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Which of the following would result in a higher absolute value of the price elasticity of demand for a product?


A) A wide variety of substitutes are available for the good.
B) The time period under consideration is short.
C) The good is a necessity.
D) The expenditure on the good is small relative to one's budget.

E) B) and C)
F) None of the above

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If demand is perfectly elastic,the absolute value of the price elasticity coefficient is


A) infinity.
B) zero.
C) more than one.
D) equal to the absolute value of the slope of the demand curve.

E) None of the above
F) A) and D)

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Suppose a decrease in the supply of bottled water results in a decrease in revenue.This indicates that


A) the demand for bottled water is inelastic in the price range considered.
B) the demand for bottled water is elastic in the price range considered.
C) the supply of bottled water is inelastic in the price range considered.
D) the supply of bottled water is elastic in the price range considered.

E) All of the above
F) A) and C)

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The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

A) True
B) False

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The income elasticity of demand measures


A) the responsiveness of quantity demanded to changes in income.
B) how a consumer's purchasing power is affected by a change in the price of a product.
C) the percentage change in the price of a product divided by the percentage change in consumer income.
D) the income effect of a change in price.

E) B) and C)
F) A) and D)

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When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent.This indicates that the demand for tortilla chips is


A) inelastic.
B) elastic.
C) unit-elastic.
D) perfectly inelastic.

E) A) and C)
F) C) and D)

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If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is


A) unit-elastic.
B) perfectly elastic.
C) relatively inelastic.
D) elastic.

E) A) and B)
F) All of the above

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Calculate the income elasticity if an 8 per cent increase in income leads to a 4 per cent increase in quantity demanded for organic produce.


A) -0.66
B) 0.5
C) 1.5
D) 2

E) A) and D)
F) A) and B)

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In order to prove that Motrin and Ibuprofen are substitutes,one should measure the ________ and get a ________.


A) cross-price elasticity; positive number
B) cross-price elasticity; negative number
C) price elasticity of demand; number greater than 1 (in absolute value)
D) price elasticity of demand; number less than 1 (in absolute value)

E) C) and D)
F) A) and D)

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Barbara,the consummate hostess,proudly announced as she served dessert,'A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake.' Evidently,Barbara views


A) port and chocolate cake as luxury items.
B) port and chocolate cake as necessities.
C) port and chocolate cake as complementary goods.
D) port and chocolate cake as substitutes to other desserts.

E) A) and D)
F) B) and D)

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Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a tonne to $180 a tonne and quantity sold decreased from 800 tonnes to 240 tonnes.What is the absolute value of the price elasticity of demand?


A) 0.11
B) 0.37
C) 2.69
D) 9.33

E) B) and C)
F) A) and D)

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Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6.What does this mean?


A) A 1 per cent decrease in the price of grapefruit juice leads to a 6 per cent increase in orange juice consumption.
B) A 6 per cent increase in the price of grapefruit juice leads to a 1 per cent increase in orange juice consumption.
C) If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased.
D) The demand for orange juice is 6 times more than the demand for grapefruit juice.

E) A) and B)
F) A) and C)

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Suppose that at a price of $55,100 units were sold while at a price of $33,153 units were sold.Without calculating the price elasticity value,can you determine whether demand is elastic,unit-elastic,or inelastic? Explain your answer.

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The first total revenue is ($5...

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When Audrina raised the price of her homemade cookies,her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

A) True
B) False

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The process involved in bringing oil to world markets can take years.Substitutes for oil-based products such as petrol are limited.As a result


A) the supply of oil is very elastic and the demand for oil is very elastic over short periods of time.
B) the supply of oil is very inelastic and the demand for petrol is inelastic over short periods of time.
C) the supply of oil and the demand for oil shift to the right over short periods of time.
D) the supply of oil and the demand for oil are both perfectly elastic over short periods of time.

E) A) and B)
F) B) and C)

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Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free market equilibrium price in the market for milk?


A) Sales revenue falls.
B) Sales revenue rises.
C) Sales revenue remains unchanged.
D) It cannot be determined without information on prices.

E) B) and C)
F) A) and B)

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Suppose the supply of bicycles is price elastic.This means that


A) consumers will respond significantly to an increase in the quantity supplied of bicycles.
B) suppliers will increase the quantity supplied of bicycles, but not immediately.
C) suppliers face many substitutes for bicycles.
D) suppliers will respond significantly to changes in the price of bicycles.

E) None of the above
F) B) and D)

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Income elasticity measures


A) how a good's quantity demanded responds to change in the good's price.
B) how a good's quantity demanded responds to change in the price of another good.
C) how a good's quantity demanded responds to change in buyers' incomes.
D) how a good's quantity demanded responds to producers' incomes.

E) None of the above
F) C) and D)

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Which of the following statements is true?


A) If the price of a good is lowered and total revenue decreases, demand is elastic.
B) If the price of a good is raised and total revenue does not change, demand is perfectly elastic.
C) If the price of a good is raised and total revenue increases, demand is inelastic.
D) If the price of a good is lowered and total revenue increases, demand is inelastic.

E) B) and C)
F) None of the above

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A supply curve that is vertical


A) is perfectly elastic.
B) is perfectly inelastic.
C) is impossible.
D) has an elasticity equal to 1.

E) B) and C)
F) C) and D)

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