Question 1

Demand is said to have unit elasticity if elasticity is
A) less than 1.
B) greater than 1.
C) equal to 1.
D) equal to 0.

Accepted Answer

Unit elasticity occurs when the percentage change in quantity demanded is exactly equal to the percentage change in price, resulting in an elasticity of 1. This means that a change in price will cause an equal and opposite change in quantity demanded.

Question 2

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?
A) There are no close substitutes for this good.
B) The good is a luxury.
C) The market for the good is broadly defined.
D) The relevant time horizon is short.

Accepted Answer

The answer of For a particular good,a 2 percent increase...

Question 3

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) smaller the decrease in equilibrium price when the supply curve shifts rightward from S₁ to S₂.

Accepted Answer

The smaller the price elasticity of demand, the steeper the demand curve will be through a given point. This means that a change in price will not significantly impact the quantity demanded. Therefore, the demand curve will not be very responsive to changes in price.

Question 4

According to a New York Times article published in November 2005,author Anna Bernasek asserts that a 10 percent increase in the price of electricity leads to a decline in the quantity demanded of about
A) 0.01 percent.
B) 3 percent.
C) 30 percent.
D) 300 percent.

Accepted Answer

According to the article, author Anna Bernasek asserts that a 10 percent increase in the price of electricity leads to a decline in the quantity demanded of about 3 percent.

Question 5

Elasticity of demand is closely related to the slope of the demand curve.The less 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

If buyers are less responsive to a change in price, it means that a change in price will result in a relatively small change in the quantity demanded. This leads to a steeper demand curve, meaning that a larger change in price is needed to achieve the same change in quantity demanded.

Question 6

For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?
A) The relevant time horizon is short.
B) The good is a necessity.
C) The market for the good is broadly defined.
D) There are many close substitutes for this good.

Accepted Answer

The high responsiveness of quantity demanded to the price increase indicates that this good has many close substitutes available in the market. When a small increase in price leads to a significant decrease in quantity demanded, it suggests that consumers have several options that they can switch to instead of buying this good at the higher price. Therefore, D is the best choice.

Question 7

If the price elasticity of demand for a good is 0.8,then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?
A) a 0.2 percent increase in the price of the good
B) a 3.2 percent increase in the price of the good
C) a 4.8 percent increase in the price of the good
D) a 5 percent increase in the price of the good

Accepted Answer

The price elasticity of demand measures the responsiveness of quantity demanded to changes in price. If the price elasticity of demand for a good is 0.8, a 1 percent change in price is expected to lead to a 0.8 percent change in quantity demanded in the opposite direction. Therefore, in order to cause a 4 percent decrease in quantity demanded, the price of the good must increase by 5 percent (4 percent divided by 0.8). Among the given choices, only option D, a 5 percent increase in the price of the good, is consistent with this.

Question 8

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 the quantity moves proportionately the same amount as price, the demand is said to be unit elastic and the price elasticity of demand is 1. This means that the percentage change in quantity demanded is equal to the percentage change in price, resulting in a constant price elasticity of demand of 1.

Question 9

According to a New York Times article published in November 2005,author Anna Bernasek asserts that a 10 percent increase in the price of gasoline leads to a decline in the quantity demanded of about
A) 0.01 percent.
B) 2 percent.
C) 20 percent.
D) 200 percent.

Accepted Answer

According to the article, author Anna Bernasek states that a 10 percent increase in the price of gasoline leads to a decline in the quantity demanded of about 2 percent.

Question 10

Figure 5-1 
-Refer to Figure 5-1.The demand curve representing the demand for a luxury good with several close substitutes is
A) A.
B) B.
C) C.
D) D.

Accepted Answer

The demand curve C represents the demand for a luxury good with several close substitutes as it has a relatively elastic demand (flatter slope) compared to the other curves, suggesting that consumers are sensitive to price changes and have alternatives to the product. A luxury good tends to have a higher price and is less essential, making it more likely that consumers will seek alternatives if the price of the product increases.

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 occurs when the percentage change in quantity demanded is exactly equal to the percentage change in price. This means that the elasticity of demand is equal to 1. So option A, which states that quantity demanded changes by the same percent as the price, is the correct answer.

Question 12

Jean-Paul says that he will spend exactly 75 cents a day on M&Ms,regardless of the price of M&Ms.Jean-Paul's demand for M&Ms is
A) perfectly elastic.
B) unit elastic.
C) perfectly inelastic.
D) None of the above answers is correct.

Accepted Answer

Jean-Paul's demand is unit elastic because he spends a constant amount (75 cents) regardless of the price, meaning the percentage change in quantity demanded is equal to the percentage change in price.

Question 13

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 through a given point, the greater the price elasticity of demand at that point. This is because a flatter demand curve indicates that a small change in price will result in a larger change in quantity demanded, indicating greater sensitivity to price changes and therefore a higher price elasticity of demand.

Question 14

The price elasticity of demand changes as we move along a
A) horizontal demand curve.
B) vertical demand curve.
C) linear,downward-sloping demand curve.
D) All of the above are correct.

Accepted Answer

The price elasticity of demand changes as we move along a linear, downward-sloping demand curve. This is because the slope of the demand curve determines the degree of responsiveness of quantity demanded to a change in price. At higher price points, the demand for the product is more sensitive to price changes, making it more elastic. As the price decreases, the demand becomes less elastic and more inelastic. Therefore, the answer is not A (horizontal demand curve) or B (vertical demand curve) as these curves have a constant price elasticity of demand.

Question 15

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?
A) The relevant time horizon is short.
B) The good is a luxury.
C) The market for the good is narrowly defined.
D) There are many close substitutes for this good.

Accepted Answer

The answer of For a particular good,a 10 percent increase...

Question 16

For a particular good,a 12 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?
A) There are many substitutes for this good.
B) The good is a necessity.
C) The market for the good is narrowly defined.
D) The relevant time horizon is long.

Accepted Answer

A 12 percent increase in price causing only a 3 percent decrease in quantity demanded suggests that the good is likely a necessity, as consumers are still willing to purchase it despite the price increase. If there were many substitutes or a narrow market, the decrease in quantity demanded would likely be greater. The relevant time horizon is not given, so D cannot be accurately assessed.

Question 17

As we move downward and to the right along a linear,downward-sloping demand curve,
A) slope and elasticity both remain constant.
B) slope changes but elasticity remains constant.
C) slope and elasticity both change.
D) slope remains constant but elasticity changes.

Accepted Answer

When moving downward and to the right along a linear, downward-sloping demand curve, the slope remains constant but the elasticity changes. This is because the slope represents the change in price for a given change in quantity demanded, while elasticity measures the responsiveness of quantity demanded to changes in price. As the quantity demanded decreases along the demand curve, buyers become less sensitive to price changes, leading to a decrease in elasticity.

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 responsive buyers are to a change in price. This indicates a higher elasticity of demand as buyers are more willing to adjust their quantity demanded in response to a change in price. Conversely, a steeper demand curve indicates lower elasticity of demand as buyers are less willing to adjust their quantity demanded in response to a change in price.

Question 19

The difference between slope and elasticity is that
A) slope is a ratio of two changes,and elasticity is a ratio of two percentage changes.
B) slope is a ratio of two percentage changes,and elasticity is a ratio of two changes.
C) slope measures changes in quantity demanded more accurately than elasticity.
D) none of the above;there is no difference between slope and elasticity.

Accepted Answer

Slope is a ratio of two changes, usually represented as rise over run or change in y over change in x. On the other hand, elasticity is a ratio of two percentage changes, typically represented as the percentage change in quantity demanded divided by the percentage change in price. Therefore, there is a clear distinction between slope and elasticity. Option B is incorrect because slope is not a ratio of two percentage changes. Option C is also incorrect because both slope and elasticity can accurately measure changes in quantity demanded, but they do so in different ways. Option D is incorrect because there is indeed a difference between slope and elasticity.

Question 20

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand
A) first becomes smaller,then larger.
B) always becomes larger.
C) always becomes smaller.
D) first becomes larger,then smaller.

Accepted Answer

When we move upward and to the left along a linear, downward-sloping demand curve, the price elasticity of demand always becomes larger. This is because the slope of the demand curve becomes steeper, resulting in a higher percentage change in quantity demanded for a given percentage change in price.

Quiz 5: Elasticity and Its Application

Demand is said to have unit elasticity if elasticity is

For a particular good,a 2 percent increase in price causes a 12 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

The smaller the price elasticity of demand,the

According to a New York Times article published in November 2005,author Anna Bernasek asserts that a 10 percent increase in the price of electricity leads to a decline in the quantity demanded of about

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

For a particular good,a 3 percent increase in price causes a 10 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

If the price elasticity of demand for a good is 0.8,then which of the following events is consistent with a 4 percent decrease in the quantity of the good demanded?

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

According to a New York Times article published in November 2005,author Anna Bernasek asserts that a 10 percent increase in the price of gasoline leads to a decline in the quantity demanded of about

Figure 5-1 -Refer to Figure 5-1.The demand curve representing the demand for a luxury good with several close substitutes is

Demand is said to be unit elastic if

Jean-Paul says that he will spend exactly 75 cents a day on M&Ms,regardless of the price of M&Ms.Jean-Paul's demand for M&Ms is

The flatter the demand curve through a given point,the

The price elasticity of demand changes as we move along a

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

For a particular good,a 12 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

As we move downward and to the right along a linear,downward-sloping demand curve,

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

The difference between slope and elasticity is that

When we move upward and to the left along a linear,downward-sloping demand curve,price elasticity of demand