B) 0.71.
C) 1.4.
D) 6.25.

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Multiple Choice

Q 144Q 144

A local transit authority has just applied to its regulatory board for a fare increase on its rail-transit system, arguing that the increase is needed to cover rising costs. A citizens committee is opposed to the proposed increase, arguing that the company could increase its revenue by decreasing fares. Which of the statements below is correct?
A) The company thinks that the demand is inelastic, whereas the committee thinks it is elastic.
B) The company thinks that the demand is elastic, whereas the committee thinks it is inelastic.
C) Both the company and the committee think that elasticity is unity.
D) It is possible that both the company and the committee are correct.

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Multiple Choice

Q 145Q 145

Graphically, what is the effect of imposing an excise tax on a product?
A) It will shift both the supply and the demand curve for the product to the left.
B) It will shift the supply curve for the product to the left.
C) It will shift the supply curve for the product to the right.
D) It will shift both the supply and the demand curve for the product to the right.
E) It will shift the supply curve for the product to the left and the demand curve to the right.

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Multiple Choice

Q 146Q 146

What is the likely effect of the government reducing the supply of illegal drugs?
A) The total amount spent on drugs will decrease.
B) The total amount spent on drugs will increase.
C) The quantity of drugs consumed will remain unchanged.
D) The demand for drugs will fall.
E) The demand for drugs will increase.

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Multiple Choice

Q 147Q 147

Which of the following circumstances will raise the total revenue of oat farmers?
A) A good harvest, combined with inelastic demand.
B) A poor harvest, combined with inelastic demand.
C) A poor harvest, combined with elastic demand.
D) A good wheat and oat harvest, combined with inelastic demands.
E) A poor wheat and oat harvest, combined with elastic demands.

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Multiple Choice

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True False

Q 149Q 149

The price elasticity of demand coefficient is, technically, always negative, but for convenience economists ignore the minus sign.
TRUE

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True False

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True False

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True False

Q 152Q 152

If the elasticity of demand is unitary and the price rises, then total revenue will rise.
FALSE

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True False

Q 153Q 153

A major determinant of demand elasticity is the number of complementary products available.
FALSE

Free

True False

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True False

Q 155Q 155

Supply elasticity is measured by percentage change in quantity supplied divided by percentage change in quantity demanded.
FALSE

Free

True False

Q 156Q 156

If cross-elasticity of demand is positive, we could conclude that the two products are substitutes.
TRUE

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True False

Q 157Q 157

If income elasticity is positive, we could conclude that the product in question is an inferior good.
FALSE

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True False

Q 158Q 158

Answer the following questions with respect to elasticity:
A) Define the term 'price elasticity of demand'.
B) Name three forms it can take.
C) What does it mean if a calculation of the price elasticity of demand turns out to be less than one?

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Essay

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Essay

Q 162Q 162

Define the term income elasticity. What does it mean if the calculation of income elasticity turns out to be positive and greater than one?

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Essay

Q 163Q 163

According to reports, the supply of rose hip tea has doubled in the last five years yet the price has not changed. This suggests that the demand for this type of tea must be perfectly elastic. Comment on this statement.

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Essay

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Essay

Q 165Q 165

The Grateful Dead (before they disbanded) sold out concert after concert and typically provided a good living for scalpers (people who buy up lots of tickets and resell them at a premium). Explain (using a supply and demand diagram) how the band's ticket pricing policy set an effective ceiling on the price of concert tickets. (Extra Credit: If the Grateful Dead knew their price of concert tickets was below equilibrium, why didn't they raise it?)

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Essay

Q 166Q 166

What is an excise tax? Demonstrate the effect of an excise tax paid by suppliers on equilibrium quantity and price.

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Essay

Q 167Q 167

Under which of the following two scenarios would demand for hot dogs be more elastic? Explain.
(a) You are at a hockey game at the local ice rink and want to eat a hot dog.
(b) It is Tuesday, you are planning the menu for a picnic you are going to have on Saturday and you decide to serve hot dogs.

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Essay

Q 168Q 168

How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

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Essay

Q 169Q 169

Demonstrate graphically and explain verbally the impact on price and quantity when supply decreases and demand is highly elastic.

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Essay

Q 170Q 170

The following graph shows the demand and supply for i-Pods. a) What is equilibrium price and quantity?
b) Suppose that a $20 per unit sales tax is placed on the product. Draw in the new supply curve labeled S

_{tax}. c) What is the new equilibrium price and quantity? d) What proportion of the tax is paid by the consumer, and what proportion is paid by the seller in this case?Free

Essay

Q 171Q 171

Given the demand curve in the following graph: a) What can you say about the slope of the demand curve?
b) What is the elasticity of demand between points a and b and between c and d?
c) At what price is the elasticity of demand equal to 1?
d) At what price will consumers spend the most on this product?

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Essay

Q 172Q 172

The data in the table below are for boxes of fresh shrimp. a) Before the tax, what is the equilibrium price and quantity?
b) Fill in the Quantity Supplied After Tax column assuming that a $10 per unit excise tax is put on the product.
c) What is the new equilibrium price and quantity?
d) What portion of the $10 per unit tax is paid by the seller and what portion is paid by the consumer?

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Essay

Q 173Q 173

Suppose that household income in Charlottetown increases from $44,000 to $45,000 and, assuming no change in price the quantity of Baker Baked Beans rises from 90 to 94 cases per week.
a) What is income elasticity of demand for the beans?
b) What does this suggest about this product?

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Short Answer

Q 174Q 174

The table below gives data for a particular market. a) What is the price elasticity of demand for the product A?
b) What is the price elasticity of demand for the product B?
c) What is the income elasticity of demand for the product A?
d) What is the income elasticity of demand for the product B?
e) What is the cross-elasticity of demand of product A for a change in the price of product B?

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Q 177Q 177

Table 4.1 shows the demand and supply schedules for bottles of wine (in thousands) for the economy of Newtown. a) If the government impose $4 per unit tax, what will be the new price and quantity?
b) What will be the total tax revenue?
c) What portion of the tax revenue is paid by the consumers?

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Q 178Q 178

Table 4.2 shows Alex's demand schedule for chocolate bars. a) Calculate the price elasticity of demand between $1 and $3
b) Calculate the price elasticity of demand between $3 and $5
c) Calculate the price elasticity of demand between $5 and $7
d) Calculate the price elasticity of demand between $7 and $9

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Q 179Q 179

Table 4.3 shows the market demand for video rentals. a) Calculate the price elasticity of demand between $1 and $3
b) Calculate the price elasticity of demand between $3 and $5
c) Calculate the price elasticity of demand between $5 and $7
d) Calculate the price elasticity of demand between $7 and $9

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Q 180Q 180

Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per unit. What portion of the tax will be paid by the producer?

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Q 181Q 181

If the government puts a $3 excise tax on a product and as a result, the price rises by $2.50. Is the demand elastic or inelastic? Explain

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Q 182Q 182

Suppose the demand for Good X is unit elastic. If the price of Good X is $10 the quantity traded is 300. How many units will be traded if the price is $25? Explain.

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Q 183Q 183

If the quantity of cheese supplied increased by 18% when the price increased by 12%, what is the value of the elasticity of supply?

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Q 184Q 184

Define price elasticity of demand. What does it mean if the price elasticity of demand is equal to 4?

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Q 185Q 185

Define cross-price elasticity. What does it mean if the cross-price elasticity is equal -3?

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Q 186Q 186

Historical data from the college bookstore shows that when the price of textbooks is increased by 5%, the number of textbooks sold falls by 10%. Should the bookstore lower its prices?

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Q 187Q 187

Suppose the supply curve is perfectly inelastic and the equilibrium price is $5 and equilibrium quantity is 7. If the government impose an excise tax of $1 per unit, what will be the new price and quantity traded? What is the total tax revenue and who pays the tax?

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Q 188Q 188

Suppose the demand curve is perfectly inelastic and the equilibrium price is $8 and equilibrium quantity is 9. If the government impose an excise tax of $1 per unit, what will be the new price and quantity traded? What is the total tax revenue and who pays the tax?

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Q 189Q 189

Suppose the demand curve is perfectly inelastic. How much of a $1 per unit tax is paid by the consumer?

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Q 190Q 190

George is an art collector and he owns three Van Gogh paintings. George decides to destroy one of them. Explain why?

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Q 191Q 191

During an economic boom, should investors invest in an industry that produces goods whose demand is income elastic or one in which the demand is income inelastic?

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Q 192Q 192

During an economic slowdown, should investors invest in an industry that produces goods whose demand is income elastic or income inelastic?

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Q 193Q 193

The price elasticity of demand for keyboards is 2.5. If the percentage change in quantity demanded is 50% and the average price is $10, what is the change in price?

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Q 196Q 196

According to Alfred Marshall, time plays a critical role in the determination of the elasticity of supply and the shape of the supply curves over time. What are these shapes?

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