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SESSION 4
SESSION 4
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Answers
1
price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is
Approximately 1.33
0.75
1
Approximately 0.33
2
If two goods are substitutes, their cross-price elasticity of demand should be:
Greater to 0
Negative yet almost equal 0
Less than 0
Equal to 0
3
Price of university sweatshirts goes from £10 to £20 and the quantity supplied from 20 to 30.Supply price elasticity is
1.50
0.66
0.60
1.66
4
YET for peaches is 1.43. income grows by 15% in a period, how will that affect total revenue?
Total revenue will rise
Total revenue will fall
Not enough information is given to answer the question
Total revenue will remain unchanged
5
If the income elasticity of demand for a good is negative, the good is said to be
A positive good
A normal good
A substitute good
An inferior good
6
XED of electricity with respect to the price of natural gas has been estimated as being equal to 0.2, This implies that
One is inferior and one's normal, but we need more info to know which
Electricity and natural gas are complements
Natural gas and electricity are both normal goods
Electricity and natural gas are substitutes
7
There is no total revenue test for price elasticity of supply because:
Price and quantity are usually inversely related
Price and quantity are usually positively related
Total revenue won't usually change in the direction of supply price change
Price and quantity are always negatively related.
8
.-.
10%; fall
10%; increase
2.5%; fall
5%; stay constant
9
If the quantity supplied responds substantially to a relatively small change in price, supply is:
Price-inelastic
Price-elastic
Negatively sloped
Insensitive to changes in price
10
In short run, the price elasticity of supply for foods low in carbohydrates is lower than it'll be in the long run cause
In the long run, the price elasticity of supply tends to be perfectly inela
In the short run, prices tend to stay constant
In short run, food producers don't have as much time to respond to changes
In short run, inputs are more available to produce these foods than in long
11
When Joe’s income is £100xweek, he spends £20xweek on pizza. When his income rises to £110xweek, he spends £25xweek.
Pizza is a normal good and luxury
Pizza's an inferior good as expenditure rose by less than increase in incom
Pizza is a normal good and necessity
Demand for pizza is price-elastic
12
The price elasticity of supply is computed as the percentage change in the:
Price divided by the percentage change in the quantity supplied
Quantity supplied divided by the percentage change in the quantity demanded
Quantity supplied divided by the percentage change in consumer income
Quantity supplied divided by the percentage change in price
13
Gala apples are a type of apple with many substitutes and is not very expensive. Which best represents the demand curve
A
B
D
C
14
Which graph shows a perfectly elastic supply curve?
A
C
B
D
15
Which graph shows a perfectly inelastic supply curve?
a
c
b
d
16
If the price of chocolate-covered peanuts increases and the demand for strawberry licorice twists increases, the goods r
Inferior goods
Complementary goods
Substitute goods
Normal goods
17
Price of e-Books decreases from £6 to £4, total revenue changes from ______ to _______, which means that demand is___
£180; £240; elastic
£240; £200; inelastic
£240; £200; elastic
£40 to £50; inelastic
18
PED for gasoline in short run is 0.1. Price of oil increases how will this effect total expenditures for oil in shortrun
Demand will not change much, but total expenditures will rise
Demand will decrease, but total expenditures will rise
Total expenditures will remain unchanged
Demand will stay the same, but total expenditures will fall
19
When a book’s price is lowered from £70 to £60, sales rise from 10,000 to 15,000. The price elasticity of demand is:
3.5
2.6
50
500
20
Which of the following would be most likely to have a vertical supply curve?
Oil
Paintings by Van Gogh
Salt
Insulin
21
A price ceiling will cause a larger shortage when demand is _________ and supply is ________
Elastic; inelastic
Inelastic; inelastic
Perfectly inelastic; elastic
Elastic; elastic
22
The pair of items that is most likely to have a negative cross-price elasticity of demand is:
Aspirin and hamburgers
Margarine and butter
Ketchup and coffee
Hot dogs and mustard
23
A linear demand curve:
Has a price elasticity of demand equal to one
Has a calculated price elasticity of demand that is positive
Can have both elastic and inelastic price elasticities of demand
Has a constant price elasticity of demand
24
Demand Schedule is
has same elasticity when price goes from £4to£6 as when it goes from £6to8£
less elastic when price goes from £4to£6 than when it increases from £6to8£
Demand schedule is both times unit elastic
more elastic when price goes from £4to£6 than when it increases from £6to8£
25
When actually calculated for a normal demand curve, the price elasticity of demand will be
Always negative
Usually equal to 1
Always greater than 1
Always positive
26
Which demand curve has the highest price elasticity?
4
3
1
2
27
Which graph shows a perfectly elastic demand curve?
B
C
D
A
28
>(
Total expenditures will remain unchanged
Total expenditures will rise
Total expenditures will fall
There is not enough information given to answer the question
29
XED between demand for BK burgers and the price of McDonald’s burgers is 0.8. If McDonald’s increases the price by 10%
Burger King will sell 8% more burgers
We can't tell what'll happen to Burger King,but McDonald’s will sell 8%less
Burger King will sell 8% fewer burgers
Burger King will sell 10% more burgers
30
Suppose the price of cereal rose by 25% and the quantity of milk sold decreased by 50%. We know that the:
Cross-price elasticity between cereal and milk is -0.5
Cross-price elasticity of demand for milk is 2
Price elasticity of demand for milk is 2
Cross-price elasticity between cereal and milk is -2
31
A perfectly elastic supply curve is:
Vertical
Upward sloping
Horizontal
Downward sloping
32
If the income elasticity of demand for a good is positive, the good is said to be:
A positive good
A substitute good
An inferior good
A normal good
33
.-.
Supply; inelastic
Supply; elastic
Demand; elastic
Demand; inelastic
34
A price floor will cause a larger surplus when demand is _________ and supply is ________
Inelastic; inelastic
Elastic; elastic
Elastic; inelastic
Perfectly inelastic; elastic
35
Which of the following will lead to a decrease in total revenue?
The price goes up and demand is price-inelastic
The price declines and demand is price-elastic
The price increases and demand is price-elastic
The price goes up and demand is perfectly inelastic
36
Suppose the price of gasoline increases 10% and quantity demanded in Orlando drops 5% per day. Demand for gasoline is
Price unit-elastic
Price inelastic
Perfectly price inelastic
Price elastic
37
The percent change in quantity demanded divided by the percent change in income, all other things unchanged, is:
Quantity elasticity of demand
Income elasticity of demand
Cross-price elasticity of demand
Price elasticity of demand
38
If the price of e-Books increases from £6 to £8, total revenue ________ which means that demand is ________.
Remains constant; unit elastic
Decreases; inelastic
Remains constant; elastic
Increases; elastic
39
The price elasticity of demand is computed as the percentage change in the:
Quantity demanded divided by the percentage change in the price
Quantity demanded divided by the percentage change in income
Quantity demanded divided by the percentage change in the quantity supplied
Price divided by the percentage change in the quantity demanded
40
Which graph shows a perfectly inelastic demand curve?
D
A
C
B
41
If the estimated price elasticity of demand for foreign travel is 4, then:
10% increase in the price increases the quantity demanded by 40%
20% increase in the price increases the quantity demanded by 80%
The demand for foreign travel is inelastic
20% decrease in the price increases the quantity demanded by 80%
42
price of gasoline rises 5% and quantity purchased falls 1%. The price elasticity of demand is equal to __ and demand is:
5; elastic
0.2; elastic
5; inelastic
0.2; inelastic
43
YET of eggs is 0.57. Income Grows by 5%, how will demand be affected?
Demand will increase by more than 5.7%
Demand will decrease by more than 5.7%
Demand will decrease
Demand will increase by about 2.9%
44
The supply curve for a good will be more elastic if:
Production inputs are readily available at a relatively low cost
The good is a luxury item
There is very little time for producers to respond to a price change
Spending on the good accounts for a large share of a consumer’s income
45
Suppose that an increase in the price of a good lead to an increase in total revenue. its current price the good must be
Inferior
Price elastic
Perfectly price-elastic
Price-inelastic
46
Demand Price elasticity for berries is 1.5. Climate change destroys 1/4 of berries. how will that affect total revenue?
Total revenue will rise
Not enough information is given to answer the question
Total revenue will fall
Total revenue will remain unchanged
47
On a linear demand curve , demand at lower prices will:
Be price unit-elastic
Have negative price elasticity
Be price –inelastic
Be price-elastic
48
If two goods are complements, their cross-price elasticity of demand should be:
Less than 0
Negative yet almost equal 0
Greater than 0
Equal to 0
49
If a good is a necessity with few substitutes, then demand will tend to:
Be the same as that of a luxury good
Have price elasticity equal to 1
Be more price-elastic
Be less price-elastic
50
The income elasticity of demand for peanut butter is -0.5. you expect local incomes to decrease by 20%. You should stock
10% less peanut butter on the shelves
20% more peanut butter on the shelves
5% more peanut butter on the shelve
10% more peanut butter on the shelves
51
The price elasticity of demand measures the responsiveness of the change in the:
Slope of the demand curve to a change in the price
Slope of the demand curve to a change in the quantity demanded
Price to a change in the quantity demanded
Quantity demanded to a change in the price
52
On a linear demand curve:
Elasticity is the same at all points on the demand curve
Demand is elastic at low prices
Demand is elastic at high prices
Demand is inelastic at high prices
53
For which of the following is the cross-price elasticity of demand most likely a large positive number?
French fries and onion rings
DVDs and milk
Hockey pucks and hockey sticks
All of these, because the cross-price elasticity in always a positive numbe
54
./.
Substitutes; complements
Inelastic good; elastic goods
Elastic goods, complements
Complements; substitutes
55
Which demand curve has the lowest price elasticity?
1
4
3
2
