Chapter 10: Price Elasticity of Demand and Supply

1. The diagram below shows the demand curve for bubble milk tea.

We can conclude that the demand for bubble milk tea within the price range of $10 to $18 is ___________ .

• A. elastic

• B. inelastic

• C. unitarily elastic

• D. perfectly elastic

2. Nick loves reading comic books. Every week, he buys a comic book regardless of its price. From this we can conclude that his demand for comic books is

• A. elastic.

• B. inelastic.

• C. unitarily elastic.

• D. perfectly inelastic.

3. Refer to the following conversation between Ashley and Keith.

Ashley: I love watching movies. I always spend $400 on watching movies every month whatever the ticket price is.

Keith: I watch 3 movies every month whatever the ticket price is.

Based on the above conversation, we can conclude that

• A. both Ashley’s and Keith’s demands for movies are perfectly inelastic.

• B. both Ashley’s and Keith’s demands for movies are unitarily elastic.

• C. Ashley’s demand for movies is unitarily elastic while Keith’s demand for movies is perfectly inelastic.

• D. Ashley’s demand for movies is perfectly inelastic while Keith’s demand for movies is unitarily elastic.

4. Under which of the following conditions will consumers’ demand for a good tend to be inelastic?

(1) There are many close substitutes in the market.

(2) The good is a daily necessity.

(3) The good only has a few uses.

(4) The good is durable.

• A. (1) and (2) only

• B. (1) and (3) only

• C. (2) and (3) only

• D. (2) and (4) only

5. Which of the following would raise the elasticity of demand for the transport service of the Disneyland Resort Line?

• A. The fare of the Disneyland Resort Line is raised.

• B. The frequency of the Disneyland Resort Line trains increases.

• C. There is a decrease in the number of tourists visiting Hong Kong Disneyland.

• D. There are more bus routes running between Hong Kong Disneyland and other districts.

6. The demand for rice is ________ than the demand for diamonds because ___________ .

• A. more elastic … diamonds are a luxury good

• B. more elastic … diamonds have more close substitutes

• C. less elastic … rice is a necessity

• D. less elastic … rice has more uses

7. Advancement in the technology of producing good X results in a 15% change in its price and a 5% change in the quantity transacted. Which of the following best explains the above changes?

• A. Good X is a durable good.

• B. Good X is a habit-forming good.

• C. Good X has many close substitutes.

• D. The cost of producing good X increases.

8. The diagram below shows the demand curve for good X. Given that area A is greater than area B.

We can conclude that the elasticity of demand for good X within the price range of P1 to P2 is _______________ (without regard to its negative sign).

• A. equal to zero

• B. between zero and one

• C. equal to 1

• D. greater than 1

9. The table below shows the relationship between the unit price and the total revenue of good Y.

Within the above price range, the demand for good Y is

• A. perfectly inelastic.

• B. inelastic.

• C. unitarily elastic.

• D. elastic.

10. Refer to the unitarily elastic demand curve shown below.

When the price decreases from $15 to $10, the quantity demanded increases from 60 units to Q₂ units. The value of Q₂ equals ____________ .

• A. 75

• B. 90

• C. 108

• D. 120