CHAPTER 3: ELASTICITY

1.         The concept of price elasticity of demand measures                       .

• A.       the slope of the demand curve

       

• B.  the number of buyer in a market

• C. the extent to which the demand curve shifts as the result of a price decline

• D. the sensitivity of quantity demanded to price changes

  2.     Which of the following does NOT affect the elasticity of demand?

• A.       The availability of substitutes

• B.        Time

• C.       The proportion of consumer income spent

• D.       Cost of production

3.         If the cross elasticity of demand for two goods is positive, then the two goods are                  .

 

• A.       Unrelated goods

• B.        Substitute good

• C.       Normal good

• D.       Complementary good

4.         Price of dragon fruits increase by 10 per cent and the number of dragon fruits supplied also increase by 10 per cent. This indicates that supply of dragon fruits is               .

•      Unitary elastic

•      Perfectly elastic

• Elastic

• Inelastic

5.         The more substitute there are for a product, the                   .

 

• A.       Less price elastic of demand for the product

• B.        More elastic demand for the product

• C.       Greater income elasticity for the product

• D.       Smaller the income elasticity for the product

6.         If the price of an egg is reduced from RM0.25 to RM0.20, the quantity demanded by consumers will increase from 10 dozens per week to 12 dozens per week. The price elasticity of demand is         .

 

• A. 0.04

• B.    4.8

• C.   0.8

• D.   1.0

7.         If the income elasticity of demand for butter is 0.3, this means that            .

 

• A.       butter is a substitute of margarine

• B.        butter is a normal product

• C.       butter is an inferior product

• D.       butter is complementary of salt

8.         If your income increase by 10% and the quantity demanded increase by 20%, the income elasticity of demand for chicken is     .

• A.       -2

• B.    0.5

• C. 10%

• D. 2

9.         If the elasticity coefficient of supply is 0.7, supply is elastic.

• TRUE

• FALSE

10.        The demand for luxury goods is more price elastic than is the demand for necessities.

• TRUE

• FALSE