Question 1

If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is

Accepted Answer

When there is a percentage increase in the price of a product and the quantity demanded decreases by a proportionately smaller percentage, it is an indication that demand is relatively inelastic. This means that consumers are less responsive to changes in price and are still willing to buy the same quantity of the product even though the price has increased.

Question 2

The price elasticity of demand is equal to

Accepted Answer

Price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Question 3

At a price of $20, Daphne sells 35 hand-painted dog collars per week.When she raised her price to $25, she sold 28 per week.Based on this information, the demand for her dog collars is

Accepted Answer

The answer of At a price of $20, Daphne sells...

Question 4

If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would

Accepted Answer

When the demand is perfectly inelastic, the quantity demanded remains constant regardless of any change in price. Therefore, even if the price of the life-saving drug doubled, the quantity demanded would remain the same.

Question 5

Consider the following types of demand curves:
A.a vertical demand curve
B.a horizontal demand curve
C.a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Accepted Answer

The price elasticity of demand coefficient remains constant along a linear demand curve.

Question 6

The slope of a demand curve is not used to measure the price elasticity of demand because

Accepted Answer

The measurement of slope is sensitive to the units chosen for price and quantity. Therefore, using the slope to measure price elasticity of demand may result in inaccurate measurements. Instead, price elasticity of demand is calculated using the percentage change in quantity demanded divided by the percentage change in price.

Question 7

At a price of $100, Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125, 9 canoes were rented.Calculate the absolute value of the price elasticity of demand for canoe rentals using the midpoint formula.

Accepted Answer

The answer of At a price of $100, Beachside Canoe...

Question 8

Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?

Accepted Answer

At high prices, the percentage change in quantity demanded is relatively large compared to the percentage change in price, making demand elastic. At low prices, the percentage change in quantity demanded is relatively small, making demand inelastic.

Question 9

Figure 6-4
 
-Refer to Figure 6-4.The inelastic segment of the demand curve

Accepted Answer

The inelastic segment of the demand curve lies below the midpoint of the curve. This is because, in this segment, the percentage change in quantity demanded is relatively less than the percentage change in price, indicating that consumers are less responsive to changes in price. Therefore, a price increase in this segment would not result in a significant decrease in the quantity demanded, leading to a relatively smaller change in total revenue.

Question 10

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to

Accepted Answer

The price elasticity of demand formula is: percentage change in quantity demanded / percentage change in price. With an elasticity of 0.60, a 20% increase in price will lead to a 12% decrease in quantity demanded (0.60 * 20% = 12%).

Question 11

If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is

Accepted Answer

The demand is elastic because the percentage change in quantity demanded (33.33% decrease) is greater than the percentage change in price (25% increase).

Question 12

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then

Accepted Answer

The answer of If the absolute value of the price...

Question 13

Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price.

Accepted Answer

Economists use the concept of elasticity to measure how one economic variable responds to a change in another economic variable. Elasticity measures the percentage change in one variable in response to a percentage change in another variable. Specifically, price elasticity of demand measures the percentage change in quantity demanded in response to a percentage change in price.

Question 14

At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week.When he raised his price to $12 per dozen, he still sold 40 dozen per week.Based on this information, the demand for his tamales is

Accepted Answer

The fact that Chuy was able to raise the price of his tamales from $8 to $12 per dozen without impacting the quantity demanded (40 dozen per week) demonstrates that the demand for his tamales is perfectly inelastic. This means that even if the price changes, consumers will still buy the same amount because there are no close substitutes for Chuy's homemade tamales.

Question 15

In 2016, Philadelphia imposed a tax of 1.5 cents per ounce on sweetened beverages, and PepsiCo indicated that its sales in Philadelphia fell by 40 percent after the tax took effect.If the demand for sweetened beverages in Philadelphia is unit elastic, then the price of Pepsico's sweetened beverages in Philadelphia would have increased by ________ percent following the implementation of the tax.

Accepted Answer

If demand is unit elastic, the percentage change in quantity demanded is equal to the percentage change in price. Therefore, a 40 percent decrease in sales implies a 40 percent increase in price.

Question 16

If at a price of $50, Ghani sells 20 hand-made leather cell-phone covers but at a price of $60, zero units are sold.Based on this information, the demand for his cell-phone covers is

Accepted Answer

The demand is perfectly elastic because a small increase in price from $50 to $60 results in the quantity demanded dropping from 20 to zero.

Question 17

If the slope of a demand curve is equal to -0.1 then

Accepted Answer

The slope of the demand curve does not directly indicate elasticity. Elasticity depends on the percentage change in quantity demanded relative to the percentage change in price, not the absolute change.

Question 18

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

Accepted Answer

The percentage change in quantity demanded (-42%) is greater than the percentage change in price (+35%), indicating that demand is relatively elastic.

Question 19

Figure 6-4
 
-Refer to Figure 6-4.The absolute value of the price elasticity of demand at the midpoint of the demand curve is

Accepted Answer

The absolute value of the price elasticity of demand at the midpoint of the demand curve is always one, which means that a 1% change in price will result in a 1% change in quantity demanded. This is because at the midpoint of the demand curve, the percentage change in price and quantity demanded are equal, resulting in a unitary elasticity of demand.

Question 20

To calculate the price elasticity of demand, we divide

Accepted Answer

The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. This formula is commonly known as the midpoint formula and is used to provide a more accurate measure of elasticity compared to using the initial or final values alone.

Quiz 6: Elasticity: the Responsiveness of Demand and Supply