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The price elasticity of demand measures how:

a) much the price goes down.

b) responsive the quantity demanded change is in relation to the price change. .

c) much the equilibrium price goes up.

d) responsive the price change is in relation to an income change.

 

Which of the following best describes the price elasticity of demand?

a) The price elasticity of demand measures the responsiveness of the change in the slope of the demand curve to a change in the slope of the price.

b) The price elasticity of demand measures the change in the price versus a change in the quantity demanded.

c) The price elasticity of demand measures the change in the slope of the demand curve versus a change in the quantity demanded.

d) The price elasticity of demand measures the responsiveness of the change in the quantity demanded to a change in the price. .

 

Suppose the price of gasoline increases 10% and quantity of gasoline demanded in drops 5% per day. Demand for gasoline is:

a) price elastic.

b) perfectly price inelastic.

c) price unit-elastic.

d) price inelastic. .

 

Which of the following is true regarding a price-elastic demand curve (very responsive to price change)?

a) All of the answers are correct. .

b) The absolute value of the price elasticity is greater than 1.

c) The percent changes in the quantity exceed the percent changes in the price for any small change in price.

d) Total revenue increases when the price falls.

 

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:

a) price-elastic.

b) price-inelastic. .

c) perfectly price-elastic.

d) inferior.

 

If total revenue goes up when the price falls, demand is said to:

a) be price-inelastic.

b) be price-elastic. .

c) be price unit-elastic.

d) have positive price elasticity.

 

If a good has a price inelastic demand (not quite responsive to price), then which of the following is likely to be characteristic of this good?

a) All of the answers are correct. .

b) The good is a necessity.

c) Consumers do not have much time to adjust to market changes.

d) Consumers spend a small percentage of their income on the good.

 

An important determinant of the price elasticity of demand is the:

a) level of technology.

b) gas price.

c) availability of close substitutes. .

d) quantity of the good supplied.

 

We predict the long-run price elasticity of demand of gasoline would be ________ the short-run price elasticity of demand of gasoline.

a) not comparable to

b) equal to

c) less than

d) larger than.

 

The price elasticity of supply is computed as the percentage change in the:

a) quantity supplied divided by the percentage change in consumer income.

b) price divided by the percentage change in the quantity supplied.

c) quantity supplied divided by the percentage change in the quantity demanded.

d) quantity supplied divided by the percentage change in the price.

 

If the quantity demanded changes by 15% and the price of a good increases by 20%, then the price elasticity of demand is equal to:

a) approximately 1.33.

b) approximately 0.33.

c) 0.75.

d) 1

 

The price elasticity of demand is measured by:

a) dividing the percentage change in the price by the percentage change in the quantity demanded.

b) dividing the percentage change in the quantity demanded by the percentage change in the price.

c) adding the percentage change in the price to the percentage change in the quantity demanded.

d) subtracting the percentage change in the price from the percentage change in the quantity demanded.

 

Suppose the price elasticity of demand for cheeseburgers equals 0.37. This means the overall demand for cheeseburgers is:

a) price unit-elastic.

b) price inelastic.

c) price elastic.

d) perfectly price inelastic.

 

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

a) zero elastic.

b) price unit elastic.

c) price inelastic.

d) price elastic.

 

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:

a) perfectly price-elastic.

b) inferior.

c) price-elastic.

d) price-inelastic.

 

If total revenue goes up when the price falls, demand is said to:

 

a) have positive price elasticity.

b) be price-inelastic.

c) be price unit-elastic.

d) be price-elastic.

 

If a good has a price inelastic demand (not quite responsive to price), then which of the following is likely to be characteristic of this good?

a) The good is a necessity.

b) Consumers do not have much time to adjust to market changes

c) All of the answers are correct.

d) Consumers spend a small percentage of their income on the good.

 

An important determinant of the price elasticity of demand is the:

a) quantity of the good supplied

b) level of technology.

c) availability of close substitutes. 

d) gas price.

 

We predict the long-run price elasticity of demand of gasoline would be ________ the short-run price elasticity of demand of gasoline.

a) equal to

b) not comparable to

c) less than

d) larger than

 

The price elasticity of supply is computed as the percentage change in the:

a) price divided by the percentage change in the quantity supplied.

b) quantity supplied divided by the percentage change in consumer income.

c) quantity supplied divided by the percentage change in the quantity demanded.

d) quantity supplied divided by the percentage change in the price.

 

Supply and Demand

 

The quantity demanded for an item is the amount of that good or service consumers are willing and able to buy at a specific price during a specific time period, with which of the following important qualifications?

Everything else held constant.”

 

 

"Fill in the blank" question: select the correct answer.

Price, time period, ability of consumers to buy, and willingness of consumers to buy all affect

Quantity Demanded

 

The amount of a good or service sellers are willing and able to sell at a specific price during a certain time period is the

quantity supplied.

 

"Fill in the blank" question: select the correct answer.

Shift factors for the supply curve include changes in price of productive resources. These include all of the following, except

Time

 

True or false. A market-clearing price only occurs in a market in equilibrium.

True

 

If a shortage exists in the market, the invisible hand will manipulate prices to maintain equilibrium by

increasing prices and thereby raising future quantity supplied.

 

The primary functions of price in a free market are to inform and direct consumers and firms.

False

 

Price ceilings can cause a shortage if they are set

below the market-clearing price.

 

Question 11 of 27

"Fill in the blank" question: select the correct answer.

A market clearing condition occurs when price floors are set

At or below the equilibrium price

 

True or false. Unintended market conditions, including black markets and shortages, can occur through the price restraint

of a price ceiling set above the market-clearing price.

False

 

When comparing a good over a long time to the same good over a short period of time, the longer time period will demonstrate an elasticity of demand that is

higher

"Fill in the blank" question: select the correct answer.

If the price elasticity of demand for a product is zero regardless of pricing changes, the product is said to be

Perfect inelastic

 

True or false. Price elasticity of demand generally increases when a product’s price is a smaller percentage of available spending power.

True

 

If income has changed by +40% and demand has changed by -30%, then the overall Income elasticity of demand is (type in your answer):

-0.75

 

"Fill in the blank" question: select the correct answer.

A new compact car is released, and the income elasticity of demand is found to be equal to -0.2. In this case, the good is

An inferior good

 

True or false. A product with low income elasticity will be affected less by falling wages than a product with high income elasticity.

True

 

Assume that peanut butter quantity demanded falls 8% and jelly prices fall 4%. In this case, the cross elasticity of

demand between peanut butter and jelly is what?

2.0

 

"Fill in the blank" question: select the correct answer.

Assume that jam and jelly have a cross elasticity of 0.8. This means that these goods are

Substitutes

 

True or false. For two complementary products A and B, demand for complementary product B has an inverse

relationship to price changes in complementary product A.

True

 

Price elasticity of supply is different from price elasticity of demand because

higher prices will yield higher total revenues regardless of supply elasticity.

 

 

"Fill in the blank" question: select the correct answer.

If mango prices rise by 10% and 8% more mangoes are supplied, the price elasticity of supply is about

0.8

 

True or false. Price elasticity of supply will not change over time.

False

 

Jana’s Jelly Jars cost $5.00 each, and Jana has standing orders for 2,000 jars per month. What is the total revenue generated each month?

$10,000.00

 

"Fill in the blank" question: select the correct answer.

Assume Jana has lost some market share due to competition, and she’s having trouble covering her costs.

Also assume that donuts are a good with elastic demand in your market. Jana has asked you if she should raise

or lower prices to increase total revenues. Jana should

Lower prices

 

True or false. Raising prices on price-inelastic products will increase total revenues.

True

 

The quantity demanded for an item is the amount of that good or service consumers are willing and able to buy at a

specific price during a specific time period, with which of the following important qualifications?

Everything else held constant.”

 

Price, time period, ability of consumers to buy, and willingness of consumers to buy all affect

Quantity Demanded

 

The amount of a good or service sellers are willing and able to sell at a specific price during a certain time period is the

quantity supplied.

 

"Fill in the blank" question: select the correct answer.

Shift factors for the supply curve include changes in price of productive resources. These include all of the following, except

Time

 

True or false. A market-clearing price only occurs in a market in equilibrium.

True

 

If a shortage exists in the market, the invisible hand will manipulate prices to maintain equilibrium by

increasing prices and thereby raising future quantity supplied.

 

True or false. The primary functions of price in a free market are to inform and direct consumers and firms.

False

 

Price ceilings can cause a shortage if they are set

below the market-clearing price.

 

Question 11 of 27

"Fill in the blank" question: select the correct answer.

A market clearing condition occurs when price floors are set

At or below the equilibrium price

 

True or false. Unintended market conditions, including black markets and shortages, can occur through the price

restraint of a price ceiling set above the market-clearing price.

False

 

When comparing a good over a long time to the same good over a short period of time, the longer time period

will demonstrate an elasticity of demand that is

higher

"Fill in the blank" question: select the correct answer.

If the price elasticity of demand for a product is zero regardless of pricing changes, the product is said to be

Perfect inelastic

 

True or false. Price elasticity of demand generally increases when a product’s price is a smaller percentage of available spending power.

True

 

If income has changed by +40% and demand has changed by -30%, then the overall Income elasticity of demand is (type in your answer):

-0.75

 

"Fill in the blank" question: select the correct answer.

A new compact car is released, and the income elasticity of demand is found to be equal to -0.2. In this case, the good is

An inferior good

 

True or false. A product with low income elasticity will be affected less by falling wages than a product with high income elasticity.

True

 

Assume that peanut butter quantity demanded falls 8% and jelly prices fall 4%. In this case, the cross elasticity of demand

between peanut butter and jelly is what?

2.0

 

"Fill in the blank" question: select the correct answer.

Assume that jam and jelly have a cross elasticity of 0.8. This means that these goods are

Substitutes

 

True or false. For two complementary products A and B, demand for complementary product B has an inverse

relationship to price changes in complementary product A.

True

 

Price elasticity of supply is different from price elasticity of demand because

higher prices will yield higher total revenues regardless of supply elasticity.

 

 

"Fill in the blank" question: select the correct answer.

If mango prices rise by 10% and 8% more mangoes are supplied, the price elasticity of supply is about

0.8

 

True or false. Price elasticity of supply will not change over time.

False

 

Jana’s Jelly Jars cost $5.00 each, and Jana has standing orders for 2,000 jars per month. What is the total revenue generated each month?

$10,000.00

 

"Fill in the blank" question: select the correct answer.

Assume Jana has lost some market share due to competition, and she’s having trouble covering her costs.

Also assume that donuts are a good with elastic demand in your market. Jana has asked you if she should raise or

lower prices to increase total revenues. Jana should

Lower prices

 

True or false. Raising prices on price-inelastic products will increase total revenues.

True