EC 232 Ch. 6

Answer the question on the basis of the following demand schedule:

Refer to the data. Which of the following is correct?
-Although the demand curve is convex to the origin, price elasticity of demand is constant throughout.
-Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges.
-A steep slope means demand is inelastic; a flat slope means demand is elastic.
-Although the slope of the demand curve is constant, price elasticity increases as we move from high to low price ranges.

- Although the slope of the demand curve is constant, price elasticity increases as we move from high to low price ranges.

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
-increase the quantity demanded by about 2.5 percent.
-increase the quantity demanded by about 25 percent.
-decrease the quantity demanded by about 2.5 percent.
-increase the quantity demanded by about 250 percent.

-increase the quantity demanded by about 25 percent

Refer to the diagram. Total revenue at price P1 is indicated by area(s):
-A.
-A + B.
-C + D.
-A + C.

- A+B

The more time consumers have to adjust to a change in price:
-the more likely the product is an inferior good.
-the greater will be the price elasticity of demand.
-the smaller will be the price elasticity of demand.
-the more likely the product is a normal good.

-the greater will be the price od elasticity of demand

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will:
-decrease the amount demanded by less than 10 percent.
-increase the amount demanded by less than 10 percent.
-increase the amount demanded by more than 10 percent.
-decrease the amount demanded by more than 10 percent

-increase the amount demanded by more than 10 percent.

(Last Word) Based on the concept of price elasticity of demand, which of the following cases is most likely to occur?
-Airlines charging lower fares for business travelers.
-Movie theaters charging higher prices for senior citizens.
-Golf courses charging higher prices for golf during the week than on weekends.
-Colleges charging lower tuition for low-income students.

-Colleges charging lower tuition for low-income students.

The demand schedules for such products as eggs, bread, and electricity tend to be:
-relatively price inelastic.
-relatively price elastic.
-of unit price elasticity.
-perfectly price elastic

-relatively price inelastic

Refer to the diagram. Between prices of $5.70 and $6.30:
-D1 and D2 have identical elasticity's.
-D1 is more elastic than D2.
-D2 is more elastic than D1.
-D2 is an inferior good and D1 is a normal good.

-D1 is more elastic that D2

The price elasticity of demand is generally:
-negative, but the minus sign is ignored.
-positive, but the plus sign is ignored.
-positive for normal goods and negative for inferior goods.
-positive because price and quantity demanded are inversely related.

-negative, but the minus sign is ignored

A perfectly inelastic demand schedule:
-can be represented by a line parallel to the horizontal axis.
-rises upward and to the right but has a constant slope.
-cannot be shown on a two-dimensional graph.
-can be represented by a line parallel to the vertical axis.

-can be represented by a line parallel to the vertical axis.

Refer to the diagrams. The case of complementary goods is represented by figure:
-D.
-B.
-A.
-C.

-C

The elasticity of demand for a product is likely to be greater:
-the greater the amount of time over which buyers adjust to a price change.
-the smaller the number of substitute products available.
-if the product is a necessity, rather than a luxury good.
-the smaller the proportion of one's income spent on the product.

-the greater the amount of time over which buyers adjust to a price change

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:
-relatively inelastic.
-perfectly elastic.
-decreasing.
-relatively elastic.

-relatively inelastic

A firm can sell as much as it wants at a constant price. Demand is thus:
-relatively elastic.
-perfectly inelastic.
-perfectly elastic.
-relatively inelastic.

-perfectly elastic

An antidrug policy that reduces the supply of heroin might:
-reduce street crime because the addict's demand for heroin is highly elastic.
-increase street crime because the addict's demand for heroin is highly inelastic.
-increase street crime because the addict's demand for heroin is highly elastic.
-reduce street crime because the addict's demand for heroin is highly inelastic.

-increase street crime because the addict's demand for heroin is highly inelastic

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens' management wanted a full house for the game, it would:
-set price so as to maximize its total revenue.
-set ticket prices at $5.
-encourage scalpers to sell their tickets for more than $7.
-set ticket prices at $9.

-set ticket prices at $5

Refer to the data. The price elasticity of demand is relatively inelastic:
-over the entire $6-$1 price range.
-in the $3-$1 price range.
-in the $6-$4 price range.
-in the $6-$5 price range only.

-in the $3-$1 price range

Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:
-positive and therefore X is a normal good.
-negative and therefore X is a normal good.
-positive and therefore X is an inferior good.
-negative and therefore X is an inferior good

-positive and therefore X is a normal good.

Which type of goods is most adversely affected by recessions?
-Goods for which the cross elasticity coefficient is positive.
-Goods for which the income elasticity coefficient is relatively low or negative.
-Goods for which the income elasticity coefficient is relatively high and positive.
-Goods for which the cross elasticity coefficient is negative.

-goods for which the income elasticity coefficient is relatively high and positive

Refer to the diagrams. In which case would the coefficient of cross elasticity of demand be positive?
-D
-C
-B
-A

-A

Suppose the income elasticity of demand for toys is +2.00. This means that:
-toys are an inferior good.
-a 10 percent increase in income will decrease the purchase of toys by 2 percent.
-a 10 percent increase in income will increase the purchase of toys by 2 percent.
-a 10 percent increase in income will increase the purchase of toys by 20 percent.

-a 10 percent increase in income will increase the purchase of lys by 20 percent.

A demand curve that is parallel to the horizontal axis is:
-relatively inelastic.
-relatively elastic.
-perfectly elastic.
-perfectly inelastic.

-perfectly elastic

The formula for cross elasticity of demand is percentage change in:
-quantity demanded of X/percentage change in price of X.
-quantity demanded of X/percentage change in price of Y.
-quantity demanded of X/percentage change in income.
-price of X/percentage change in quantity demanded of Y.

-quantity demanded of X/ percentage change in price of Y

Which of the following statements is not correct?
-In the range of prices in which demand is elastic, total revenue will diminish as price decreases.
-If the relative change in price is greater than the relative change in the quantity demanded associated with it, demand is inelastic.
-Total revenue will not change if price varies within a range where the elasticity coefficient is unity.
-Demand tends to be elastic at high prices and inelastic at low prices.

-in the range of prices in which demand is elastic, total revenue will diminish as price decreases.

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is:
-inelastic.
-parallel to the horizontal axis.
-shifting to the left.
-elastic.

-inelastic

Refer to the diagrams. The case of substitute goods is represented by figure:
-D.
-C.
-A.
-B.

-D

The concept of price elasticity of demand measures:

-the extent to which the demand curve shifts as the result of a price decline.
-the sensitivity of consumer purchases to price changes.
-the number of buyers in a market.
-the slope of the demand curve.

-the sensitivity of consumer purchases to price changes.

If a firm's demand for labor is elastic, a union-negotiated wage increase will:
-cause a shortage of labor.
-cause the firm's total payroll to decline.
-necessarily be inflationary.
-cause the firm's total payroll to increase.

-cause a firms total payroll to decline.

If demand for a product is elastic, the value of the price elasticity coefficient is:
-less than one.
-zero.
-equal to one.
-greater than one

-greater than one

If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then:
-the price elasticity of demand is 0.44.
-A is a complementary good.
-the price elasticity of demand is 2.25.
-A is an inferior good.

-the price elasticity of demand is 2.25

Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game:
-varies inversely with ticket prices.
-is perfectly elastic.
-is perfectly inelastic.
-varies directly with ticket prices

-is perfectly inelastic

Refer to the data. If this demand schedule were graphed, we would find that:
-its slope diminishes as we move southeast down the curve.
-the data are inconsistent with the law of demand.
-its slope is constant throughout.
-its slope diminishes as we move northwest up the curve.

-its slope is constant throughout

Which of the following is not characteristic of the demand for a commodity that is elastic?
-Total revenue declines if price is increased.
-Buyers are relatively sensitive to price changes.
-The elasticity coefficient is less than one.
-The relative change in quantity demanded is greater than the relative change in price.

-the elasticity coefficient is less than one.

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded:
-decreased by 1.75 percent.
-decreased by 7 percent.
-decreased by 9 percent.
-increased by 7 percent.

-decreased by 7 percent

Which of the following is correct?
-The price elasticity coefficient applies to demand, but not to supply.
-If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction.
-If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction.
-If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction.

- if the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction.

The larger the coefficient of price elasticity of demand for a product, the:
-larger the resulting price change for an increase in supply.
-smaller the resulting price change for an increase in supply.
-more rapid the rate at which the marginal utility of that product diminishes.
-less competitive will be the industry supplying that product.

-smaller the resulting price change for an increase in supply.

Refer to the diagrams. The case of an inferior good is represented by figure:
-D.
-B.
-A.
-C.

-B

Refer to the information. Over the $11-$9 price range, demand is:
perfectly inelastic.
inelastic.
perfectly elastic.
elastic.

-elastic

Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that:
-an increase in the minimum wage would increase the total incomes of teenage workers as a group.
-the unemployment effect of an increase in the minimum wage would be relatively large.
-the cross elasticity of demand between teenage and adult workers is positive and very large.
-an increase in the minimum wage would decrease the total incomes of teenage workers as a group.

-an increase in the minimum wage would increase the total incomes of teenage workers as a group

The demand for a luxury good whose purchase would exhaust a big portion of one's income is:
-perfectly price elastic.

-relatively price inelastic.

-relatively price elastic.

-perfectly price inelastic.

-relatively price elastic.

The diagram suggests that:
-X and Y are both normal goods.
-X and Y are independent goods.
-X and Y are both inferior goods.
-X and Y are substitute goods.

-X and Y are independent goods.

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (midpoint method) is:
-2.09.
-4.00.
-3.94.
-1.37.

-$1.37

Refer to the diagrams. In which case would the coefficient of income elasticity be negative?
-B
-C
-A
-D

-B

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:
-the demand curve for peanuts has shifted to the right.
-no inference can be made as to the elasticity of demand for peanuts.
-the demand for peanuts is elastic.
-the demand for peanuts is inelastic.

-the demand for peanuts is inelastic

Refer to the diagram. If price falls from P1 to P2, total revenue will become area(s):
-A + C.
-C + D.
-B + D.
-C.

-B+D

Refer to the diagram and assume a single good. If the price of the good increased from $5.70 to $6.30 along D1, the price elasticity of demand along this portion of the demand curve would be:
-0.8.
-1.0.
-2.0.
-1.2.

-1.2

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because:

-the income effect always exceeds the substitution effect.
-there are more good substitutes for soft drinks as a whole than for Pepsi specifically.
-soft drinks are normal goods.
-there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically.

-there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically.

The narrower the definition of a product:
-the smaller the number of substitutes and the greater the price elasticity of demand.
-the larger the number of substitutes and the greater the price elasticity of demand.
-the larger the number of substitutes and the smaller the price elasticity of demand.
-the smaller the number of substitutes and the smaller the price elasticity of demand.

-the larger the number of substitutes and the greater the price elasticity of demand

In which of the following cases will total revenue increase?
-Price rises and demand is inelastic.
-Price rises and demand is elastic.
-Price falls and supply is elastic.
-Price falls and demand is inelastic.

-price rises and demand is inelastic

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:
-be unchanged.
-increase.
-decrease.
-either increase or decrease, depending on what happens to supply.

-decrease

A perfectly inelastic demand curve:
-graphs as a line parallel to the horizontal axis.
-has a price elasticity coefficient of unity throughout.
-has a price elasticity coefficient greater than unity.
-graphs as a line parallel to the vertical axis

-graphs as a line parallel to the vertical axis

Refer to the diagrams. The case of a normal good is represented by figure:
D.
C.
A.
B.

-A

Suppose the total revenue curve is derived from a particular linear demand curve. That demand curve must be:
-inelastic for price increases that reduce quantity demanded from 4 units to 3 units.
-elastic for price declines that increase quantity demanded from 5 units to 6 units.
-inelastic for price declines that increase quantity demanded from 2 units to 3 units.
-unit elastic for price increases that reduce quantity demanded from 5 units to 4 units

-unit elastic for price increases that reduce quantity demanded from 5 units to 4 units

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens' management charges $7 per ticket:
-there will be 2,000 empty seats.
-the game will be sold out.
-there will be 1,000 empty seats.
-some fans who want to see the game will find that tickets are not available.

-there will be 1,000 empty seats.

The demand for a necessity whose cost is a small portion of one's total income is:
-relatively price inelastic.
-perfectly price inelastic.
-relatively price elastic.
-perfectly price elastic.

-relatively price inelastic.

Refer to the diagram. If price falls from $10 to $2, total revenue:
-falls from A + B to B + C and demand is inelastic.
-rises from A + B to A + B + D + C and demand is elastic.
-rises from C + D to B + A and demand is elastic.
-falls from A + D to B + C and demand is inelastic.

-falls from A + B to B + C and demand is inelastic.

The price elasticity of demand of a straight-line demand curve is:
-1 at all points on the curve.
-inelastic but does not change at various points on the curve.
-elastic in high-price ranges and inelastic in low-price ranges.
-elastic but does not change at various points on the curve.

-elastic in high-price ranges and inelastic in low-price ranges.

If the demand for product X is inelastic, a 4 percent increase in the price of X will:
-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 less than 4 percent.
-increase the quantity of X demanded by more than 4 percent

-decrease the quantity of X demanded by less that 4 percent

Refer to the diagram, which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. If this rectangular hyperbola was a demand curve, we could say that it would be:
-elastic at low prices and inelastic at high prices.
-elastic at high prices and inelastic at low prices.
-impossible to generalize about its elasticity.
-of unit elasticity throughout.

-of unit elasticity throughout

Compared to coffee, we would expect the cross elasticity of demand for:
-tea to be positive, but negative for cream.
-both tea and cream to be positive.
-both tea and cream to be negative.
-tea to be negative, but positive for cream.

-tea to be positive, but negative for cream

The price of old baseball cards rises rapidly with increases in demand because:
-the demand for old baseball cards is price inelastic.
-the supply of old baseball cards is price inelastic.
-the demand for old baseball cards is price elastic.
-the supply of old baseball cards in price elastic.

the supply of old baseball cards is price inelastic

(Last Word) Which of the following is not an example of pricing based on group differences in elasticity of demand?
-Cash rebates for purchases of automobiles.
-Senior-citizen discounts at restaurants and motels.
-Child discounts for admission to theme parks.
-Discounted student prices for visits to museums

-cash rebated for purchases of automobiles

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:
-positive and therefore X is an inferior good.
-positive and therefore X is a normal good.
-positive but less than one; therefore X is an inferior good.
-negative and therefore X is an inferior good

-positive but less than one; therefore X is an inferior good.

Refer to the data. The price elasticity of demand is relatively elastic:
-in the $3-$1 price range.
-in the $6-$4 price range.
-over the entire $6-$1 price range.
-in the $6-$5 price range only

- in the $6-$4 price range

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,

-$5 is not the equilibrium price of pizza.
-the demand for pizza is inelastic above $5 and elastic below $5.
-the demand for pizza is elastic above $5 and inelastic below $5.
-the demand for pizza is elastic both above and below $5.

- the demand for pizza is elastic about $5 and inelastic below $5

Refer to the data. Suppose quantity supplied declined by 23 units at each price, changing the equilibrium price in a direction and amount for you to determine. Over that price range, demand is:
-elastic.
-perfectly elastic.
-inelastic.
-perfectly inelastic

-inelastic

The state legislature has cut Gigantic State University's appropriations. GSU's Board of Regents decides to increase tuition and fees to compensate for the loss of revenue. The board is assuming that the:

-demand for education at GSU is elastic.
-coefficient of price elasticity of demand for education at GSU is unity.
-demand for education at GSU is inelastic.
-coefficient of price elasticity of demand for education at GSU is greater than unity.

-demand for education at GSU is inelastic

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that:
-the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic.
-the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.
-both groups felt that the demand was inelastic but for different reasons.
-both groups felt that the demand was elastic but for different reasons.

-the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is:
-1.2.
-0.8.
-1.6.
-8.0.

-1.2

If quantity demanded is completely unresponsive to price changes, demand is:
-relatively elastic.
-perfectly inelastic.
-perfectly elastic.
-relatively inelastic.

-perfectly inelastic

Suppose that the total revenue curve is derived from a particular linear demand curve. That demand curve must be:
-elastic for price declines that increase quantity demanded from 6 units to 7 units.
-elastic for price increases that reduce quantity demanded from 8 units to 7 units.
-inelastic for price increases that reduce quantity demanded from 4 units to 3 units.
-inelastic for price declines that increase quantity demanded from 6 units to 7 units.

-elastic for price declines that increase quantity demanded from 6 units to 7 units

Refer to the information. Over the $7-$5 price range, demand is:
-perfectly elastic.
-perfectly inelastic.
-elastic.
-inelastic.

-inelastic

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is:
-negative and therefore X is an inferior good.
-positive and therefore X is a normal good.
-positive and therefore X is an inferior good.
-negative and therefore X is a normal good.

-negative and therefor X is an inferior good.

If the price elasticity of demand for a product is unity, a decrease in price will:
-increase the quantity demanded but decrease total revenue.
-increase the quantity demanded, but total revenue will be unchanged.
-have no effect upon the amount purchased.
-increase the quantity demanded and increase total revenue.

-increase the quantity demanded, but total revenue will be unchanged

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?
-Chicken purchased at the grocery store for preparation at home (+0.25)
-Dinner at a nice restaurant (+1.8)
-Facial tissue (+0.6)
-Plasma screen and LCD TVs (+4.2)

-plasma screen and LCD TVs (+4.2)

Refer to the diagram. The decline in price from P1 to P2 will:
decrease total revenue by A.
increase total revenue by D.
increase total revenue by B + D.
increase total revenue by D - A.

-increase total revenue by D-A

Refer to the information. Over the $9-$7 price range, demand is:
-elastic.
-inelastic.
-perfectly elastic.
-perfectly inelastic.

-elastic

Refer to the diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer expenditure would:
-decrease if demand were either D1 or D2.
-increase if demand were either D1 or D2.
-decrease if demand were D2 only.
-decrease if demand were D1 only.

-decrease if demand were d2 only

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then:
-demand is inelastic.
-not enough information is given to make a statement about elasticity.
-demand is of unit elasticity.
-demand is elastic.

-demand is elastic

The demand for autos is likely to be:
-more price elastic than the demand for Honda Accords.
-of the same price elasticity as the demand for Honda Accords.
-perfectly inelastic.
-less price elastic than the demand for Honda Accords.

-less price elastic than the demand for Honda Accords.

If price and total revenue vary in opposite directions, demand is:
-relatively inelastic.
-perfectly elastic.
-relatively elastic.
-perfectly inelastic.

-relatively elastic

Suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10 percent, the quantity demanded will increase by:
-20 percent and total expenditures on bread will fall.
-2 percent and total expenditures on bread will rise.
-2 percent and total expenditures on bread will fall.
-20 percent and total expenditures on bread will rise.

-2 percent and total expenditures on bread will rise

The larger the positive cross elasticity coefficient of demand between products X and Y, the:
-smaller the price elasticity of demand for both products.
-the less sensitive purchases of each are to increases in income.
-stronger their complementariness.
-greater their substitutability.

-greater their substitutability

Most demand curves are relatively elastic in the upper-left portion because the original price:
-from which the percentage price change is calculated is small and the original quantity from which the percentage change in quantity is calculated is large.
-from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.
-and quantity from which the percentage changes in price and quantity are calculated are both large.
-and quantity from which the percentage changes in price and quantity are calculated are both small.

-from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.

When the percentage change in price is greater than the resulting percentage change in quantity demanded:
-an increase in price will increase total revenue.
-demand may be either elastic or inelastic.
-a decrease in price will increase total revenue.
-demand is elastic.

-an increase in price will increase total revenue.

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then:
-the demand for the product must have increased.
-the demand for the product is elastic in the $6-$5 price range.
-the demand for the product is inelastic in the $6-$5 price range.
-elasticity of demand is 0.74.

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

Refer to the data. The price elasticity of demand is unity:
-over the entire $6-$4 price range.
-throughout the entire price range because the slope of the demand curve is constant.
-in the $4-$3 price range only.
-over the entire $3-$1 price range.

-in the $4-$3 price range only

Refer to the diagrams. In which case would the coefficient of income elasticity be positive?
-A
-C
-D
-B

-A

Refer to the diagram. In the P3P4 price range, demand is:
-perfectly elastic.
-relatively elastic.
-of unit elasticity.
-relatively inelastic.

-relatively inelastic

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
-negative and therefore these goods are complements.
-positive and therefore these goods are complements.
-positive and therefore these goods are substitutes.
-negative and therefore these goods are substitutes

-negative and therefore the goods are complements

Refer to the diagram, which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. In comparing the price elasticity and the slope of this demand curve, we can conclude that the:
-slope of a demand curve measures its elasticity.
-elasticity of a demand curve measures its slope.
-slope of the curve varies, but its elasticity is constant.
-slope and elasticity of the curve are both constant throughout.

-slope of the curve varies, but its elasticity is constant

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, demand for X in this price range:
is inelastic.
is elastic.
has declined.
is of unit elasticity.

-is elastic

Suppose the total revenue curve is derived from a particular linear demand curve. That demand curve must be:
-inelastic for price increases that reduce quantity demanded from 4 units to 3 units.
-inelastic for price declines that increase quantity demanded from 2 units to 3 units.
-elastic for price declines that increase quantity demanded from 5 units to 6 units.
-elastic for price increases that reduce quantity demanded from 4 units to 3 units.

elastic for price increases that reduce quantity demanded from 4 units to 3 units.

We would expect the cross elasticity of demand between dress shirts and ties to be:
-positive, indicating complementary goods.
-negative, indicating substitute goods.
-negative, indicating complementary goods.
-positive, indicating normal goods.

negative, indicating complementary goods.

The diagram shows two product demand curves. On the basis of this diagram, we can say that:
-over range P1P2 price elasticity of demand is greater for D1 than for D2.
-over range P1P2 price elasticity is the same for the two demand curves.
-not enough information is given to compare price elasticity's.
-over range P1P2 price elasticity of demand is greater for D2 than for D1.

over range P1P2 price elasticity of demand is greater for D1 than for D2.

The demand for a product is inelastic with respect to price if:
-a drop in price is accompanied by an increase in the quantity demanded.
-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.

consumers are largely unresponsive to a per unit price change.

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that:
-farm products are normal goods.
-the price elasticity of demand for farm products is less than 1.
-farm products are inferior goods.
-the price elasticity of demand for farm products is greater than 1.

the price elasticity of demand for farm products is less than 1.

Studies show that the demand for gasoline is:
-price elastic in both the short and long run.
-price inelastic in both the short and long run.
-price elastic in the short run but inelastic in the long run.
-price inelastic in the short run but elastic in the long run.

-price inelastic in both the short and long run

In which price range of the accompanying demand schedule is demand elastic?
-$2-$1.
-Below $1.
-$3-$2.
-$4-$3.

-$4-$3.

EC 232 Ch. 6 - Subjecto.com

EC 232 Ch. 6

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Answer the question on the basis of the following demand schedule:

Refer to the data. Which of the following is correct?
-Although the demand curve is convex to the origin, price elasticity of demand is constant throughout.
-Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges.
-A steep slope means demand is inelastic; a flat slope means demand is elastic.
-Although the slope of the demand curve is constant, price elasticity increases as we move from high to low price ranges.

– Although the slope of the demand curve is constant, price elasticity increases as we move from high to low price ranges.

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
-increase the quantity demanded by about 2.5 percent.
-increase the quantity demanded by about 25 percent.
-decrease the quantity demanded by about 2.5 percent.
-increase the quantity demanded by about 250 percent.

-increase the quantity demanded by about 25 percent

Refer to the diagram. Total revenue at price P1 is indicated by area(s):
-A.
-A + B.
-C + D.
-A + C.

– A+B

The more time consumers have to adjust to a change in price:
-the more likely the product is an inferior good.
-the greater will be the price elasticity of demand.
-the smaller will be the price elasticity of demand.
-the more likely the product is a normal good.

-the greater will be the price od elasticity of demand

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will:
-decrease the amount demanded by less than 10 percent.
-increase the amount demanded by less than 10 percent.
-increase the amount demanded by more than 10 percent.
-decrease the amount demanded by more than 10 percent

-increase the amount demanded by more than 10 percent.

(Last Word) Based on the concept of price elasticity of demand, which of the following cases is most likely to occur?
-Airlines charging lower fares for business travelers.
-Movie theaters charging higher prices for senior citizens.
-Golf courses charging higher prices for golf during the week than on weekends.
-Colleges charging lower tuition for low-income students.

-Colleges charging lower tuition for low-income students.

The demand schedules for such products as eggs, bread, and electricity tend to be:
-relatively price inelastic.
-relatively price elastic.
-of unit price elasticity.
-perfectly price elastic

-relatively price inelastic

Refer to the diagram. Between prices of $5.70 and $6.30:
-D1 and D2 have identical elasticity’s.
-D1 is more elastic than D2.
-D2 is more elastic than D1.
-D2 is an inferior good and D1 is a normal good.

-D1 is more elastic that D2

The price elasticity of demand is generally:
-negative, but the minus sign is ignored.
-positive, but the plus sign is ignored.
-positive for normal goods and negative for inferior goods.
-positive because price and quantity demanded are inversely related.

-negative, but the minus sign is ignored

A perfectly inelastic demand schedule:
-can be represented by a line parallel to the horizontal axis.
-rises upward and to the right but has a constant slope.
-cannot be shown on a two-dimensional graph.
-can be represented by a line parallel to the vertical axis.

-can be represented by a line parallel to the vertical axis.

Refer to the diagrams. The case of complementary goods is represented by figure:
-D.
-B.
-A.
-C.

-C

The elasticity of demand for a product is likely to be greater:
-the greater the amount of time over which buyers adjust to a price change.
-the smaller the number of substitute products available.
-if the product is a necessity, rather than a luxury good.
-the smaller the proportion of one’s income spent on the product.

-the greater the amount of time over which buyers adjust to a price change

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:
-relatively inelastic.
-perfectly elastic.
-decreasing.
-relatively elastic.

-relatively inelastic

A firm can sell as much as it wants at a constant price. Demand is thus:
-relatively elastic.
-perfectly inelastic.
-perfectly elastic.
-relatively inelastic.

-perfectly elastic

An antidrug policy that reduces the supply of heroin might:
-reduce street crime because the addict’s demand for heroin is highly elastic.
-increase street crime because the addict’s demand for heroin is highly inelastic.
-increase street crime because the addict’s demand for heroin is highly elastic.
-reduce street crime because the addict’s demand for heroin is highly inelastic.

-increase street crime because the addict’s demand for heroin is highly inelastic

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens’ management wanted a full house for the game, it would:
-set price so as to maximize its total revenue.
-set ticket prices at $5.
-encourage scalpers to sell their tickets for more than $7.
-set ticket prices at $9.

-set ticket prices at $5

Refer to the data. The price elasticity of demand is relatively inelastic:
-over the entire $6-$1 price range.
-in the $3-$1 price range.
-in the $6-$4 price range.
-in the $6-$5 price range only.

-in the $3-$1 price range

Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:
-positive and therefore X is a normal good.
-negative and therefore X is a normal good.
-positive and therefore X is an inferior good.
-negative and therefore X is an inferior good

-positive and therefore X is a normal good.

Which type of goods is most adversely affected by recessions?
-Goods for which the cross elasticity coefficient is positive.
-Goods for which the income elasticity coefficient is relatively low or negative.
-Goods for which the income elasticity coefficient is relatively high and positive.
-Goods for which the cross elasticity coefficient is negative.

-goods for which the income elasticity coefficient is relatively high and positive

Refer to the diagrams. In which case would the coefficient of cross elasticity of demand be positive?
-D
-C
-B
-A

-A

Suppose the income elasticity of demand for toys is +2.00. This means that:
-toys are an inferior good.
-a 10 percent increase in income will decrease the purchase of toys by 2 percent.
-a 10 percent increase in income will increase the purchase of toys by 2 percent.
-a 10 percent increase in income will increase the purchase of toys by 20 percent.

-a 10 percent increase in income will increase the purchase of lys by 20 percent.

A demand curve that is parallel to the horizontal axis is:
-relatively inelastic.
-relatively elastic.
-perfectly elastic.
-perfectly inelastic.

-perfectly elastic

The formula for cross elasticity of demand is percentage change in:
-quantity demanded of X/percentage change in price of X.
-quantity demanded of X/percentage change in price of Y.
-quantity demanded of X/percentage change in income.
-price of X/percentage change in quantity demanded of Y.

-quantity demanded of X/ percentage change in price of Y

Which of the following statements is not correct?
-In the range of prices in which demand is elastic, total revenue will diminish as price decreases.
-If the relative change in price is greater than the relative change in the quantity demanded associated with it, demand is inelastic.
-Total revenue will not change if price varies within a range where the elasticity coefficient is unity.
-Demand tends to be elastic at high prices and inelastic at low prices.

-in the range of prices in which demand is elastic, total revenue will diminish as price decreases.

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is:
-inelastic.
-parallel to the horizontal axis.
-shifting to the left.
-elastic.

-inelastic

Refer to the diagrams. The case of substitute goods is represented by figure:
-D.
-C.
-A.
-B.

-D

The concept of price elasticity of demand measures:

-the extent to which the demand curve shifts as the result of a price decline.
-the sensitivity of consumer purchases to price changes.
-the number of buyers in a market.
-the slope of the demand curve.

-the sensitivity of consumer purchases to price changes.

If a firm’s demand for labor is elastic, a union-negotiated wage increase will:
-cause a shortage of labor.
-cause the firm’s total payroll to decline.
-necessarily be inflationary.
-cause the firm’s total payroll to increase.

-cause a firms total payroll to decline.

If demand for a product is elastic, the value of the price elasticity coefficient is:
-less than one.
-zero.
-equal to one.
-greater than one

-greater than one

If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then:
-the price elasticity of demand is 0.44.
-A is a complementary good.
-the price elasticity of demand is 2.25.
-A is an inferior good.

-the price elasticity of demand is 2.25

Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game:
-varies inversely with ticket prices.
-is perfectly elastic.
-is perfectly inelastic.
-varies directly with ticket prices

-is perfectly inelastic

Refer to the data. If this demand schedule were graphed, we would find that:
-its slope diminishes as we move southeast down the curve.
-the data are inconsistent with the law of demand.
-its slope is constant throughout.
-its slope diminishes as we move northwest up the curve.

-its slope is constant throughout

Which of the following is not characteristic of the demand for a commodity that is elastic?
-Total revenue declines if price is increased.
-Buyers are relatively sensitive to price changes.
-The elasticity coefficient is less than one.
-The relative change in quantity demanded is greater than the relative change in price.

-the elasticity coefficient is less than one.

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded:
-decreased by 1.75 percent.
-decreased by 7 percent.
-decreased by 9 percent.
-increased by 7 percent.

-decreased by 7 percent

Which of the following is correct?
-The price elasticity coefficient applies to demand, but not to supply.
-If the demand for a product is inelastic, a change in price may cause total revenue to change in either the opposite or the same direction.
-If the demand for a product is inelastic, a change in price will cause total revenue to change in the opposite direction.
-If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction.

– if the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction.

The larger the coefficient of price elasticity of demand for a product, the:
-larger the resulting price change for an increase in supply.
-smaller the resulting price change for an increase in supply.
-more rapid the rate at which the marginal utility of that product diminishes.
-less competitive will be the industry supplying that product.

-smaller the resulting price change for an increase in supply.

Refer to the diagrams. The case of an inferior good is represented by figure:
-D.
-B.
-A.
-C.

-B

Refer to the information. Over the $11-$9 price range, demand is:
perfectly inelastic.
inelastic.
perfectly elastic.
elastic.

-elastic

Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that:
-an increase in the minimum wage would increase the total incomes of teenage workers as a group.
-the unemployment effect of an increase in the minimum wage would be relatively large.
-the cross elasticity of demand between teenage and adult workers is positive and very large.
-an increase in the minimum wage would decrease the total incomes of teenage workers as a group.

-an increase in the minimum wage would increase the total incomes of teenage workers as a group

The demand for a luxury good whose purchase would exhaust a big portion of one’s income is:
-perfectly price elastic.

-relatively price inelastic.

-relatively price elastic.

-perfectly price inelastic.

-relatively price elastic.

The diagram suggests that:
-X and Y are both normal goods.
-X and Y are independent goods.
-X and Y are both inferior goods.
-X and Y are substitute goods.

-X and Y are independent goods.

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (midpoint method) is:
-2.09.
-4.00.
-3.94.
-1.37.

-$1.37

Refer to the diagrams. In which case would the coefficient of income elasticity be negative?
-B
-C
-A
-D

-B

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:
-the demand curve for peanuts has shifted to the right.
-no inference can be made as to the elasticity of demand for peanuts.
-the demand for peanuts is elastic.
-the demand for peanuts is inelastic.

-the demand for peanuts is inelastic

Refer to the diagram. If price falls from P1 to P2, total revenue will become area(s):
-A + C.
-C + D.
-B + D.
-C.

-B+D

Refer to the diagram and assume a single good. If the price of the good increased from $5.70 to $6.30 along D1, the price elasticity of demand along this portion of the demand curve would be:
-0.8.
-1.0.
-2.0.
-1.2.

-1.2

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because:

-the income effect always exceeds the substitution effect.
-there are more good substitutes for soft drinks as a whole than for Pepsi specifically.
-soft drinks are normal goods.
-there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically.

-there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically.

The narrower the definition of a product:
-the smaller the number of substitutes and the greater the price elasticity of demand.
-the larger the number of substitutes and the greater the price elasticity of demand.
-the larger the number of substitutes and the smaller the price elasticity of demand.
-the smaller the number of substitutes and the smaller the price elasticity of demand.

-the larger the number of substitutes and the greater the price elasticity of demand

In which of the following cases will total revenue increase?
-Price rises and demand is inelastic.
-Price rises and demand is elastic.
-Price falls and supply is elastic.
-Price falls and demand is inelastic.

-price rises and demand is inelastic

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:
-be unchanged.
-increase.
-decrease.
-either increase or decrease, depending on what happens to supply.

-decrease

A perfectly inelastic demand curve:
-graphs as a line parallel to the horizontal axis.
-has a price elasticity coefficient of unity throughout.
-has a price elasticity coefficient greater than unity.
-graphs as a line parallel to the vertical axis

-graphs as a line parallel to the vertical axis

Refer to the diagrams. The case of a normal good is represented by figure:
D.
C.
A.
B.

-A

Suppose the total revenue curve is derived from a particular linear demand curve. That demand curve must be:
-inelastic for price increases that reduce quantity demanded from 4 units to 3 units.
-elastic for price declines that increase quantity demanded from 5 units to 6 units.
-inelastic for price declines that increase quantity demanded from 2 units to 3 units.
-unit elastic for price increases that reduce quantity demanded from 5 units to 4 units

-unit elastic for price increases that reduce quantity demanded from 5 units to 4 units

Refer to the information and assume the stadium capacity is 5,000. If the Mudhens’ management charges $7 per ticket:
-there will be 2,000 empty seats.
-the game will be sold out.
-there will be 1,000 empty seats.
-some fans who want to see the game will find that tickets are not available.

-there will be 1,000 empty seats.

The demand for a necessity whose cost is a small portion of one’s total income is:
-relatively price inelastic.
-perfectly price inelastic.
-relatively price elastic.
-perfectly price elastic.

-relatively price inelastic.

Refer to the diagram. If price falls from $10 to $2, total revenue:
-falls from A + B to B + C and demand is inelastic.
-rises from A + B to A + B + D + C and demand is elastic.
-rises from C + D to B + A and demand is elastic.
-falls from A + D to B + C and demand is inelastic.

-falls from A + B to B + C and demand is inelastic.

The price elasticity of demand of a straight-line demand curve is:
-1 at all points on the curve.
-inelastic but does not change at various points on the curve.
-elastic in high-price ranges and inelastic in low-price ranges.
-elastic but does not change at various points on the curve.

-elastic in high-price ranges and inelastic in low-price ranges.

If the demand for product X is inelastic, a 4 percent increase in the price of X will:
-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 less than 4 percent.
-increase the quantity of X demanded by more than 4 percent

-decrease the quantity of X demanded by less that 4 percent

Refer to the diagram, which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. If this rectangular hyperbola was a demand curve, we could say that it would be:
-elastic at low prices and inelastic at high prices.
-elastic at high prices and inelastic at low prices.
-impossible to generalize about its elasticity.
-of unit elasticity throughout.

-of unit elasticity throughout

Compared to coffee, we would expect the cross elasticity of demand for:
-tea to be positive, but negative for cream.
-both tea and cream to be positive.
-both tea and cream to be negative.
-tea to be negative, but positive for cream.

-tea to be positive, but negative for cream

The price of old baseball cards rises rapidly with increases in demand because:
-the demand for old baseball cards is price inelastic.
-the supply of old baseball cards is price inelastic.
-the demand for old baseball cards is price elastic.
-the supply of old baseball cards in price elastic.

the supply of old baseball cards is price inelastic

(Last Word) Which of the following is not an example of pricing based on group differences in elasticity of demand?
-Cash rebates for purchases of automobiles.
-Senior-citizen discounts at restaurants and motels.
-Child discounts for admission to theme parks.
-Discounted student prices for visits to museums

-cash rebated for purchases of automobiles

Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:
-positive and therefore X is an inferior good.
-positive and therefore X is a normal good.
-positive but less than one; therefore X is an inferior good.
-negative and therefore X is an inferior good

-positive but less than one; therefore X is an inferior good.

Refer to the data. The price elasticity of demand is relatively elastic:
-in the $3-$1 price range.
-in the $6-$4 price range.
-over the entire $6-$1 price range.
-in the $6-$5 price range only

– in the $6-$4 price range

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,

-$5 is not the equilibrium price of pizza.
-the demand for pizza is inelastic above $5 and elastic below $5.
-the demand for pizza is elastic above $5 and inelastic below $5.
-the demand for pizza is elastic both above and below $5.

– the demand for pizza is elastic about $5 and inelastic below $5

Refer to the data. Suppose quantity supplied declined by 23 units at each price, changing the equilibrium price in a direction and amount for you to determine. Over that price range, demand is:
-elastic.
-perfectly elastic.
-inelastic.
-perfectly inelastic

-inelastic

The state legislature has cut Gigantic State University’s appropriations. GSU’s Board of Regents decides to increase tuition and fees to compensate for the loss of revenue. The board is assuming that the:

-demand for education at GSU is elastic.
-coefficient of price elasticity of demand for education at GSU is unity.
-demand for education at GSU is inelastic.
-coefficient of price elasticity of demand for education at GSU is greater than unity.

-demand for education at GSU is inelastic

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad’s revenues would fall because of the rate hike. It can be concluded that:
-the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic.
-the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.
-both groups felt that the demand was inelastic but for different reasons.
-both groups felt that the demand was elastic but for different reasons.

-the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is:
-1.2.
-0.8.
-1.6.
-8.0.

-1.2

If quantity demanded is completely unresponsive to price changes, demand is:
-relatively elastic.
-perfectly inelastic.
-perfectly elastic.
-relatively inelastic.

-perfectly inelastic

Suppose that the total revenue curve is derived from a particular linear demand curve. That demand curve must be:
-elastic for price declines that increase quantity demanded from 6 units to 7 units.
-elastic for price increases that reduce quantity demanded from 8 units to 7 units.
-inelastic for price increases that reduce quantity demanded from 4 units to 3 units.
-inelastic for price declines that increase quantity demanded from 6 units to 7 units.

-elastic for price declines that increase quantity demanded from 6 units to 7 units

Refer to the information. Over the $7-$5 price range, demand is:
-perfectly elastic.
-perfectly inelastic.
-elastic.
-inelastic.

-inelastic

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is:
-negative and therefore X is an inferior good.
-positive and therefore X is a normal good.
-positive and therefore X is an inferior good.
-negative and therefore X is a normal good.

-negative and therefor X is an inferior good.

If the price elasticity of demand for a product is unity, a decrease in price will:
-increase the quantity demanded but decrease total revenue.
-increase the quantity demanded, but total revenue will be unchanged.
-have no effect upon the amount purchased.
-increase the quantity demanded and increase total revenue.

-increase the quantity demanded, but total revenue will be unchanged

Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?
-Chicken purchased at the grocery store for preparation at home (+0.25)
-Dinner at a nice restaurant (+1.8)
-Facial tissue (+0.6)
-Plasma screen and LCD TVs (+4.2)

-plasma screen and LCD TVs (+4.2)

Refer to the diagram. The decline in price from P1 to P2 will:
decrease total revenue by A.
increase total revenue by D.
increase total revenue by B + D.
increase total revenue by D – A.

-increase total revenue by D-A

Refer to the information. Over the $9-$7 price range, demand is:
-elastic.
-inelastic.
-perfectly elastic.
-perfectly inelastic.

-elastic

Refer to the diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer expenditure would:
-decrease if demand were either D1 or D2.
-increase if demand were either D1 or D2.
-decrease if demand were D2 only.
-decrease if demand were D1 only.

-decrease if demand were d2 only

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then:
-demand is inelastic.
-not enough information is given to make a statement about elasticity.
-demand is of unit elasticity.
-demand is elastic.

-demand is elastic

The demand for autos is likely to be:
-more price elastic than the demand for Honda Accords.
-of the same price elasticity as the demand for Honda Accords.
-perfectly inelastic.
-less price elastic than the demand for Honda Accords.

-less price elastic than the demand for Honda Accords.

If price and total revenue vary in opposite directions, demand is:
-relatively inelastic.
-perfectly elastic.
-relatively elastic.
-perfectly inelastic.

-relatively elastic

Suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10 percent, the quantity demanded will increase by:
-20 percent and total expenditures on bread will fall.
-2 percent and total expenditures on bread will rise.
-2 percent and total expenditures on bread will fall.
-20 percent and total expenditures on bread will rise.

-2 percent and total expenditures on bread will rise

The larger the positive cross elasticity coefficient of demand between products X and Y, the:
-smaller the price elasticity of demand for both products.
-the less sensitive purchases of each are to increases in income.
-stronger their complementariness.
-greater their substitutability.

-greater their substitutability

Most demand curves are relatively elastic in the upper-left portion because the original price:
-from which the percentage price change is calculated is small and the original quantity from which the percentage change in quantity is calculated is large.
-from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.
-and quantity from which the percentage changes in price and quantity are calculated are both large.
-and quantity from which the percentage changes in price and quantity are calculated are both small.

-from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.

When the percentage change in price is greater than the resulting percentage change in quantity demanded:
-an increase in price will increase total revenue.
-demand may be either elastic or inelastic.
-a decrease in price will increase total revenue.
-demand is elastic.

-an increase in price will increase total revenue.

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then:
-the demand for the product must have increased.
-the demand for the product is elastic in the $6-$5 price range.
-the demand for the product is inelastic in the $6-$5 price range.
-elasticity of demand is 0.74.

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

Refer to the data. The price elasticity of demand is unity:
-over the entire $6-$4 price range.
-throughout the entire price range because the slope of the demand curve is constant.
-in the $4-$3 price range only.
-over the entire $3-$1 price range.

-in the $4-$3 price range only

Refer to the diagrams. In which case would the coefficient of income elasticity be positive?
-A
-C
-D
-B

-A

Refer to the diagram. In the P3P4 price range, demand is:
-perfectly elastic.
-relatively elastic.
-of unit elasticity.
-relatively inelastic.

-relatively inelastic

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
-negative and therefore these goods are complements.
-positive and therefore these goods are complements.
-positive and therefore these goods are substitutes.
-negative and therefore these goods are substitutes

-negative and therefore the goods are complements

Refer to the diagram, which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. In comparing the price elasticity and the slope of this demand curve, we can conclude that the:
-slope of a demand curve measures its elasticity.
-elasticity of a demand curve measures its slope.
-slope of the curve varies, but its elasticity is constant.
-slope and elasticity of the curve are both constant throughout.

-slope of the curve varies, but its elasticity is constant

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, demand for X in this price range:
is inelastic.
is elastic.
has declined.
is of unit elasticity.

-is elastic

Suppose the total revenue curve is derived from a particular linear demand curve. That demand curve must be:
-inelastic for price increases that reduce quantity demanded from 4 units to 3 units.
-inelastic for price declines that increase quantity demanded from 2 units to 3 units.
-elastic for price declines that increase quantity demanded from 5 units to 6 units.
-elastic for price increases that reduce quantity demanded from 4 units to 3 units.

elastic for price increases that reduce quantity demanded from 4 units to 3 units.

We would expect the cross elasticity of demand between dress shirts and ties to be:
-positive, indicating complementary goods.
-negative, indicating substitute goods.
-negative, indicating complementary goods.
-positive, indicating normal goods.

negative, indicating complementary goods.

The diagram shows two product demand curves. On the basis of this diagram, we can say that:
-over range P1P2 price elasticity of demand is greater for D1 than for D2.
-over range P1P2 price elasticity is the same for the two demand curves.
-not enough information is given to compare price elasticity’s.
-over range P1P2 price elasticity of demand is greater for D2 than for D1.

over range P1P2 price elasticity of demand is greater for D1 than for D2.

The demand for a product is inelastic with respect to price if:
-a drop in price is accompanied by an increase in the quantity demanded.
-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.

consumers are largely unresponsive to a per unit price change.

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that:
-farm products are normal goods.
-the price elasticity of demand for farm products is less than 1.
-farm products are inferior goods.
-the price elasticity of demand for farm products is greater than 1.

the price elasticity of demand for farm products is less than 1.

Studies show that the demand for gasoline is:
-price elastic in both the short and long run.
-price inelastic in both the short and long run.
-price elastic in the short run but inelastic in the long run.
-price inelastic in the short run but elastic in the long run.

-price inelastic in both the short and long run

In which price range of the accompanying demand schedule is demand elastic?
-$2-$1.
-Below $1.
-$3-$2.
-$4-$3.

-$4-$3.

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