Elasticity

Question 1

What is being measured when the percentage change in quantity demanded is divided by the percentage change in price?

Answer 1

Price elasticity of demand

Question 2

Why are percentages used to calculate price elasticity of demand?

Answer 2

So that the type of units can be ignored.

Question 3

If a 10% increase in price leads to a 5% decrease in the quantity demand, the demand for the good is said to be _____.

Answer 3

Inelastic

Question 4

How is a buyer’s responsiveness to price changes measured?

Answer 4

By the price elasticity of demand coefficient

Question 5

______ is the ease of switching from one good to another.

Answer 5

Substitutability

Question 6

What term describes demand when the quantity demanded is NOT very responsive to changes in price?

Answer 6

Inelastic

Question 7

What is being measured when the percentage change in quantity demanded is divided by the percentage change in price?

Answer 7

Price elasticity of demand

Question 8

True or false: A product that is narrowly defined is less elastic than a product that is broadly defined

Answer 8

False

Question 9

Which of the following is a determinant of the price elasticity of demand?

Answer 9

Substitutability

Question 10

The proportion of income allocated to a particular good or service is a determinant of:

Answer 10

the price elasticity of demand

Question 11

When the time period under consideration is shorter, product demand is generally more _____.

Answer 11

Inelastic

Question 12

The amount of time that has passed since a price change does not affect elasticity.

Answer 12

False

Question 13

What term describes demand when the percentage change in quantity is exactly the same as the percentage change in price?

Answer 13

Unitary elasticity

Question 14

Which Greek letter is used to represent elasticity?

Answer 14

Epsilon ε

Question 15

Why will the coefficient for the price elasticity of demand always be a negative number?

Answer 15

Because price and quantity demanded are inversely related.

Question 16

Which of the following will make the demand for a product more inelastic?

Answer 16

If it is a small percentage of income.

Question 17

Demand for Reebok shoes is more ______ than overall demand for shoes.

Answer 17

Elastic

Question 18

If the original price was $30 and the new price is $50 what is the percentage change in price (use the average method)?

Answer 18

50

Question 19

A brand name product is more _____ defined than a product in general and thus has a more ______ demand

Answer 19

narrowly; elastic

Question 20

It has been determined that the price elasticity of demand for university tuition is 0.85. The school is considering a tuition increase to help off set rising costs. What would you advise the school to do?

Answer 20

Increase the tuition since that will lead to an increase in total revenue.

Question 21

A demand curve that is drawn relatively steep illustrates a(n) _____ demand.

Answer 21

Inelastic

Question 22

A demand curve that is drawn as a rectangular parabola illustrates a(n) _____ demand.

Answer 22

unit elastic

Question 23

If a change in price and total revenue move in the same direction, then demand is _____

Answer 23

Inelastic

Question 24

A demand curve that is drawn relatively flat illustrates a(n) _____ demand.

Answer 24

Elastic

Question 25

You work for a car company who are considering raising the price of their new cars. You find that the price elasticity of demand is 2.0, what would you advise them to do?

Answer 25

Decrease the price since they will sell more cars and this will lead to an increase in total revenue.

Question 26

A relatively inelastic demand (but is not perfectly inelastic) is drawn as a ______ line.

Answer 26

steep downward sloping

Question 27

Slope and elasticity are not the same for a demand curve.

Answer 27

True

Question 28

Over the inelastic range of the demand curve, a decrease in price will lead to a(n) ____.

Answer 28

decrease in total revenue

Question 29

If demand is unit elastic and the price increases, what will happen to total revenue?

Answer 29

It will not change

Question 30

At the mid-point of a straight-line demand curve, the price elasticity of demand has a value of

Answer 30

One

Question 31

A relatively elastic demand is drawn as a ______ line.

Answer 31

shallow downward sloping

Question 32

True or false: Total revenue is maximized at the mid-point of a straight-line demand curve.

Answer 32

True

Question 33

Moving up and down a demand curve changes the elasticity of demand. True false question.

Answer 33

True

Question 34

Over the elastic range of the demand curve, a decrease in price will lead to a(n) ____.

Answer 34

increase in total revenue

Question 35

At the lower half of any straight line demand curve the demand is _____.

Answer 35

Inelastic

Question 36

A demand curve that is drawn as a vertical lineillustrates a(n) _____ demand.

Answer 36

Perfectly inelastic

Question 37

At what point on a straight-line demand curve is total revenue maximized?

Answer 37

At mid-point

Question 38

Originally the price of a bottle of wine was $9 and 1 million bottles are sold. The price increases to $10 and the quantity of wine sold falls to 900,000 bottles. The change in total revenue is _____ and the elasticity of demand is _____.

Answer 38

$0; unit elastic

Question 39

True or false: The price elasticity of demand will change as you move along the demand curve.

Answer 39

True

Question 40

At the upper half of any straight line demand curve, the demand is _____.

Answer 40

Elastic

Question 41

Originally the price of gas is $0.90 per litre and 1 million litres of gas are sold. The price increases to $1.00 and the quantity of gas sold falls to 850,000 litres. The change in total revenue is _____ and the elasticity of demand is _____.

Answer 41

- $50,000; elastic

Question 42

A tax on a specific product such as alcohol is often referred to as a(n) _____ tax.

Answer 42

Excise

Question 43

If the demand for a product is inelastic then the major burden of a sales tax is on the producer.

Answer 43

True

Question 44

The steeper a demand curve, the higher the percentage of tax paid by consumers.

Answer 44

True

Question 45

Which of the following describes the relationship between inelastic demand and the burden of a tax on a product?

Answer 45

The more inelastic the demand for a product, the greater the burden of the tax on the consumer.

Question 46

Governments place heavy excise taxes on certain goods because

Answer 46

demand for certain products is relatively inelastic so the tax does not reduce sales by much and tax revenue stays high.

Question 47

Which of the following describes the relationship between demand elasticity and the burden of a tax?

Answer 47

The more elastic the demand for a product, the more the burden of a tax on the product falls on producers.

Question 48

The more inelastic a demand curve, the higher the percentage of tax paid by consumers.

Answer 48

True

Question 49

If the demand for a product is inelastic, then the major burden of a sales tax is on the ________

Answer 49

Consumer

Question 50

Since demand for certain products is relatively inelastic, a tax on these products does not reduce sales by much and tax revenues stay high. This is the reason why:

Answer 50

governments impose heavy excise taxes on these products

Question 51

Originally the price of gas is $0.90 per litre and 1 million litres of gas are sold. The price increases to $1.00 and the quantity of gas sold falls to 950,000 litres. The change in total revenue is _____ and the elasticity of demand is _____.

Answer 51

+ $50,000; inelastic

Question 52

Illegal drugs, such as cocaine and heroin, are considered to have what kind of price elasticity of demand?

Answer 52

Inelastic

Question 53

Which of the following describes the relationship between inelastic demand and the burden of a tax on a product?

Answer 53

The more inelastic the demand for a product, the greater the burden of the tax on the consumer.

Question 54

What will happen to the crime rate when the price of illegal drugs increases substantially

Answer 54

The crime rate will go up since drug users will resort to other crimes to pay for the higher priced drugs.

Question 55

Gasoline, alcohol, tobacco products like cigarettes, and cell-phone usage are all products that are considered to have ______ demands and therefore are taxed heavily because of their ability to generate ______.

Answer 55

inelastic; tax revenues

Question 56

In the market for illegal drugs, what happens when there is a crackdown on these activities?

Answer 56

Supply shifts to the left and since demand is inelastic the price increases considerably.

Question 57

Why might a bad harvest be good for farmers?

Answer 57

Because their total revenue increases a lot.

Question 58

Basic farm commodities, such as wheat, are considered to have what kind of price elasticity of demand?

Answer 58

Inelastic

Question 59

What is being measured when the change in quantity supplied is divided by the change in price?

Answer 59

Elasticity of supply

Question 60

Suppose that a company will produce 100 cars per week at a price of $100,000 each but would produce 300 per week at $140,000. The co-efficient of the elasticity of supply is

Answer 60

3

Question 61

A relatively elastic supply (but is not perfectly inelastic) is drawn as a ______ line.

Answer 61

flat upward sloping

Question 62

What is the elasticity of supply for a firm that uses complicated technology?

Answer 62

Inelastic

Question 63

The elasticity of supply shows the responsiveness of supply of a good or service when the ______ changes

Answer 63

Price

Question 64

Why is the supply curve more elastic in the long run than in the short run?

Answer 64

Because firms have time to adjust their plant sizes

Question 65

Suppose that a company will produce 100 cars per week at a price of $90,000 each but would produce 300 per week at $110,000. The co-efficient of the elasticity of supply is

Answer 65

5

Question 66

A supply curve that is drawn relatively flat illustrates a(n) _____ supply.

Answer 66

Elastic

Question 67

What is the shape of the market period supply curve?

Answer 67

A vertical straight line.

Question 68

A relatively inelastic supply (but is not perfectly inelastic) is drawn as a ______ line.

Answer 68

steep upward sloping

Question 69

What are the shapes of the three supply curves for the three different time periods?

Answer 69

A straight vertical line. A steep upward-sloping curve A shallow upward-sloping curve

Question 70

The steeper the supply curve, the (more/less) | ______(one word) is the supply elasticity.

Answer 70

Less

Question 71

Ticket scalping (the buying and reselling of tickets), from the sellers' perspective, is an application of _____.

Answer 71

price elasticity of supply

Question 72

When supply is fixed, the price of the good is determined by the government.

Answer 72

False - the price will be determined by demand

Question 73

A supply curve that is drawn relatively flat illustrates a(n) _____ supply.

Answer 73

Elastic

Question 74

The income elasticity of demand shows the responsiveness of demand for a good or service when an individual's changes.

Answer 74

Income

Question 75

As income increases, what will happen to the demand curve for an inferior good?

Answer 75

It will shift leftward.

Question 76

For a sporting event, where the supply is fixed, what determines the price of the tickets?

Answer 76

The demand

Question 77

The income elasticity of demand measures the responsiveness of demand to a change in _____.

Answer 77

Earnings

Question 78

If the income elasticity of demand is 1.5, what is demand?

Answer 78

Income elastic

Question 79

A product with an income elasticity of +0.67 would be considered:

Answer 79

Income inelastic

Question 80

As income increases, what will happen to the demand curve for a normal good?

Answer 80

It will shift rightward.

Question 81

The cross elasticity of demand measures _____.

Answer 81

the responsiveness of quantity demanded of one product to a change in the price of some other product

Question 82

If the income elasticity of demand is -0.5, what kind of product is this?

Answer 82

An inferior product

Question 83

The percentage change in quantity demanded of good X divided by the percentage change in the price of product Y is known as the:

Answer 83

cross elasticity of demand

Question 84

If coffee and tea are substitutes, what can you conclude about their elasticity from this information?

Answer 84

Their cross price elasticity will be a positive number.

Question 85

If coffee and cream are complements, what can you conclude about their elasticity from this information?

Answer 85

Their cross price elasticity will be a negative number.

Question 86

If coffee and cream are complements, what can you conclude about their elasticity from this information?

Answer 86

Their cross price elasticity will be a negative number.