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Elasticity

Total questions: 40

Worksheet time: 48mins

Name
Class
Date
1.
If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of a good, demand is:
a)
Relatively inelastic
b)
Relatively elastic
c)
Perfectly elastic
d)
Perfectly inelastic
2.
For an inferior good, an increase in consumer income will cause:
a)
The demand curve to shift left
b)
The demand curve to shift right
c)
The supply curve to shift left
d)
The supply curve to shift right
3.

A product is likely to have a price elasticity of demand that exceeds 1 when:

a)

Its price falls

b)

It is a necessity

c)

It has close substitutes

d)

Consumers are not very responsive to changes in price

4.
 If the price elasticity of demand for a product equals 1, as its price rises the:
a)
Quantity demanded does not change.
b)
 Total revenue increases.
c)
 Total revenue does not change
d)
 Quantity demanded increases.
5.
A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a Pepsi and Coca-Cola is:
a)
50
b)
0.20
c)
10
d)
5
6.
A 10 percent decrease in income decreases the quantity demanded of scented candles by 3 percent. The income elasticity of demand for scented candles is:
a)
0.3
b)
-0.3
c)
3
d)
-3.3
7.
If a 1 percent decrease in the price of a pound of oranges results in a smaller percentage decrease in the quantity supplied, then:
a)
Supply is inelastic
b)
Demand is inelastic
c)
Supply is elastic
d)
Demand is elastic
8.

If the income elasticity of demand for good X is negative and the cross-price elasticity of demand between good X and good Y is negative, which of the following must be true of good X?

a)

X is an inferior good and is a complement to Y.

b)

X is an inferior good and is a substitute for Y.

c)

X is a normal good and is a complement to Y.

d)

X is a normal good and is a substitute for Y.

9.

Assume the income elasticity of demand for good Z equals −5.0. Which of the following is true?

a)

An increase in income will lead to a decrease in demand.

b)

Good Z is a normal good.

c)

An increase in income will lead to an increase in demand.

d)

Good Z must have an inelastic demand.

10.

The medication known as insulin has seen a decrease in demand of 2%, while the price has increased 10%

a)

5 inelastic

b)

5 elastic

c)

.2 inelastic

d)

.2 elastic

11.
The price elasticity of demand measures how much
a)
quantity demanded responds to a change in price.
b)
quantity demanded responds to a change in income.
c)
price responds to a change in demand.
d)
demand responds to a change in supply.
12.
Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is
a)
0
b)
1
c)
6
d)
36
13.
For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
a)
There are many substitutes for this good.
b)
The good is a necessity.
c)
The market for the good is narrowly defined.
d)
The relevant time horizon is long.
14.
Income elasticity of demand measures how
a)
the quantity demanded changes as consumer income changes.
b)
consumer purchasing power is affected by a change in the price of a good.
c)
the price of a good is affected when there is a change in consumer income.
d)
many units of a good a consumer can buy given a certain income level.
15.
OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to
a)
an inelastic demand for oil and a reduction in the amount of oil supplied.
b)
a reduction in the amount of oil supplied and a world-wide oil embargo.
c)
a world-wide oil embargo and an elastic demand for oil.
d)
a reduction in the amount of oil supplied and an elastic demand for oil.
16.

If the income elasticity of market demand is negative, most consumers view the good as:

a)

a luxury good

b)

having many imperfect substitutes.

c)

an inferior good.

d)

) a normal good.

17.

If two goods have negative price cross‑elasticities of demand, the goods are:

a)

inferior goods.

b)

luxury goods.

c)

complementary goods:

d)

substitute goods.

18.

The percentage change in quantity supplied divided by the percentage change in price is a rough measure of a good's:

a)

unitary margin.

b)

price elasticity of supply.

c)

exclusivity ratio.

d)

price elasticity of demand.

19.

The graph of a demand curve that is perfectly elastic is:

a)

positively sloped.

b)

horizontal.

c)

vertical

d)

negatively sloped.

20.

Price elasticities of demand tend to

a)

fall as higher prices are charged.

b)

rise as higher prices are charged.

c)

almost always be constant.

d)

not be related to the length of time.

21.
Demand is almost always more elastic at higher prices and less elastic at lower prices.
a)
True
b)
False
22.

What does it mean?

Ed = 0

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

23.

What does it mean?

Ed = 1

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

24.

What does it mean?

Ed = ∞

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

25.

What does it mean?

Ed > 1

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

26.

What does it mean?

Ed < 1

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

27.

What does it mean?

% change in Qd = % change in P

a)

Perfectly inelastic demand

b)

Inelastic demand

c)

Unitarily elastic demand

d)

Elastic demand

e)

Perfectly elastic demand

28.

Which of the following has more elastic demand?

a)
b)
c)
d)
29.

Which of the following has more inelastic demand?

a)
b)
c)
d)
30.
A complement example would be all except
a)
butter and margarine 
b)
peanut-butter and jelly
c)
flashlight and batteries 
d)
cameras and film 
31.
When replacing a certain item with with a less costly item is an example of
a)
the substitution effect 
b)
the income effect 
c)
demand elasticity 
d)
complements 
32.
Buying one ice-cream instead of two at lunch describes what concept 
a)
marginal utility 
b)
diminishing marginal utility
c)
demand
d)
consumerism 
33.

Cross elasticity of demand = 0.4

a)

Normal Good

b)

Inferior Good

c)

Complementary Good

d)

Substitute Good

34.

Cross elasticity of demand = 1.4

a)

Normal Good

b)

Inferior Good

c)

Complementary Good

d)

Substitute Good

35.

Income elasticity of demand = 1.4

a)

Normal Good

b)

Inferior Good

c)

Complementary Good

d)

Substitute Good

36.

Cross elasticity of demand = -1.4

a)

Normal Good

b)

Inferior Good

c)

Complementary Good

d)

Substitute Good

37.

Income Elasticity of Demand measures....

a)

The responsiveness of Quantity demanded to a change in income

b)

The responsiveness of demand to a change in income

c)

The responsiveness of price to a change in income

d)

The responsiveness of demand to a change in price

38.
Advertising is the art of spreading marketing information through
a)
Various media
b)
letters
c)
Door to door service
d)
Vendors
39.
The following is a factor that will not cause the demand curve to shift:
a)
Advertising
b)
Population
c)
Price
d)
Consumer expectations
40.
Consuming more of one good because of a change in price of another good is known as the 
a)
income effect
b)
substitution effect
c)
elasticity effect
d)
demand effect

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