Question 1

Price elasticity of demand for transportation generally is:
A) the same as price elasticity of the demand for bus tickets.
B) greater than price elasticity of the demand for bus tickets.
C) less than price elasticity of the demand for bus tickets.
D) greater than price elasticity of the demand for bus tickets when bus tickets are expensive,but less than price elasticity of the demand for bus tickets when the prices of bus tickets fall.

Accepted Answer

The more specifically defined the good,the more substitutes it has.While transportation generally has few substitutes,so low price elasticity of demand,a consumer can choose from among different specific types of transportation that are substitutes for each other.

Question 2

Suppose you have one hour to catch a flight to Miami for spring break.It takes 45 minutes to drive to the airport.Your car is almost out of gas;the price of gas at the closest gas station is higher than at the one on the other side of the town.To you,the price elasticity of demand for gas is likely to be ______ than it would be if you had several hours before the flight.
A) higher
B) more inelastic
C) more elastic
D) no different

Accepted Answer

When you have little time to seek substitutes,your demand will be less elastic.

Question 3

The following graph depicts demand. 
Refer to the figure above.The price elasticity of demand at point D is:
A) 5/2.
B) 1/2.
C) 2/5.
D) 2.

Accepted Answer

The price elasticity of demand at any point on a linear demand curve can be calculated as the ratio of the percentage change in quantity demanded to the percentage change in price. At point D, the price is $8 and the quantity demanded is 20. Moving vertically up to point E shows that the quantity demanded decreases to 16, which is a decrease of 20%. Moving horizontally to point C shows that the price increases to $10, which is an increase of 25%. Therefore, the price elasticity of demand at point D is (20%/25%) = 0.8, or 2/5.

Question 4

The following graph depicts demand. 
Refer to the figure above.At point D,demand is:
A) price inelastic.
B) price elastic.
C) unitary elastic.
D) perfectly price elastic.

Accepted Answer

The formula to use is (price/quantity)/slope.Here it is 2/10 times 2 = 2/5 (2 is the reciprocal of 0.5. ),less than one,so demand is price inelastic at that point.

Question 5

Suppose two demand curves have a point in common.With respect to price at that point,demand shown by the steeper curve will be _______ the less steep curve.
A) more elastic than
B) less elastic than
C) as elastic as
D) more likely to be unitary than

Accepted Answer

At any given price,the steeper demand will be the less price elastic demand.

Question 6

If the elasticity of demand for the latest American Idol CD is 1.4,this means:
A) few substitutes exist.
B) a 1% increase in the price leads to a 14% reduction in quantity demanded.
C) a 10% decrease in the price leads to a 140% increase in quantity demanded.
D) a 5% increase in the price leads to a 7% decrease in quantity demanded.

Accepted Answer

Demand for necessities is less price elastic than demand for non-necessities.

Question 7

The following graph depicts demand. 
Refer to the figure above.The price elasticity of demand at point B is:
A) 3/4.
B) 4/3.
C) 3.
D) 1/3.

Accepted Answer

The formula to use is (price/quantity)/slope.Here it is 4/6 × 2 = 4/3.(2 is the reciprocal of 0.5. )

Question 8

The following graph depicts demand. 
Refer to the figure above.The slope of the demand curve (if you ignore the negative sign)is:
A) 2.
B) 1.5.
C) 1.
D) 0.5.

Accepted Answer

The formula for slope is rise/run,here 1/2 or 0.5.

Question 9

Assume the price of gasoline doubles tonight and remains at that price for the next two years.The short-term price elasticity of demand for gasoline will be ______ when compared with the long-term price elasticity of demand for gasoline.
A) more elastic
B) larger in absolute value
C) the same
D) more inelastic

Accepted Answer

When you have little time to seek substitutes,your demand will be less elastic.

Question 10

The following graph depicts demand. 
Refer to the figure above.The price elasticity of demand at point C is:
A) 3/16.
B) 16/3.
C) 3/4.
D) 3/8.

Accepted Answer

The formula to use is (price/quantity)/slope.Here it is 3/8 × 2 = 3/4.(2 is the reciprocal of 0.5. )

Question 11

Demand tends to be _______ in the short run than in the long run.
A) more elastic
B) more inelastic
C) more volatile
D) less important

Accepted Answer

When consumers have more time to adapt to a price change,they are better able to find a substitute or make adjustments in consumption.

Question 12

If the quantity demanded of a good is Q when the price for the good is P,the price elasticity of demand for that good at that point is:
A) (P/Q)*(1/slope)
B) (Q/P)*(1/slope)
C) (P/Q)*(slope)
D) Q*P*(1/slope)

Accepted Answer

The formula to use is (price/quantity)/(1/slope).

Question 13

Economists have found that the price elasticity of demand for water is higher in the summer than in the winter.Why?
A) Winter is longer than summer,and price elasticity is lower over longer time horizons.
B) Winter is longer than summer,and price elasticity is higher over longer time horizons.
C) Winter water use tends to be for necessities like cleaning and cooking,and summer water use tends to be for both necessities and non-necessities,like gardening and recreation.
D) People take more vacations in the summer and so use less water at home.

Accepted Answer

Demand for necessities is less price elastic than demand for non-necessities.

Question 14

If the slope of the demand curve is -0.167,price is $8 and quantity demanded is 12 units,then demand for this good is:
A) perfectly elastic.
B) elastic.
C) unit elastic.
D) inelastic.

Accepted Answer

The formula to use is (price/quantity)/slope.Here it is 8/12 = approximately 0.667.Divided by slope of -0.167 yields approximately 4,which is greater than 1,or elastic.

Question 15

The following graph depicts demand. 
Refer to the figure above.The price elasticity of demand at point A is:
A) 5/2.
B) 5/8.
C) 2/5.
D) 8/5.

Accepted Answer

The formula to use is (price/quantity)/slope.Here it is 5/4 × 2 = 5/2.(2 is the reciprocal of 0.5. )

Question 16

The following graph depicts demand. 
Refer to the figure above.At point A,demand is:
A) price inelastic.
B) price elastic.
C) unitary elastic.
D) perfectly price elastic.

Accepted Answer

To find elasticity,use the formula (price/quantity)/slope.Here it is 5/4 × 2 = 5/2.(2 is the reciprocal of 0.5. )This is greater than one,so it is price elastic.

Question 17

Price elasticity of demand is _______ the slope of the demand curve.
A) not related to
B) inversely related to
C) positively related to
D) equal to

Accepted Answer

At any given price,the steeper demand will be the less price elastic demand.

Question 18

If the slope of the demand curve is -1.4,price is $5 and quantity demanded is 13 units,the price elasticity of demand is:
A) 0.27.
B) 0.38.
C) 1.4.
D) 1.8.

Accepted Answer

The formula to use is (price/quantity)/slope.Here it is 5/13 = approximately 0.3846.Divided by slope of -1.4 yields approximately 0.27.

Question 19

Suppose that the short run price elasticity of demand for electricity is 0.03 and the long run price elasticity of demand is 1.2.One would classify the short run elasticity as being ___________ and the long run elasticity as being ____________.
A) elastic;elastic
B) elastic;inelastic
C) inelastic;unitary elastic
D) inelastic;elastic

Accepted Answer

If the percentage change in quantity is greater than the percentage change in price,then the elasticity will be greater than one.When elasticity is greater than one,demand is price elastic.

Question 20

The reason a brand name item (e.g. ,Tyson chicken)has a larger price elasticity than a class of items (e.g. ,chicken),is because:
A) there are fewer substitutes for Tyson chicken.
B) it takes a lot of time to adjust to a substitute brand of chicken.
C) the share of income spent on "chicken" is larger than spent on "Tyson Chicken".
D) there are fewer substitutes for chicken than for Tyson chicken.

Accepted Answer

There are other brands of chicken that serve as substitutes.

Quiz 4: Elasticity

Price elasticity of demand for transportation generally is:

The following graph depicts demand. Refer to the figure above.The price elasticity of demand at point D is:

The following graph depicts demand. Refer to the figure above.At point D,demand is:

Suppose two demand curves have a point in common.With respect to price at that point,demand shown by the steeper curve will be _______ the less steep curve.

If the elasticity of demand for the latest American Idol CD is 1.4,this means:

The following graph depicts demand. Refer to the figure above.The price elasticity of demand at point B is:

The following graph depicts demand. Refer to the figure above.The slope of the demand curve (if you ignore the negative sign) is:

Assume the price of gasoline doubles tonight and remains at that price for the next two years.The short-term price elasticity of demand for gasoline will be ______ when compared with the long-term price elasticity of demand for gasoline.

The following graph depicts demand. Refer to the figure above.The price elasticity of demand at point C is:

Demand tends to be _______ in the short run than in the long run.

If the quantity demanded of a good is Q when the price for the good is P,the price elasticity of demand for that good at that point is:

Economists have found that the price elasticity of demand for water is higher in the summer than in the winter.Why?

If the slope of the demand curve is -0.167,price is $8 and quantity demanded is 12 units,then demand for this good is:

The following graph depicts demand. Refer to the figure above.The price elasticity of demand at point A is:

The following graph depicts demand. Refer to the figure above.At point A,demand is:

Price elasticity of demand is _______ the slope of the demand curve.

If the slope of the demand curve is -1.4,price is $5 and quantity demanded is 13 units,the price elasticity of demand is:

Suppose that the short run price elasticity of demand for electricity is 0.03 and the long run price elasticity of demand is 1.2.One would classify the short run elasticity as being _ and the long run elasticity as being __.

The reason a brand name item (e.g. ,Tyson chicken) has a larger price elasticity than a class of items (e.g. ,chicken) ,is because: