Question 1

The demand for a good tends to be more elastic:

Accepted Answer

A)  the longer the period of time
B)  the greater the availability of close substitutes
C)  the narrower the definition of the market
D)  all of the above are correctE) A) and C)
F) A) and B)

Question 2

If you think good wine is a necessity but cheese is a luxury, then your demand for wine will be more ______ than your demand for cheese:

Accepted Answer

A)  elastic
B)  inelastic
C)  unit elastic
D)  strongE) B) and C)
F) None of the above

Question 3

Alice says that she likes banana splits but if the price changed, she wouldn't buy them anymore.If this is the case:

Accepted Answer

A)  Alice's demand for banana splits is perfectly inelastic
B)  Alice's price elasticity of demand for banana splits is one
C)  Alice's income elasticity of demand for banana splits is negative
D)  none of the answers is correctE) None of the above
F) All of the above

Question 4

If the price of forest-products rises, the price elasticity of supply will be more responsive in the long run than in the short run.

Accepted Answer

A) True 
 B)False

Question 5

Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450.Using the midpoint method, the price elasticity of demand for X in the given price range is:

Accepted Answer

A)  1.40
B)  1.00
C)  0.40
D)  0.29E) C) and D)
F) B) and C)

Question 6

Economists compute the price elasticity of demand as the:

Accepted Answer

A)  percentage change in the price divided by the percentage change in quantity demanded
B)  percentage change in the quantity demanded divided by the percentage change in price
C)  change in quantity demanded divided by the change in the price
D)  percentage change in the quantity demanded divided by the percentage change in incomeE) A) and B)
F) B) and C)

Question 7

When Anna was studying at university, she had a monthly income of $900 and bought 4 items of second-hand clothing.Now, she is working full-time with a monthly income of $3000.She now buys 20 items of second-hand clothing a month.Compute Anna's income elasticity of demand using the midpoint method.What type of goods are second-hand clothes for Anna?

Accepted Answer

The income elasticity of deman...

Question 8

Demand is classed as inelastic if the elasticity coefficient is:

Accepted Answer

A)  less than one
B)  equal to one
C)  greater than one
D)  equal to zeroE) B) and D)
F) A) and C)

Question 9

Normal goods have positive income elasticities of demand, while inferior goods have negative income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 10

An inferior good is one that has:

Accepted Answer

A)  a positive income elasticity of demand
B)  a negative income elasticity of demand
C)  a positive price elasticity of demand
D)  a negative elasticity of demandE) A) and B)
F) A) and C)

Question 11

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Accepted Answer

A) True 
 B)False

Question 12

The cross-price elasticity of demand measures how the quantity demanded of a good changes:

Accepted Answer

A)  as its price changes
B)  as the price of a related good changes
C)  as income changes
D)  as the slope of the demand curve changesE) A) and B)
F) A) and C)

Question 13

Given a linear demand curve has a constant slope, it follows that the elasticity of the linear demand curve is also always constant.

Accepted Answer

A) True 
 B)False

Question 14

Major Australian supermarket chains have been fighting to sell milk at the lowest price.The fact that they place such importance on the price must mean that they consider demand for milk to be somewhat price inelastic.

Accepted Answer

A) True 
 B)False

Question 15

Suppose the government increases the tax on petrol in order to raise revenue.Since raising the petrol tax would increase the price of petrol, the government must be assuming that the:

Accepted Answer

A)  demand for petrol is price elastic
B)  demand for petrol is price inelastic
C)  demand for petrol is price unit elastic
D)  tax on petrol will not affect the consumption of petrolE) A) and B)
F) B) and C)

Question 16

Graph 5-5 2 C) S3 D) it is impossible to tell without more information" class="answers-bank-image d-inline" rel="preload" > 
-In Graph 5-5, which supply curve is perfectly inelastic?

Accepted Answer

A)  S1
B)  S2
C)  S3
D)  it is impossible to tell without more informationE) A) and C)
F) C) and D)

Question 17

What is elasticity and why do economists use the concept?

Accepted Answer

Elasticity is a measure of the relative ...

Question 18

If law enforcement agencies prohibit the use of drugs such as heroin, cocaine and crack and the demand for drugs is inelastic, it is possible that:

Accepted Answer

A)  the price of drugs will fall and drug-related crime will fall
B)  the price of drugs will fall and drug-related crime will increase
C)  the price of drugs will rise and drug-related crime will increase
D)  the price of drugs will rise and drug-related crime will fallE) A) and B)
F) All of the above

Question 19

The midpoint method will often give you two different values of elasticity depending on whether you calculate the elasticity from point A to point B or point B to point A.

Accepted Answer

A) True 
 B)False

Question 20

In the case of a downward linear demand curve, total revenue is always maximised at

Accepted Answer

A)  at the upper end of the demand curve
B)  at the lower end of the demand curve
C)  at the midpoint of the demand curve
D)  it is impossible to tell without knowing the price and quantity demandedE) None of the above
F) A) and B)

Exam 5: Elasticity and Its Application

Correct Answer
verified
The income elasticity of deman...
View Answer

Alice says that she likes banana splits but if the price changed, she wouldn't buy them anymore.If this is the case:

Correct Answer
verified

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Correct Answer
verified

The demand for a good tends to be more elastic:

Correct Answer
verified

Normal goods have positive income elasticities of demand, while inferior goods have negative income elasticities of demand.

Correct Answer
verified

If the price of forest-products rises, the price elasticity of supply will be more responsive in the long run than in the short run.

Correct Answer
verified

If you think good wine is a necessity but cheese is a luxury, then your demand for wine will be more ______ than your demand for cheese:

Correct Answer
verified

An inferior good is one that has:

Correct Answer
verified

The midpoint method will often give you two different values of elasticity depending on whether you calculate the elasticity from point A to point B or point B to point A.

Correct Answer
verified

Demand is classed as inelastic if the elasticity coefficient is:

Correct Answer
verified

Major Australian supermarket chains have been fighting to sell milk at the lowest price.The fact that they place such importance on the price must mean that they consider demand for milk to be somewhat price inelastic.

Correct Answer
verified

Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450.Using the midpoint method, the price elasticity of demand for X in the given price range is:

Correct Answer
verified

Given a linear demand curve has a constant slope, it follows that the elasticity of the linear demand curve is also always constant.

Correct Answer
verified

Suppose the government increases the tax on petrol in order to raise revenue.Since raising the petrol tax would increase the price of petrol, the government must be assuming that the:

Correct Answer
verified

What is elasticity and why do economists use the concept?

Correct Answer
verified
Elasticity is a measure of the relative ...
View Answer

Economists compute the price elasticity of demand as the:

Correct Answer
verified

Graph 5-5 -In Graph 5-5, which supply curve is perfectly inelastic?

Correct Answer
verified

If law enforcement agencies prohibit the use of drugs such as heroin, cocaine and crack and the demand for drugs is inelastic, it is possible that:

Correct Answer
verified

In the case of a downward linear demand curve, total revenue is always maximised at

Correct Answer
verified

The cross-price elasticity of demand measures how the quantity demanded of a good changes:

Correct Answer
verified

Exam 5: Elasticity and Its Application

Correct AnswerverifiedThe income elasticity of deman...View AnswerShow Answer

Alice says that she likes banana splits but if the price changed, she wouldn't buy them anymore.If this is the case:

Correct AnswerverifiedShow Answer

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Correct AnswerverifiedShow Answer

The demand for a good tends to be more elastic:

Correct AnswerverifiedShow Answer

Normal goods have positive income elasticities of demand, while inferior goods have negative income elasticities of demand.

Correct AnswerverifiedShow Answer

If the price of forest-products rises, the price elasticity of supply will be more responsive in the long run than in the short run.

Correct AnswerverifiedShow Answer

If you think good wine is a necessity but cheese is a luxury, then your demand for wine will be more ______ than your demand for cheese:

Correct AnswerverifiedShow Answer

An inferior good is one that has:

Correct AnswerverifiedShow Answer

The midpoint method will often give you two different values of elasticity depending on whether you calculate the elasticity from point A to point B or point B to point A.

Correct AnswerverifiedShow Answer

Demand is classed as inelastic if the elasticity coefficient is:

Correct AnswerverifiedShow Answer

Major Australian supermarket chains have been fighting to sell milk at the lowest price.The fact that they place such importance on the price must mean that they consider demand for milk to be somewhat price inelastic.

Correct AnswerverifiedShow Answer

Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450.Using the midpoint method, the price elasticity of demand for X in the given price range is:

Correct AnswerverifiedShow Answer

Given a linear demand curve has a constant slope, it follows that the elasticity of the linear demand curve is also always constant.

Correct AnswerverifiedShow Answer

Suppose the government increases the tax on petrol in order to raise revenue.Since raising the petrol tax would increase the price of petrol, the government must be assuming that the:

Correct AnswerverifiedShow Answer

What is elasticity and why do economists use the concept?

Correct AnswerverifiedElasticity is a measure of the relative ...View AnswerShow Answer

Economists compute the price elasticity of demand as the:

Correct AnswerverifiedShow Answer

Graph 5-5 -In Graph 5-5, which supply curve is perfectly inelastic?

Correct AnswerverifiedShow Answer

If law enforcement agencies prohibit the use of drugs such as heroin, cocaine and crack and the demand for drugs is inelastic, it is possible that:

Correct AnswerverifiedShow Answer

In the case of a downward linear demand curve, total revenue is always maximised at

Correct AnswerverifiedShow Answer

The cross-price elasticity of demand measures how the quantity demanded of a good changes:

Correct AnswerverifiedShow Answer

Correct Answer
verified
The income elasticity of deman...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Elasticity is a measure of the relative ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified