Question 1

The arc price elasticity of demand method is best used for:
A) small changes in price.
B) large changes in quantity demanded.
C) large changes in both price and quantity demanded.
D) infinitely large changes in price.

Accepted Answer

The arc price elasticity of demand method is most suitable for measuring the responsiveness of quantity demanded to small changes in price. This method calculates the elasticity between two points on a demand curve, where the price and quantity values are not too far apart from each other. It is not appropriate for measuring large changes in either price or quantity demanded, and certainly not for infinitely large changes in price.

Question 2

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, this indicates that, if other things are unchanged, the price elasticity of demand is:
A) 0.
B) -0.5.
C) -1.
D) -2.

Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. If the quantity demanded does not change when the price changes, it indicates that the demand is perfectly inelastic, which is represented by an elasticity of 0.

Question 3

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:
A) 0.
B) -0.5.
C) -1.
D) -2.

Accepted Answer

The answer of If the price of chocolate-covered peanuts decreases...

Question 4

Use the following to answer question(s): Demand for Shirts
 
-(Exhibit: Demand for Shirts) The price elasticity of demand for the segment EF is:
A) -1.3.
B) -1.
C) -0.7.
D) -0.33.

Accepted Answer

The answer of Use the following to answer question(s): Demand...

Question 5

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt.Hence, the absolute value of the price elasticity of demand is:
A) greater than zero but less than 1.
B) equal to 1.
C) greater than 1 but less than 3.
D) greater than 3.

Accepted Answer

The price elasticity of demand (PED) is calculated using the formula: PED = (% Change in Quantity Demanded) / (% Change in Price). Here, the quantity demanded changes from 10 dozen (120) shirts to 15 dozen (180) shirts, which is a 50% increase. The price changes from $4 to $3, which is a 25% decrease. Therefore, PED = 50% / 25% = 2, which is greater than 1 but less than 3.

Question 6

The price elasticity of a demand curve with a constant slope:
A) is equal to the slope.
B) is greater than the slope.
C) is less than the slope.
D) increases in absolute value as the price rises.

Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. For a demand curve with a constant slope, the price elasticity of demand increases in absolute value as we move up the curve (i.e., as the price rises), because the percentage change in quantity demanded becomes larger relative to the percentage change in price.

Question 7

Use the following to answer question(s): Demand for Shirts
 
-(Exhibit: Demand for Shirts) The price elasticity of demand for the segment FG is:
A) 0.
B) 0.09.
C) -0.5.
D) greater than 1 (absolute value).

Accepted Answer

The answer of Use the following to answer question(s): Demand...

Question 8

If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from 180 bags to 220 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:
A) -0.5.
B) -1.
C) -2.
D) greater than 2 (absolute value).

Accepted Answer

Price elasticity of demand = % change in quantity demanded / % change in price
% change in quantity demanded = (New quantity - Old quantity) / Old quantity *100
% change in price = (New price - Old price) / Old price * 100
Using the given values, we get:
% change in quantity demanded = (220-180)/180 * 100 = 22.22%
% change in price = (0.95-1.05)/1.05 * 100 = -9.52%
Price elasticity of demand = 22.22/-9.52 = -2.33
Since the price elasticity of demand is greater than 2 (in absolute value), the demand for chocolate-covered peanuts is elastic, meaning that a small change in price leads to a proportionate change in quantity demanded.

Question 9

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:
A) -0.5.
B) -1.
C) -2.
D) greater than 2 (absolute value).

Accepted Answer

The price elasticity of demand (PED) is calculated using the formula: PED = (% change in quantity demanded) / (% change in price). Here, the % change in quantity demanded is (400 - 0) / 0 = infinity (or a very large number since the initial quantity was 0), and the % change in price is (0.90 - 1.10) / 1.10 = -0.18 (or -18%). Thus, the PED is a very large negative number, indicating an elasticity greater than 2 in absolute value.

Question 10

Suppose the demand curve has a slope equal to negative 1.The price elasticity of demand at any point on this demand curve is:
A) infinite.
B) equal to zero.
C) greater than 1, but less than infinite.
D) not described by any of the above.

Accepted Answer

The price elasticity of demand depends on both the slope of the demand curve and the price-quantity combination. A slope of -1 does not directly translate to a specific elasticity value without additional information about the price and quantity.

Question 11

The concept of price elasticity of demand is most closely related to:
A) the law of demand.
B) the equilibrium price.
C) the equilibrium quantity.
D) a shift in the demand curve.

Accepted Answer

The concept of price elasticity of demand is directly related to the law of demand, which states that as prices increase, demand decreases. Price elasticity of demand measures the responsiveness of demand to changes in price, indicating how much demand will change in response to a change in price.

Question 12

The concept of price elasticity of demand is most closely related to:
A) the equilibrium price.
B) the equilibrium quantity.
C) a movement along the demand curve.
D) a shift in the demand curve.

Accepted Answer

Price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good, which is represented by a movement along the demand curve, not a shift in the curve itself.

Question 13

Price elasticity of demand is computed as the arc elasticity by:
A) dividing the slope of the demand curve by the average value of each variable between two points.
B) dividing the slope of the demand curve by the average value of each variable at one point.
C) calculating percentage changes relative to the value of one variable at one point.
D) calculating percentage changes relative to the average value of each variable between two points.

Accepted Answer

Arc elasticity of demand is calculated by taking the percentage change in quantity demanded and dividing it by the percentage change in price, with both percentage changes calculated relative to the average values of quantity and price between two points.

Question 14

Use the following to answer question(s): Demand for Shirts
 
-(Exhibit: Demand for Shirts) The price elasticity of demand for the segment AB is:
A) -13.
B) -11.
C) -0.91.
D) -0.1.

Accepted Answer

The answer of Use the following to answer question(s): Demand...

Question 15

The price elasticity of a demand curve with a constant slope:
A) is equal to the slope.
B) is greater than the slope.
C) is less than the slope.
D) decreases in absolute value as quantity demanded rises.

Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. For a demand curve with a constant slope, the price elasticity of demand decreases in absolute value as one moves down the curve (i.e., as quantity demanded rises), because the percentage change in quantity demanded becomes smaller relative to the percentage change in price.

Question 16

Use the following to answer question(s): Demand for Shirts
 
-(Exhibit: Demand for Shirts) The price elasticity of demand for the segment DE is:
A) greater than 1 (absolute value).
B) -1.
C) -0.7.
D) -0.3.

Accepted Answer

The answer of Use the following to answer question(s): Demand...

Question 17

Use the following to answer question(s): Demand for Shirts
 
-(Exhibit: Demand for Shirts) The price elasticity of demand for the segment BC is:
A) greater than 3.33 (absolute value).
B) -3.33.
C) -3.
D) -0.33.

Accepted Answer

The answer of Use the following to answer question(s): Demand...

Question 18

Use the following to answer question(s): Demand for Shirts
 
-(Exhibit: Demand for Shirts) The price elasticity of demand for the segment CD is:
A) greater than 1 (absolute value).
B) -1.
C) -0.71.
D) -0.29.

Accepted Answer

According to the exhibit, the demand curve for segment CD is relatively flat, indicating that a small change in price will result in a relatively large change in quantity demanded. This is characteristic of elastic demand, which is defined as having a price elasticity of demand greater than 1 (absolute value). Therefore, the correct answer is A.

Question 19

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 180 bags to 220 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:
A) 0.
B) -0.5.
C) -1.
D) -2.

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Using the midpoint method, we have:

%ΔQ = [(220-180)/((220+180)/2)]*100% = 22.22%
%ΔP = [(0.90-1.10)/((0.90+1.10)/2)]*100% = -18.18%

Therefore, the price elasticity of demand is:

|E| = %ΔQ/|%ΔP| = 22.22% / 18.18% = 1.22

Since the price elasticity of demand is greater than 1, we can conclude that the demand for chocolate-covered peanuts is elastic. More specifically, a 1% decrease in price leads to a 1.22% increase in quantity demanded. Therefore, the correct answer is C.

Question 20

Calculating percentage changes relative to the average value of each variable between two points is:
A) slope elasticity.
B) arc elasticity.
C) median elasticity.
D) differential elasticity.

Accepted Answer

Arc elasticity measures the percentage change in a variable relative to the average value of that variable between two points. It is used when there is a significant change in price or quantity along the demand curve. Therefore, B is the best choice.

Quiz 5: Elasticity: a Measure of Response

The arc price elasticity of demand method is best used for:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, this indicates that, if other things are unchanged, the price elasticity of demand is:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

Use the following to answer question(s) : Demand for Shirts -(Exhibit: Demand for Shirts) The price elasticity of demand for the segment EF is:

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt.Hence, the absolute value of the price elasticity of demand is:

The price elasticity of a demand curve with a constant slope:

Use the following to answer question(s) : Demand for Shirts -(Exhibit: Demand for Shirts) The price elasticity of demand for the segment FG is:

If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity demanded increases from 180 bags to 220 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 0 bags to 400 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

Suppose the demand curve has a slope equal to negative 1.The price elasticity of demand at any point on this demand curve is:

The concept of price elasticity of demand is most closely related to:

The concept of price elasticity of demand is most closely related to:

Price elasticity of demand is computed as the arc elasticity by:

Use the following to answer question(s) : Demand for Shirts -(Exhibit: Demand for Shirts) The price elasticity of demand for the segment AB is:

The price elasticity of a demand curve with a constant slope:

Use the following to answer question(s) : Demand for Shirts -(Exhibit: Demand for Shirts) The price elasticity of demand for the segment DE is:

Use the following to answer question(s) : Demand for Shirts -(Exhibit: Demand for Shirts) The price elasticity of demand for the segment BC is:

Use the following to answer question(s) : Demand for Shirts -(Exhibit: Demand for Shirts) The price elasticity of demand for the segment CD is:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 180 bags to 220 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

Calculating percentage changes relative to the average value of each variable between two points is: