Economics Final Review Exam

What coefficient is measured in the price elasticity of demand?

• buyer responsiveness to price changes.

• the extent to which a demand curve shifts as incomes change.

• the slope of the demand curve.

• how far business executives can stretch their fixed costs.

What signifies if the demand for a product is inelastic with respect to price?

• consumers are largely unresponsive to a per unit price change.

• the elasticity coefficient is greater than 1.

• a drop in price is accompanied by a decrease in the quantity demanded.

• a drop in price is accompanied by an increase in the quantity demanded.

If the price elasticity of demand for a product is 2.5, what will occur if there is a price cut from 2.00 to 1.80?

• increase the quantity demanded by about 2.5 percent.

• decrease the quantity demanded by about 2.5 percent.

• increase the quantity demanded by about 25 percent.

• increase the quantity demanded by about 250 percent.

Suppose that as the price of Y falls from 2.00 to 1.90 the quantity of Y demanded increases from 110 to 118. What is the price elasticity of demand? (5 points for the solution)

• 4.00.

• 2.09.

• 1.37.

• 3.94.

If the demand for product X is inelastic, what will occur if there is a 4 percent increase in the price of X?

• decrease the quantity of X demanded by more than 4 percent.

• decrease the quantity of X demanded by less than 4 percent.

• increase the quantity of X demanded by more than 4 percent.

• increase the quantity of X demanded by less than 4 percent.

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, what does it imply if there is a 16 percent increase in sales? (3 points for the solution)

• 1 percent reduction in price.

• 12 percent reduction in price.

• 40 percent reduction in price.

• 20 percent reduction in price

The price of product X is reduced from 100 to 90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, what is the demand for X in this price range? (5 points for the solution)

• has declined.

• is of unit elasticity.

• is inelastic.

• is elastic

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. What can we conclude in that quantity demanded?

• increased by 7 percent.

• decreased by 9 percent.

• decreased by 7 percent.

• decreased by 12 percent.

If the price of hand calculators falls from 10 to 9 and, as a result, the quantity demanded increases from 100 to 125, what is then the implication to the elasticity of demand? (5 points for the solution)

• demand is elastic.

• demand is inelastic.

• demand is of unit elasticity.

• not enough information is given to make a statement about elasticity.

If a firm finds that it can sell 13,000 of a product when its price is 5 per unit and 11,000 of it when its price is 6, what is then the effect to the elasticity? (5 points for the solution)

• the demand for the product is elastic in the 6-5 price range.

• the demand for the product must have increased.

• elasticity of demand is 0.74.

• the demand for the product is inelastic in the 6-5 price range.