WorksheetsElasticities
Total questions: 28
Worksheet time: 14mins
Why does travel by private jet have elastic demand?
It is a luxury form of travel
It is a necessity
It has to be arranged some time in advance
It has no close substitutes
A rise in the price of a product from US$50 to US$60 causes quantity demanded to fall from 800 to 760. What is the price elasticity of demand?
-0,25
-0,5
-2,0
-4,0
The price elasticity of demand for a product is -0,3. What effect will a fall in its price have?
A decrease in total spending on the product
A shift to the right of the demand curve
A more than proportionate change in quantity demanded
No change in the quantity demanded
What is meant by price elasticity of supply?
The extent to which price changes when there is a change in supply
The extent to which a firm can raise the price of a product whilst keeping the supply unchanged
The responsiveness of supply to a change in the cost of production
The responsiveness of supply to a change in price
Perfectly elastic demand is represented by a demand curve that
is vertical
is horizontal
has a 45° slope
is a rectangular hyperbola
If college enrollments drop by 10% when textbook prices double; textbooks and enrollments are __________ goods and their cross price elasticity is __________.
complementary; -0,5
substitute; 5
complementary; -0,1
complementary; -5
Which of the following goods would you expect to have the largest income elasticity of demand?
rice
toothpaste
beer
stereo equipment
newspapers
The cross price elasticity between two products is found to be -1/2. From this you know that the two products are:
normal
inferior
necessities
substitutes
complements
If the cross price elasticity between goods B and A is -2 and the price of good B increases by 5%, the quantity demanded of good A will:
increase by 5%
increase by 10%
decrease by 2%
decrease by 5%
decrease by 10%
Karen's income elasticity of demand for bottles of her favorite wine is 1,5. Currently her income is equal to $50,000 and she normally buys 500 bottles per year (unless Karen entertains a lot she has a problem). If her income increases to $55,000 how many bottles of her favorite wine will she buy per year?
425
550
515
675
575
A firm learns that the own price elasticity of a product it manufactures is 3,5. What would be the correct action for this firm to take if it wishes to raise its total revenue?
Raise the price because demand for the product is inelastic
We need information on the firm's cost structure in order to answer this question
Raise the price because demand is elastic
Lower the price because demand is inelastic
Lower the price because demand for the good is elastic
A monopolist learns that the own price elasticity of a product it manufactures is 0,5. What would be the correct action for this firm to take if it wishes to increase its profits?
Lower the price because demand for the good is elastic
We need information on the firm's cost structure in order to answer this question
Raise the price because demand is elastic
Lower the price because demand is inelastic
Raise the price because demand for the product is inelastic
Cheryl's income elasticity for good A is -2,5. Her current income is $100,000 and she normally buys 100 units of good A per year. If her income increases to $110,000 how many units of good A will she buy?
250
125
75
100
82.5
After paying an economist to estimate the price elasticity of demand for socks, sock manufacturers, expecting to increase revenues, decide to reduce the price of socks. The estimate of demand elasticity could have been:
0,5
0,25
0,75
-0,75
1,75
If the price elasticity of demand for some good is estimated to be 4, then a 1% increase in price will lead to a:
20% increase in quantity demanded
0,25% decrease in quantity demanded
0,5% increase in quantity demanded
4% increase in quantity demanded
4% decrease in quantity demanded
If coffee and tea are substitutes, what do we know for certain about the cross-price elasticity of demand for coffee with respect to the price of tea?
It is greater than 1
It is negative
It is positive
They are both inferior goods
It is equal to one
Which of the following might cause the own price elasticity of demand for product Z to go from 0,75 to 1,25.
The introduction of a new product that is considered a close substitute for Z
A decrease in the manufacturing cost of Z
An improvement in the manufacturing technology for Z
More firms begin producing product Z
A change in consumer tastes that causes consumers to feel that consuming Z is an important enhancement to their image
Candice currently spends $200 per month on long distance telephone calls. If the telephone company decides to reduce the rate from 10 cents a minute to 5 cents a minute then:
whether she spends more or less than $200 per month depends on whether long distance telephone calls are a normal good or an inferior good
the fact that demand curves are downward-sloping implies she will spend more than $200 per month on long distance telephone calls
she will spend less than $200 per month on long distance telephone calls because the new price is an effective price floor
whether she spends more or less than $200 per month on long distance telephone calls depends on whether her demand is elastic or inelastic
she will spend more than $200 per month on long distance telephone calls because her demand shifted out
On the front page of the September 27, 1996 New York Times is an article with the headline "U.S. Census Finds First Income Rise in Past Six Years". The text reports that "much of the rise in household incomes was in the Midwest". Based on this information alone, what would you expect has been happening to equilibrium prices and quantities sold of new cars in the Midwest during this period of increasing incomes.
Equilibrium prices have probably been rising and quantities falling since supply of new cars is probably inelastic
Equilibrium prices have probably been rising and quantities falling since demand for new cars is probably price and income inelastic
Equilibrium prices have probably been rising and quantities increasing since income elasticity of demand for new cars is probably positive and greater than one
Equilibrium prices have probably been falling and quantities increasing since income elasticity of demand for new cars is probably negative
Equilibrium prices have probably been falling and quantities falling since cross price elasticity of demand for new cars with respect to income is probably negative
Jane considers tofu a normal good and peanut butter an inferior good. We can predict that with an increase in her income she will consume:
more of both goods
less of both goods
she will not change her consumption of peanut butter
more peanut butter and less tofu
more tofu and less peanut butter
The government is considering an increase in the tax on gasoline. They know that the own-price elasticity of demand for gas is .25. The current price is $1.00 per gallon. They are willing to allow the quantity of gas sold to fall by 10%. What tax increase (in cents per gallon) would lead to a 10% reduction in quantity demanded? (we assume that the entire tax shows up in the price at the pump)
0,04
0,10
0,25
0,29
0,40
The post office charges $1 to mail an iguana overseas. At this price 1,000 iguana are mailed each week. To increase revenue, the post office is considering an increase in the price of overseas iguana delivery to $2. Post office researchers have determined that the own price elasticity of demand for its iguana delivery service is 1/5. If the post office increases its price to $2:
revenue will fall by $300
revenue will increase by $300
revenue won't change
revenue will fall by $600
revenue will increase by $600
Kevin's income elasticity for good A is equal to -1.5. His current income is $40,000 per year and he buys 200 units of good A annually. If his income falls to $36,000 how many units of good A will he purchase?
230.
170.
150.
125.
250.
Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the
price elasticity of demand
price elasticity of supply
income elasticity of demand
cross elasticity of demand
If a 20% increase in the price of a used car results in a 10% decrease in the quantity of used cars demanded, then the price elasticity of demand equals
0,5
1,0
2,0
10,0
Demand is elastic when a price ________ results in total revenue ________.
rise, decreasing
fall, decreasing
rise, increasing
fall; remaining constant
A perfectly inelastic demand curve
indicates the value of PED as infinity
is a vertical line parallel to the X-axis
is a vertical line parallel to the Y-axis
indicates the value of PED as 1
The demand for a particular brand of soap
is less elastic than the demand for soap, because soap is a necessity
is more elastic than the demand for soap, because brands have close substitutes
none of the answers is correct
is more elastic than the demand for soap, because soap is a necessity
