AP Micro Elasticity Practice

Assume that demand for bottled water is relatively price elastic. An increase in supply of bottled water will result in which of the following?

• A decrease in price, leading to an increase in total revenue

• A decrease in price, leading to a decrease in total revenue

• An excess supply of bottled water

• An excess demand for bottled water

• A relatively small decrease in price and no change in equilibrium quantity

If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of the good, demand is

• relatively inelastic

• relatively elastic

• unit elastic

• perfectly elastic

• perfectly inelastic

Assume a 10 percent increase in price increased the market quantity supplied by 20 percent. Which of the following is true?

• The value of the price elasticity of supply is 2.

• The value of the price elasticity of supply is 0.5.

• Supply is price inelastic.

• Demand is price elastic.

• This price-quantity combination violates the law of supply.

Assume that the price elasticity of supply for good Y is 0.5. If the price of good Y decreases by 30 percent, the quantity supplied of good Y will

• decrease by 60 percent

• decrease by 30 percent

• decrease by 15 percent

• increase by .5 percent

• increase by .15 percent

Assume the income elasticity of demand for good Z equals -5.0. Which of the following is true?

• Good Z is a normal good.

• Good Z must have an inelastic demand.

• An increase in income will lead to a decrease in demand.

• An increase in income will lead to an increase in demand.

• The income effect of a price increase will be a decrease in quantity demanded at every price.

If the income elasticity of demand for good X is negative and the cross-price elasticity of demand between good X and good Y is negative, which of the following must be true of good X?

• X is a normal good and is a substitute for Y.

• X is a normal good and is a complement to Y.

• X is an inferior good and is a substitute for Y.

• X is an inferior good and is a complement to Y.

• X is a normal good and Y is an inferior good.

To alleviate a financial crisis, a university increases student fees. This action will increase university revenues if the price elasticity of demand for university education is

• inelastic

• unit elastic

• elastic

• equal to the price elasticity of supply

• equal to one

If a one-of-a-kind Etruscan vase is offered for sale at an auction, which, if any, of the following correctly shows the supply curve for the vase?

• 
• 
• 
• 
• It is impossible to determine the shape of the supply curve from the given information.