Chapter 5 Practice

if demand for gasoline is inelastic, how would a 10% increase in price affect revenues?

• revenues will increase

• revenues will decrease

• revenues will remain unchanged

• cannot be determined

a 30% increase in income causes demand for clothes to increase 20%. Income elasticity is

• 0.67 and a normal good

• • -0.67 and an inferior good

• 1.50 and a luxury good

• -1.50 and an inferior good

all of the following are basic determinants of a products elasticity of demand, EXCEPT the:

• availability of complementary products

• availability of substitutes products

• percentage of income spent on the product

• time period being examined

if hot dogs and relish are complements, their cross elasticity of demand is:

• greater than 0

• greater than 0, but less than 1

• less than 0

• 0

if quantity demanded rises by 60% when price falls by 20% the price elasticity of demand is:

• 3

• 20

• 60

• 0.33

if firms can change all of their inputs, including plant capacity, then they are in the

• long run

• short run

• market period

• elasticity of time

If the price elasticity of demand for chili peppers is 0.5, what happens when the price rises by 20%. 

• quantity demanded falls by 5%

• quantity demanded rises by 20%

• quantity demanded rises by 10%

• quantity demand falls by 10%.

  
  

A tariff is imposed on high-priced luxury cars, causing prices to increase. We can expect:

• a significant reduction in the quantity demanded

•  a small reduction in quantity demanded

• no reduction in quantity demanded

•  a small increase in quantity demand

If the demand for plants is inelastic and the price decreases, what will happen as a result?

•  the total revenue collected from plant sales will increase

• the total revenue collected from plant sales will decrease

• the quantity of plants sold will decrease

• there will be decrease in demand for complementary goods

  
  

Which pair of goods would be most likely to have a positive cross-elasticity of demand?

• bread and butter

• apples and oranges

• coffee and doughnuts

• cheese and crackers