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Principles of Microeconomics, 12e (Case/Fair/Oster)
Chapter 5 Elasticity
5.1 Price Elasticity of Demand
Refer to the information provided in Figure 5.1 below to answer the question(s) that follow.
Figure 5.1
1) Refer to Figure 5.1. The demand for tickets is
A) perfectly price elastic.
B) perfectly price inelastic.
C) unit price elastic.
D) perfectly income inelastic.
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
2) Refer to Figure 5.1. The price elasticity of demand for tickets
A) is equal to zero.
B) is equal to 1.
C) is infinity.
D) varies at every point along the demand curve.
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
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3) Demand determines price entirely when
A) demand is downward sloping.
B) demand is perfectly inelastic.
C) supply is perfectly inelastic.
D) supply is perfectly elastic.
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
4) A perfectly price elastic demand curve will be a ________ line.
A) horizontal
B) vertical
C) positively sloped
D) negatively sloped
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
5) When the price of coffee decreases 5%, quantity demanded increases 5%. The price elasticity of
demand for coffee is ________ and total revenue from coffee sales will ________.
A) elastic; decrease
B) elastic; increase
C) inelastic; decrease
D) unit elastic; not change
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
6) When the price of fresh fish increases 10%, quantity demanded decreases 5%. The price elasticity of
demand for fresh fish is ________ and total revenue from fresh fish sales will ________.
A) inelastic; increase
B) inelastic; decrease
C) elastic; decrease
D) elastic; increase
Topic: Price Elasticity of Demand
Skill: Definition
AACSB: Analytical Thinking
Learning Outcome: Micro-6
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7) When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of
demand for fresh fish is
A) perfectly inelastic.
B) elastic.
C) inelastic.
D) unitary elastic.
Topic: Price Elasticity of Demand
Skill: Definition
AACSB: Analytical Thinking
Learning Outcome: Micro-6
8) When the price of coffee increases 5%, quantity demanded decreases 10%. The price elasticity of
demand for coffee is ________ and total revenue from coffee sales will ________.
A) inelastic; increase
B) inelastic; decrease
C) elastic; increase
D) elastic; decrease
Topic: Price Elasticity of Demand
Skill: Definition
AACSB: Analytical Thinking
Learning Outcome: Micro-6
9) The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price
elasticity of demand is –2.5, the company must
A) increase price by 2.0%.
B) decrease price by 2.0%.
C) increase price by 0.5%.
D) decrease price by 0.5%.
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
10) A government wants to reduce electricity consumption by 10%. The price elasticity of demand for
electricity is –5. The government must ________ the price of electricity by ________.
A) raise; 2.0%
B) raise; 0.5%
C) raise; 1.25%
D) lower; 0.5%
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
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11) A government wants to reduce electricity consumption by 5%. The price elasticity of demand for
electricity is –0.5. The government must ________ the price of electricity by ________.
A) raise; 10.0%
B) raise; 1.0%
C) raise; 0.1%
D) lower; 0.5%
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
12) The price elasticity of demand for kale in Texas is –2, and the price elasticity of demand for kale in
California is –0.5. In other words, demand in Texas is ________, and demand in California is ________.
A) elastic; inelastic
B) inelastic; elastic
C) elastic; unit elastic
D) inelastic; unit inelastic
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Analytical Thinking
Learning Outcome: Micro-6
13) The price elasticity of demand for heart transplants is perfectly inelastic. Thus, the price elasticity
demand for heart transplants is
A) 1.0.
B) 0.0.
C) –1.0.
D) –100.0.
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
14) Demand determines ________ entirely when ________ is perfectly inelastic.
A) quantity; supply
B) price and quantity; supply
C) price; supply
D) price and quantity; demand
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
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15) A perfectly price inelastic demand curve will be a ________ line.
A) horizontal
B) vertical
C) positively sloped
D) negatively sloped
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
16) A ________ line is a perfectly price elastic demand curve.
A) horizontal
B) vertical
C) positively sloped
D) negatively sloped
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
17) When the price of cheddar cheese increases 15%, quantity demanded decreases 15%. The price
elasticity of demand for cheddar cheese is ________ and total revenue from cheddar cheese sales will
________.
A) elastic; decrease
B) elastic; increase
C) inelastic; decrease
D) unit elastic; not change
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
18) When the price of oysters decreases 25%, quantity demanded increases 10%. The price elasticity of
demand for oysters is ________ and total revenue from oyster sales will ________.
A) inelastic; increase
B) inelastic; decrease
C) elastic; decrease
D) elastic; increase
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
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19) When the price of oysters decreases 25%, quantity demanded is unchanged. The price elasticity of
demand for oysters is
A) perfectly inelastic.
B) elastic.
C) inelastic.
D) unitary elastic.
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
20) When the price of tea decreases 7%, quantity demanded increases 12%. The price elasticity of demand
for tea is ________ and total revenue from tea sales will ________.
A) inelastic; increase
B) inelastic; decrease
C) elastic; increase
D) elastic; decrease
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
21) The All Smiles Greeting Card Company wants to increase the quantity of greeting cards it sells by
20%. If the price elasticity of demand is –5.0, the company must
A) increase price by 4.0%.
B) decrease price by 4.0%.
C) increase price by 0.25%.
D) decrease price by 0.25%.
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
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22) A government wants to reduce electricity consumption by 40%. The price elasticity of demand for
electricity is –10. The government must ________ the price of electricity by ________.
A) raise; 4.0%
B) raise; 0.25%
C) raise; 1.25%
D) lower; 0.25%
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
23) A government wants to reduce electricity consumption by 10%. The price elasticity of demand for
electricity is –0.1. The government must ________ the price of electricity by ________.
A) raise; 100.0%
B) raise; 10.0%
C) raise; 1.0%
D) lower; 20%
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
24) The price elasticity of demand for bottled water in New York is –3, and the price elasticity of demand
for bottled water in Florida is –0.6. In other words, demand in New York is ________ and demand in
Florida is ________.
A) elastic; inelastic
B) inelastic; elastic
C) elastic; unit elastic
D) inelastic; unit inelastic
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
25) An increase in quantity demanded caused no change in the equilibrium price. Thus, demand must be
A) perfectly inelastic.
B) inelastic.
C) elastic.
D) perfectly elastic.
Topic: Other Important Elasticities
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
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26) The price elasticity of demand for alfalfa is perfectly elastic. Thus, the price elasticity demand for
alfalfa is
A) 1.0.
B) 0.0.
C) –1.0.
D) infinity.
Topic: Price Elasticity of Demand
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-6
27) Price elasticity of demand is calculated as the ratio of the change in quantity demanded to the change
in price.
Topic: Price Elasticity of Demand
Skill: Definition
Learning Outcome: Micro-6
28) The price elasticity of demand is generally negative to reflect the indirect relationship between the
quantity demanded of a good and its price.
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
29) Perfectly inelastic demand is represented as a vertical line.
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
30) Perfectly elastic demand is represented as a horizontal line.
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
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31) Price elasticity of demand is calculated as the change in price divided by the change in quantity
demanded.
Topic: Price Elasticity of Demand
Skill: Definition
Learning Outcome: Micro-6
32) Slope is the best measure of responsiveness of the quantity demanded to a price change.
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
33) Perfectly elastic demand has an elasticity value of zero.
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
34) Perfectly inelastic demand has an elasticity value of 1.
Answer: FALSE
Diff: 1
Topic: Price Elasticity of Demand
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-6
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Copyright © 2017 Pearson Education, Inc.
5.2 Calculating Elasticities
Refer to the information provided in Figure 5.2 below to answer the question(s) that follow.
Figure 5.2
1) Refer to Figure 5.2. If the price of a hamburger increases from $8 to $10, the price elasticity of demand
equals ________. Use the midpoint formula.
A) –0.33
B) –3.0
C) –30.
D) –300
Topic: Calculating Elasticities
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-2
2) Refer to Figure 5.2. If the price of a hamburger increases from $6 to $8, the price elasticity of demand
equals ________. Use the midpoint formula.
A) –0.24
B) –1.0
C) –1.4
D) –2.0
Topic: Calculating Elasticities
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-2