Question 1

When consumers face rising gasoline prices, they typically
A)reduce their quantity demanded more in the long run than in the short run.
B)reduce their quantity demanded more in the short run than in the long run.
C)do not reduce their quantity demanded in the short run or the long run.
D)increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Accepted Answer

The answer of When consumers face rising gasoline prices, they...

Question 2

A 10 percent increase in gasoline prices reduces gasoline consumption by about
A)6 percent after one year and 2.5 percent after five years.
B)2.5 percent after one year and 6 percent after five years.
C)10 percent after one year and 20 percent after five years.
D)0 percent after one year and 1 percent after five years.

Accepted Answer

According to the question, a 10 percent increase in gasoline prices reduces gasoline consumption. The question does not mention a specific rate at which the consumption decreases over time, but the answer choices do. Option B suggests that after one year, there would be a 2.5 percent reduction in gasoline consumption, and after five years, the reduction would be 6 percent. This is a reasonable assumption as people may adjust their habits, such as carpooling or taking public transportation, in the long run. Therefore, the best choice is B.

Question 3

Which of the following statements about the consumers' responses to rising gasoline prices is correct?
A)Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.
B)Consumers react to a 10% increase in price with about a 10% decrease in quantity demanded in both the short run and long run.
C)Consumers decrease their quantity demanded more in the short run than in the long run.
D)Consumers decrease their quantity demanded more in the long run than in the short run.

Accepted Answer

The answer of Which of the following statements about the...

Question 4

When studying how some event or policy affects a market, elasticity provides information on the
A)change in the costs of production.
B)tradeoff between equality and efficiency.
C)effect on the budget deficit or surplus.
D)direction and magnitude of the effect.

Accepted Answer

Elasticity provides information on how sensitive quantity demanded or quantity supplied is to a change in price or other factors. Therefore, it can provide insights into the direction and magnitude of the effect of an event or policy on the market.

Question 5

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?
A)Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.
B)Elasticity provides us with a better rationale for statements such as "an increase in x will lead to a decrease in y" than we would have in the absence of the elasticity concept.
C)Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage.
D)Without elasticity, it is very difficult to assess the degree of competition within a market.

Accepted Answer

Elasticity allows us to measure the responsiveness of buyers and sellers to changes in price and other factors, which in turn allows us to make more precise predictions and understand the dynamics of supply and demand better.

Question 6

Which of the following statements about the consumers' responses to rising gasoline prices is correct?
A)About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
B)About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
C)About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
D)Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

Accepted Answer

The answer of Which of the following statements about the...

Quiz 5: Elasticity and Its Application

When consumers face rising gasoline prices, they typically

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

When studying how some event or policy affects a market, elasticity provides information on the

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Which of the following statements about the consumers' responses to rising gasoline prices is correct?