Question 1

Income elasticity of demand is the percentage change in

Accepted Answer

A)  demand divided by the percentage change in the price of the product.
B)  demand divided by the percentage change in the price of different products.
C)  quantity demanded divided by the absolute price of the product.
D)  quantity demanded of a product divided by the percentage change in income.
E)  income divided by the percentage change in quantity demanded.F) A) and B)
G) None of the above

Question 2

The minimum wage is an example of a

Accepted Answer

A)  price floor.
B)  price ceiling.
C)  market equilibrium.
D)  restriction on quantity.
E)  price elasticity.F) A) and D)
G) A) and C)

Question 3

Suppose the price of a good falls from $200 to $150,and the quantity demanded changes from 45,000 units to 50,500 units.Calculate the price elasticity of demand using the midpoint formula,and indicate whether demand is elastic,inelastic,or unit elastic.

Accepted Answer

The answer of Suppose the price of a good falls...

Question 4

If the price elasticity of demand is 5.3,demand is said to be

Accepted Answer

A)  inelastic.
B)  elastic.
C)  unit elastic.
D)  perfectly inelastic.
E)  perfectly elastic.F) A) and E)
G) B) and E)

Question 5

Which of the following is the equation for price elasticity of supply?

Accepted Answer

A)   
B)   
C)   
D)   
E)   F) A) and C)
G) None of the above

Question 6

A horizontal demand curve is

Accepted Answer

A)  unit elastic.
B)  relatively inelastic.
C)  relatively elastic.
D)  perfectly inelastic.
E)  perfectly elastic.F) B) and E)
G) A) and B)

Question 7

If price gouging is prohibited by the government so that sellers cannot suddenly raise prices,then a sudden drop in gasoline supply due to bad weather will most likely result in

Accepted Answer

A)  an equilibrium in the gasoline market.
B)  a surplus in the gasoline market.
C)  a shortage in the gasoline market.
D)  high profits for sellers.
E)  a sudden increase in the gasoline supply.F) None of the above
G) C) and D)

Question 8

Which of the following statements about the price elasticity of demand is true?

Accepted Answer

A)  Slope and elasticity measure the same things.
B)  Price elasticity of demand varies depending on how price and quantity are measured.
C)  It is important to know whether the price elasticity of demand is a positive or negative number.
D)  The slope of a demand curve does not tell us the price elasticity of demand.
E)  Price elasticity is the same everywhere along a demand curve of any shape.F) C) and E)
G) B) and D)

Question 9

Consider two demand curves with different slopes.It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Accepted Answer

A) True 
 B)False

Question 10

Rent control for apartments in New York City is an example of a

Accepted Answer

A)  price floor.
B)  price ceiling.
C)  market equilibrium.
D)  restriction on quantity.
E)  price elasticity.F) None of the above
G) A) and B)

Question 11

Calculate the price elasticity of demand if a .8 percent change in the price of a product results in a .25 percent change in quantity demanded,and indicate whether demand is elastic,inelastic,or unit elastic.

Accepted Answer

0.25/.8 = ...

Question 12

When the demand curve is a vertical line,demand is

Accepted Answer

A)  relatively elastic.
B)  perfectly inelastic.
C)  unit elastic.
D)  infinitely elastic.
E)  cross-elastic.F) A) and B)
G) B) and D)

Question 13

Which of the following is not a likely result of a price floor?

Accepted Answer

A)  Excess supply of a good
B)  A persistent shortage
C)  A market price higher than equilibrium
D)  The quantity supplied exceeds the quantity demanded.
E)  Resources are diverted away from other activities to deal with the extra output.F) A) and B)
G) All of the above

Question 14

Given the following income elasticities of demand,would you classify the good as a luxury,necessity,or inferior good?
(A)Salt: elasticity = .3.
(B)Potatoes: elasticity = -.1.
(C)Frozen dinners: elasticity = .9.
(D)Restaurant meals: elasticity = 1.4

Accepted Answer

(A) Necessity
(B) I...

Question 15

The price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 16

If the quantity supplied of a product stays the same no matter what its price,then the elasticity of supply of the product is

Accepted Answer

A)  perfectly elastic.
B)  unit elastic.
C)  zero.
D)  perfectly inelastic.
E)  infinity.F) C) and D)
G) A) and D)

Question 17

The price elasticity of demand is the same as the slope of the demand curve.

Accepted Answer

A) True 
 B)False

Question 18

If the cross-price elasticity between two goods is positive,then it is most likely that the two goods are

Accepted Answer

A)  both inferior goods.
B)  both luxury goods.
C)  complements.
D)  substitutes.
E)  necessities.F) B) and C)
G) A) and E)

Question 19

The price elasticity of demand is expressed as the

Accepted Answer

A)  percentage change in the quantity demanded divided by the percentage change in income.
B)  percentage change in the price divided by the percentage change in the quantity demanded.
C)  percentage change in the quantity demanded divided by the percentage change in the price.
D)  percentage change in supply divided by the percentage change in demand.
E)  absolute change in the quantity demanded divided by the absolute change in the price.F) B) and D)
G) All of the above

Question 20

Price elasticity of supply is 1 minus the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Exam 4: Subtleties of the Supply and Demand Model: Price Floors,price Ceilings,and Elasticity

Price elasticity of supply is 1 minus the price elasticity of demand.

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The price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price.

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Income elasticity of demand is the percentage change in

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Given the following income elasticities of demand,would you classify the good as a luxury,necessity,or inferior good? (A)Salt: elasticity = .3. (B)Potatoes: elasticity = -.1. (C)Frozen dinners: elasticity = .9. (D)Restaurant meals: elasticity = 1.4

Correct Answerverified(A) Necessity (B) I...View AnswerShow Answer

Calculate the price elasticity of demand if a .8 percent change in the price of a product results in a .25 percent change in quantity demanded,and indicate whether demand is elastic,inelastic,or unit elastic.

Correct Answerverified0.25/.8 = ...View AnswerShow Answer

Consider two demand curves with different slopes.It is possible to predict ranges on each demand curve where the price elasticities of demand will be different.

Correct AnswerverifiedShow Answer

If the cross-price elasticity between two goods is positive,then it is most likely that the two goods are

Correct AnswerverifiedShow Answer

If the price elasticity of demand is 5.3,demand is said to be

Correct AnswerverifiedShow Answer

Rent control for apartments in New York City is an example of a

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Which of the following is not a likely result of a price floor?

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When the demand curve is a vertical line,demand is

Correct AnswerverifiedShow Answer

The minimum wage is an example of a

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Suppose the price of a good falls from $200 to $150,and the quantity demanded changes from 45,000 units to 50,500 units.Calculate the price elasticity of demand using the midpoint formula,and indicate whether demand is elastic,inelastic,or unit elastic.

Correct AnswerverifiedShow Answer

If the quantity supplied of a product stays the same no matter what its price,then the elasticity of supply of the product is

Correct AnswerverifiedShow Answer

If price gouging is prohibited by the government so that sellers cannot suddenly raise prices,then a sudden drop in gasoline supply due to bad weather will most likely result in

Correct AnswerverifiedShow Answer

Which of the following statements about the price elasticity of demand is true?

Correct AnswerverifiedShow Answer

Which of the following is the equation for price elasticity of supply?

Correct AnswerverifiedShow Answer

A horizontal demand curve is

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The price elasticity of demand is expressed as the

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The price elasticity of demand is the same as the slope of the demand curve.

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(A) Necessity
(B) I...
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0.25/.8 = ...
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