Chapter 5: Elasticity and its Application
Q2013. (0.2 point)
Which of the following is determinant of the price elasticity of demand for a good
EXCEPT?
a. the time horizon
b. the steepness or flatness of the supply curve for the good
c. the definition of the market for the good
d. the availability of substitutes for the good
Q2014. (0.2 point)
The price elasticity of demand is computed
a. percentage change in price divided by the percentage change in quantity demanded.
b. change in quantity demanded divided by the change in the price.
c. percentage change in quantity demanded divided by the percentage change in price.
d. percentage change in quantity demanded divided by the percentage change in income.
Q2015. (0.2 point)
If the price elasticity of demand for a good is 20.0, then a 3 percent increase in price
results in
a. 0.2 percent decrease in the quantity demanded.
b. 3.5 percent decrease in the quantity demanded.
c. 9 percent decrease in the quantity demanded.
d. 60 percent decrease in the quantity demanded.
Q2016. (0.2 point)
When quantity demanded responds slightly to changes in price, demand is said to be
a. elastic.
b. inelastic.
c. dynamic.
d. variable.
Q2017. (0.2 point)
If the quantity demanded of a certain good responds strongly to a change in the price of
the good, then the
a. demand for the good is said to be elastic.
b. demand for the good is said to be inelastic.
c. law of demand does not apply to the good.
d. law of demand can apply to the good.
Q2018. (0.2 point)
When the price of a good is $4, the quantity demanded is 100 units; when the price is $6,
the quantity demanded is 60 units. Using the midpoint method, the price elasticity of
demand is
a. 0.25.
b. 1.25.
c. 1.66.
d. 1.9.
Q2019. (0.2 point)
A decrease in price will cause………….. when demand is elastic.
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue but an increase in quantity demanded.
d. no change in total revenue but a decrease in quantity demanded.
Q2020. (0.2 point)
Income elasticity of demand measures how
a. the quantity supplied changes as consumer income changes.
b. the quantity demanded changes as consumer income changes.
c. the price of a good is affected as consumer income changes.
d. consumer can sell good as consumer income changes .
2021. (0.2 point)
Which of the following could be the cross-price elasticity of demand for two goods that
are complements?
a. -1.6
b. 0.2
c. 0.5
d. 1.2
Q2022. (0.2 point)
If a 20% change in price results in a 60% change in quantity supplied, then the price
elasticity of supply is about
a. 3.0, and supply is elastic.
b. 1.03, and supply is inelastic.
c. 0.25, and supply is elastic.
d. 1.75, and supply is inelastic.
Q2030. (0.5 point)
For water or diamonds , would you expect the demand to be more price elastic? Why?
Q2031. (0.5 point)
Is demand elastic or inelastic if the elasticity is greater than 1?
Is demand perfectly elastic or perfectly inelastic if the elasticity equals zero ?
Q2032. (0.5 point)
What is good with an income elasticity less than zero?
Essays
Q2034. (3 points)
Suppose that businessman and visitors have the following demand for airline tickets from
Chicago to Ohio:
Price Quantity demanded Quantity demanded
(businessman) (visitors)
$150 2100 tickets 1000 tickets
200 2000 800
250 1900 600
300 1800 400
As the price of tickets rises from $200 to $250 :
a. What is the price elasticity of demand for businessman ? (Use the midpoint method in
your calculations ). (1p)
b. What is the price elasticity of demand for visitors? (Use the midpoint method in your
calculations). (1p)
c. Why might visitors have a different elasticity from businessman? (1p)