Question 1

When the price of kittens was $25 each,the pet shop sold 20 per month.When they raised the price to $35 each,they sold 14 per month.The price elasticity of demand for kittens is about
A)1.66.
B)1.06.
C)0.94.
D)0.60.

Accepted Answer

The answer of When the price of kittens was $25...

Question 2

A perfectly elastic demand implies that
A)buyers will not respond to any change in price.
B)any rise in price above that represented by the demand curve will result in a quantity demanded of zero.
C)quantity demanded and price change by the same percent as we move along the demand curve.
D)price will rise by an infinite amount when there is a change in quantity demanded.

Accepted Answer

The answer of A perfectly elastic demand implies that
A)buyers will...

Question 3

When the local used bookstore prices economics books at $15.00 each,they generally sell 70 books per month.If they lower the price to $7.00,sales increase to 90 books per month.Given this information,we know that the price elasticity of demand for economics books is about
A)2.91, and an increase in price from $7.00 to $15.00 results in an increase in total revenue.
B)2.91, and an increase in price from $7.00 to $15.00 results in a decrease in total revenue.
C)0.34, and an increase in price from $7.00 to $15.00 results in an increase in total revenue.
D)0.34, and an increase in price from $7.00 to $15.00 results in a decrease in total revenue.

Accepted Answer

Price Elasticity of Demand (PED) can be calculated using the formula:
% change in quantity demanded / % change in price

Using the given information, we can calculate the PED as follows:
Change in quantity demanded = 90-70 = 20
% change in quantity demanded = (20/70) * 100 = 28.57%

Change in price = 15-7 = 8
% change in price = (8/15) * 100 = 53.33%

PED = % change in quantity demanded / % change in price = 28.57% / 53.33% ≈ 0.34

Since the PED value is less than 1 (in absolute value), the demand is inelastic. This means that an increase in price from $7.00 to $15.00 will result in an increase in total revenue. Therefore, option C is the correct choice.

Question 4

When demand is perfectly inelastic,the price elasticity of demand
A)is zero and the demand curve is vertical.
B)is zero and the demand curve is horizontal.
C)approaches infinity and the demand curve is vertical.
D)approaches infinity and the demand curve is horizontal.

Accepted Answer

When demand is perfectly inelastic, the quantity demanded does not change with a change in price. Therefore, the price elasticity of demand is zero, and the demand curve is vertical. This means that no matter how much the price changes, the quantity demanded remains the same.

Question 5

When quantity moves proportionately the same amount as price,demand is
A)elastic and the price elasticity of demand is 1.
B)perfectly elastic and the price elasticity of demand is infinitely large.
C)perfectly inelastic and the price elasticity of demand is 0.
D)unit elastic and the price elasticity of demand is 1.

Accepted Answer

When quantity moves proportionately the same amount as price, demand is said to be unit elastic and the price elasticity of demand is 1.

Question 6

Suppose demand is perfectly inelastic and the supply of the good in question decreases.As a result,
A)the equilibrium quantity decreases and the equilibrium price is unchanged.
B)the equilibrium price increases and the equilibrium quantity is unchanged.
C)the equilibrium quantity and the equilibrium price both are unchanged.
D)buyers' total expenditure on the good is unchanged.

Accepted Answer

If demand is perfectly inelastic, the quantity demanded is fixed and does not change with changes in price. Therefore, if the supply decreases, the equilibrium quantity remains unchanged while the equilibrium price increases to match the demand. Since demand is perfectly inelastic, buyers' total expenditure on the good also increases.

Question 7

Figure 5-2
 
-Refer to Figure 5-2.Sellers' total revenue would increase if the price
A)increased from $6 to $8.
B)decreased from $18 to $16.
C)decreased from $16 to $15.
D)All of the above are correct.

Accepted Answer

The answer of Figure 5-2
 
-Refer to Figure 5-2.Sellers' total...

Question 8

The smaller the price elasticity of demand,the
A)steeper the demand curve will be through a given point.
B)flatter the demand curve will be through a given point.
C)more strongly buyers respond to a change in price between any two prices P₁ and P₂.
D)larger the decrease in equilibrium price when the supply curve shifts rightward from S₁ to S₂.

Accepted Answer

A smaller price elasticity of demand means that buyers are less sensitive to changes in price, therefore the demand curve will be steeper through a given point.

Question 9

Demand is said to be inelastic if the
A)quantity demanded changes proportionately more than price.
B)price changes proportionately more than income.
C)quantity demanded changes proportionately less than price.
D)quantity demanded changes proportionately the same as price.

Accepted Answer

Demand is said to be inelastic when a change in price results in a relatively smaller change in the quantity demanded. This means that the proportionate change in quantity demanded is less than the proportionate change in price. For example, if the price of insulin increases by 20%, but the quantity demanded only decreases by 5%, then the demand for insulin is inelastic.

Question 10

The case of perfectly elastic demand is illustrated by a demand curve that is
A)vertical.
B)horizontal.
C)downward-sloping but relatively steep.
D)downward-sloping but relatively flat.

Accepted Answer

A perfectly elastic demand curve is horizontal, meaning that any increase in price above the equilibrium price will result in a complete loss of demand.

Question 11

Demand is said to be unit elastic if
A)quantity demanded changes by the same percent as the price.
B)quantity demanded changes by a larger percent than the price.
C)the demand curve shifts by the same percentage amount as the price.
D)quantity demanded does not respond to a change in price.

Accepted Answer

Unit elastic demand means that the percentage change in quantity demanded is equal to the percentage change in price. In other words, if the price increases by 10%, demand will decrease by 10%. If the price decreases by 20%, demand will increase by 20%.

Question 12

A perfectly inelastic demand implies that buyers
A)decrease their purchases when the price rises.
B)purchase the same amount as before when the price rises or falls.
C)increase their purchases only slightly when the price falls.
D)respond substantially to an increase in price.

Accepted Answer

The answer of A perfectly inelastic demand implies that buyers
A)decrease...

Question 13

Suppose demand is perfectly elastic and the supply of the good in question decreases.As a result,
A)the equilibrium quantity decreases and the equilibrium price is unchanged.
B)the equilibrium price increases and the equilibrium quantity is unchanged.
C)the equilibrium quantity and the equilibrium price both are unchanged.
D)buyers' total expenditure on the good is unchanged.

Accepted Answer

The answer of Suppose demand is perfectly elastic and the...

Question 14

The flatter the demand curve through a given point,the
A)greater the price elasticity of demand at that point.
B)smaller the price elasticity of demand at that point.
C)closer the price elasticity of demand will be to the slope of the curve.
D)greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.

Accepted Answer

The flatter the demand curve, the easier it is for consumers to substitute other goods or services for the one in question, thus making the price elasticity of demand greater at that point. This means that a small change in price will cause a larger change in quantity demanded.

Question 15

Figure 5-2
 
-Refer to Figure 5-2.Which of the following price changes would result in no change in sellers' total revenue?
A)The price increases from $6 to $9.
B)The price increases from $9 to $15.
C)The price decreases from $12 to $9.
D)The price decreases from $9 to $5.

Accepted Answer

In the graph, the price elasticity of demand is inelastic in the range of $9 to $12, meaning a change in price would result in a proportionate change in quantity demanded. Therefore, a decrease in price from $12 to $9 would increase the quantity demanded by the same proportion, resulting in no change in total revenue for the seller. The other options would result in a change in total revenue for the seller, as they are either in the elastic range (A and D) or will result in a decrease in quantity demanded (B).

Question 16

In the case of perfectly inelastic demand,
A)the change in quantity demanded equals the change in price.
B)the percentage change in quantity demanded equals the percentage change in price.
C)infinitely-large changes in quantity demanded result from very small changes in the price.
D)quantity demanded stays the same whenever price changes.

Accepted Answer

In the case of perfectly inelastic demand, quantity demanded stays the same whenever price changes. This means that even a large change in price will not result in any change in the quantity demanded. The demand curve will be perfectly vertical.

Question 17

When small changes in price lead to infinite changes in quantity demanded,demand is perfectly
A)elastic and the demand curve will be horizontal.
B)inelastic and the demand curve will be horizontal.
C)elastic and the demand curve will be vertical.
D)inelastic and the demand curve will be vertical.

Accepted Answer

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly elastic and the demand curve will be horizontal. This means that consumers are extremely sensitive to changes in price and a small increase in price will cause them to stop buying the product altogether. On the other hand, a small decrease in price will lead to a large increase in quantity demanded because consumers are very responsive to price changes.

Question 18

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the
A)steeper the demand curve will be.
B)flatter the demand curve will be.
C)further to the right the demand curve will sit.
D)closer to the vertical axis the demand curve will sit.

Accepted Answer

The flatter the demand curve, the more elastic the demand is. This means that buyers are more responsive to a change in price. Conversely, the steeper the demand curve, the less elastic the demand is, meaning buyers are less responsive to a change in price. Therefore, choice B is the correct answer.

Question 19

When demand is perfectly inelastic,the demand curve will be
A)negatively sloped, because buyers decrease their purchases when the price rises.
B)vertical, because buyers purchase the same amount as before whenever the price rises or falls.
C)positively sloped, because buyers respond by increasing the market quantity demanded of the good when price rises.
D)positively sloped, because buyers respond by increasing their total expenditure on the good when price rises.

Accepted Answer

When demand is perfectly inelastic, buyers purchase the same amount regardless of the price. This means that the demand curve will be vertical, as the quantity demanded does not change as the price changes.

Question 20

Figure 5-2
 
-Refer to Figure 5-2.Sellers' total revenue would increase if the price
A)increased from $4 to $6.
B)increased from $16 to $18.
C)decreased from $8 to $6.
D)All of the above are correct.

Accepted Answer

According to the graph, sellers' total revenue is maximized at a price of $6, where the quantity demanded is 12. Therefore, increasing the price from $4 to $6 would increase total revenue. However, increasing the price from $16 to $18 or decreasing the price from $8 to $6 would result in a decrease in total revenue, as the quantity demanded would decrease at those price points.

Quiz 5: Elasticity and Its Applications

When the price of kittens was $25 each,the pet shop sold 20 per month.When they raised the price to $35 each,they sold 14 per month.The price elasticity of demand for kittens is about

A perfectly elastic demand implies that

When the local used bookstore prices economics books at $15.00 each,they generally sell 70 books per month.If they lower the price to $7.00,sales increase to 90 books per month.Given this information,we know that the price elasticity of demand for economics books is about

When demand is perfectly inelastic,the price elasticity of demand

When quantity moves proportionately the same amount as price,demand is

Suppose demand is perfectly inelastic and the supply of the good in question decreases.As a result,

Figure 5-2 -Refer to Figure 5-2.Sellers' total revenue would increase if the price

The smaller the price elasticity of demand,the

Demand is said to be inelastic if the

The case of perfectly elastic demand is illustrated by a demand curve that is

Demand is said to be unit elastic if

A perfectly inelastic demand implies that buyers

Suppose demand is perfectly elastic and the supply of the good in question decreases.As a result,

The flatter the demand curve through a given point,the

Figure 5-2 -Refer to Figure 5-2.Which of the following price changes would result in no change in sellers' total revenue?

In the case of perfectly inelastic demand,

When small changes in price lead to infinite changes in quantity demanded,demand is perfectly

Elasticity of demand is closely related to the slope of the demand curve.The more responsive buyers are to a change in price,the

When demand is perfectly inelastic,the demand curve will be

Figure 5-2 -Refer to Figure 5-2.Sellers' total revenue would increase if the price