AS Economics MCQs: Elasticities

A good has a unitary price elasticity of demand and at a price of $20 a firm sells 40 000 units. How many will the firm sell if it charges a price of $5?

A 10 000

B 100 000

C 160 000

D 200 000

• A

• B

• C

• D

The cross elasticity of demand between two products, X and Y, is negative. What would be the immediate effect of a rise in the price of product Y?

A Quantity demanded of product X will fall.

B Supply of product X will rise.

C The cross elasticity of demand will rise.

D The price of product X would rise.

• A

• B

• C

• D

The demand for a good falls at the same time as its costs of production decrease. What will be the combined effect of these changes on the price and on the quantity supplied of the good?

• A

• B

• C

• D

What is a market demand curve?

A the demand for all of a country’s products

B the total sum of individual demand curves for a product

C the output of all the firms in an industry

D the stocks of a particular good available for sale

• A

• B

• C

• D

The price elasticity of demand for good X is 1. At a price of $12, quantity demanded is 4000 units. What will be the price when the quantity demanded is 20 000 units?

A $2.00

B $2.40

C $12.00

D $20.00

• A

• B

• C

• D

Consumer spending decreased in the recession of 2009-10. A firm tried to keep revenue high by giving discounts to encourage demand. It measured the price elasticity of demand (PED) for its own product and the cross elasticity of demand (XED) with its competitors’ products. When might such promotions achieve the result the company hoped?

A when PED is greater than one and XED is positive

B when PED is less than one and XED is negative

C when PED is less than one and XED is positive

D when PED is unity and XED is negative

• A

• B

• C

• D

What will happen to an industry’s supply curve if new firms enter the industry?

A It will shift to the left at any given price.

B It will shift to the right at any given price.

C There will be a downward movement along the supply curve.

D There will be an upward movement along the supply curve.

• A

• B

• C

• D

The diagrams show possible relationships between income and the quantity of a good purchased. Which diagram shows an inferior good?

• A

• B

• C

• D

The price elasticity of demand for a product is unitary for all price ranges. What will be the effect of an increase in its price?

A an equal proportionate decrease in the amount demanded

B an equal proportionate decrease in expenditure on the product

C an increase in the product’s percentage of total consumer expenditure

D no change in the amount of the product demanded

• A

• B

• C

• D

A fall in the price of cars causes the demand for petrol to rise by 20%. The cross-elasticity of demand between cars and petrol is –2. Which change in car prices has brought this about?

• A

• B

• C

• D