1. The price elasticity of demand measures how much
a.
quantity demanded responds to a change in price.
b.
quantity demanded responds to a change in income.
c.
price responds to a change in demand.
d.
demand responds to a change in supply.
2. The price elasticity of demand measures
a.
buyers’ responsiveness to a change in the price of a good.
b.
the extent to which demand increases as additional buyers enter the market.
c.
how much more of a good consumers will demand when incomes rise.
d.
the movement along a supply curve when there is a change in demand.
3. The price elasticity of demand for a good measures the willingness of
a.
b.
c.
d.
4. Which of the following statements about the price elasticity of demand is correct?
a.
The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the
good as its price increases.
b.
Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer
tastes.
c.
Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand
for good x will be more elastic than the demand for good y.
d.
All of the above are correct.
5. Demand is said to be price elastic if
a.
the price of the good responds substantially to changes in demand.
b.
demand shifts substantially when income or the expected future price of the good changes.
c.
buyers do not respond much to changes in the price of the good.
d.
buyers respond substantially to changes in the price of the good.
6. Demand is said to be inelastic if
a.
buyers respond substantially to changes in the price of the good.
b.
demand shifts only slightly when the price of the good changes.
c.
the quantity demanded changes only slightly when the price of the good changes.
d.
the price of the good responds only slightly to changes in demand.
7. If demand is price inelastic, then
a.
buyers do not respond much to a change in price.
b.
buyers respond substantially to a change in price, but the response is very slow.
c.
buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in
tastes.
d.
the demand curve is very flat.
8. If the quantity demanded of a certain good responds only slightly 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.
demand curve for the good shifts only slightly in response to a change in price.
9. When quantity demanded responds strongly to changes in price, demand is said to be
a.
fluid.
b.
elastic.
c.
dynamic.
d.
highly variable.
10. Demand is said to be inelastic if the
a.
quantity demanded changes proportionately more than price.
b.
price changes proportionately more than income.
c.
quantity demanded changes proportionately less than price.
d.
quantity demanded changes proportionately the same as price.
11. Demand is elastic if the price elasticity of demand is
a.
less than 1.
b.
equal to 1.
c.
equal to 0.
d.
greater than 1.
12. Demand is inelastic if the price elasticity of demand is
a.
less than 1.
b.
equal to 1.
c.
greater than 1.
d.
equal to 0.
13. Which of the following is not a determinant of the price elasticity of demand for a good?
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
14. The smaller the price elasticity of demand, the
a.
more likely the product is a luxury.
b.
smaller the responsiveness of quantity demanded to a change in price.
c.
more substitutes the product has.
d.
greater the responsiveness of quantity demanded to a change in price.
15. Whether a good is a luxury or necessity depends on the
a.
price of the good.
b.
preferences of the buyer.
c.
intrinsic properties of the good.
d.
scarcity of the good.
16. Goods with many close substitutes tend to have
a.
more elastic demands.
b.
less elastic demands.
c.
price elasticities of demand that are unit elastic.
d.
income elasticities of demand that are negative.
17. For a good that is a luxury, demand
a.
tends to be inelastic.
b.
tends to be elastic.
c.
has unit elasticity.
d.
cannot be represented by a demand curve in the usual way.
18. For a good that is a necessity, demand
a.
tends to be inelastic.
b.
tends to be elastic.
c.
has unit elasticity.
d.
cannot be represented by a demand curve in the usual way.
19. A good will have a more elastic demand, the
a.
greater the availability of close substitutes.
b.
more broad the definition of the market.
c.
shorter the period of time.
d.
more it is regarded as a necessity.
20. The value of the price elasticity of demand for a good will be relatively large when
a.
there are no good substitutes available for the good.
b.
the time period in question is relatively short.
c.
the good is a luxury rather than a necessity.
d.
All of the above are correct.
21. For a good that is a necessity,
a.
quantity demanded tends to respond substantially to a change in price.
b.
demand tends to be inelastic.
c.
the law of demand does not apply.
d.
All of the above are correct.
22. A good will have a more inelastic demand, the
a.
greater the availability of close substitutes.
b.
broader the definition of the market.
c.
longer the period of time.
d.
more it is regarded as a luxury.
23. Other things equal, the demand for a good tends to be more inelastic, the
a.
fewer the available substitutes.
b.
longer the time period considered.
c.
more the good is considered a luxury good.
d.
more narrowly defined is the market for the good.
24. If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?
a.
immediately after the price increase
b.
one month after the price increase
c.
three months after the price increase
d.
one year after the price increase
25. If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?
a.
immediately after the price increases
b.
one month after the price increase
c.
three months after the price increase
d.
one year after the price increase
26. If the price of milk rises, when is the price elasticity of demand likely to be the lowest?
a.
immediately after the price increase
b.
one month after the price increase
c.
three months after the price increase
d.
one year after the price increase
27. The price elasticity of demand for bread
a.
is computed as the percentage change in quantity demanded of bread divided by the percentage change in price
of bread.
b.
depends, in part, on the availability of close substitutes for bread.
c.
reflects the many economic, social, and psychological forces that influence consumers’ tastes for bread.
d.
All of the above are correct.
28. Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would
fall substantially over a ten-year period because
a.
buyers tend to be much less sensitive to a change in price when given more time to react.
b.
buyers tend to be much more sensitive to a change in price when given more time to react.
c.
buyers will have substantially more real income over a ten-year period.
d.
the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.
29. The price elasticity of demand for mobile phones
a.
will be higher if there is an improvement in the production technology.
b.
will be lower if consumers perceive mobile phones to be a necessity.
c.
is computed as the percentage change in the price of mobile phones divided by the percentage change in
quantity of mobile phones.
d.
All of the above are correct.
30. The price elasticity of demand measures the
a.
magnitude of the response in quantity demanded to a change in price.
b.
direction of the shift in the demand curve in response to a market event.
c.
size of the shortage created by the increase in demand.
d.
responsiveness of quantity demanded to a change in income.
31. If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price
of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the
importance of
a.
the availability of close substitutes in determining the price elasticity of demand.
b.
a necessity versus a luxury in determining the price elasticity of demand.
c.
the definition of a market in determining the price elasticity of demand.
d.
the time horizon in determining the price elasticity of demand.
32. Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet
cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small
amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the
importance of
a.
the availability of close substitutes in determining the price elasticity of demand.
b.
a necessity versus a luxury in determining the price elasticity of demand.
c.
the definition of a market in determining the price elasticity of demand.
d.
the time horizon in determining the price elasticity of demand.
33. Suppose that Juan Carlos is filling out a survey that he received in the mail. The survey asks him what he would do if
the price of his favorite toothpaste increased. Juan Carlos reports that he would switch to a different brand. The survey
asks what he would do if the price of all toothpastes increased. Juan Carlos reports that he must use toothpaste, so he
would have to adjust his spending elsewhere. These examples illustrate the importance of
a.
changes in total revenue in determining the price elasticity of demand.
b.
a necessity versus a luxury in determining the price elasticity of demand.
c.
the definition of a market in determining the price elasticity of demand.
d.
the time horizon in determining the price elasticity of demand.
34. Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over
the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and
purchases one only 10 miles from her place of employment. These examples illustrate the importance of
a.
the availability of substitutes in determining the price elasticity of demand.
b.
a necessity versus a luxury in determining the price elasticity of demand.
c.
the definition of a market in determining the price elasticity of demand.
d.
the time horizon in determining the price elasticity of demand.
35. The demand for Godiva mint chocolates is likely quite elastic because
a.
there are many close substitutes.
b.
this particular type of chocolate is viewed as a luxury by many chocolate lovers.
c.
the market is narrowly defined.
d.
All of the above are correct.
36. The demand for grape-flavored Hubba Bubba bubble gum is likely
a.
inelastic because there are many close substitutes for grape-flavored Hubba Bubba .
b.
elastic because there are many close substitutes for grape-flavored Hubba Bubba.
c.
inelastic because the market is broadly defined.
d.
elastic because the market is broadly defined.
37. Which of the following statements is correct?
a.
The demand for flat-screen computer monitors is more elastic than the demand for monitors in general.
b.
The demand for grandfather clocks is more elastic than the demand for clocks in general.
c.
The demand for cardboard is more elastic over a long period of time than over a short period of time.
d.
All of the above are correct.
38. Which of the following statements is correct?
a.
The demand for natural gas is more elastic over a short period of time than over a long period of time.
b.
The demand for smoke alarms is more elastic than the demand for Persian rugs.
c.
The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.
d.
All of the above are correct.
39. Which of the following is likely to have the most price elastic demand?
a.
clothing
b.
blue jeans
c.
Tommy Hilfiger jeans
d.
All three would have the same elasticity of demand because they are all related.
40. Which of the following is likely to have the most price elastic demand?
a.
ice cream
b.
frozen yogurt
c.
vanilla ice cream
d.
Häagen-Dazs® vanilla bean ice cream
41. Which of the following is likely to have the most price elastic demand?
a.
lattés
b.
doctor’s visits
c.
eggs
d.
natural gas
42. Which of the following is likely to have the most price elastic demand?
a.
dental floss
b.
milk
c.
salt
d.
diamond earrings
43. Which of the following is likely to have the most price elastic demand?
a.
scissors
b.
fruit
c.
music downloads
d.
toothpaste
44. Which of the following is likely to have the most price inelastic demand?
a.
mint-flavored toothpaste
b.
toothpaste
c.
Colgate mint-flavored toothpaste
d.
a generic mint-flavored toothpaste
45. Which of the following is likely to have the most price inelastic demand?
a.
white chocolate chip with macadamia nut cookies
b.
Mrs. Field’s chocolate chip cookies
c.
milk chocolate chip cookies
d.
cookies
46. Which of the following is likely to have the most price inelastic demand?
a.
white chocolate chip with macadamia nut cookies
b.
hardback novels
c.
salt
d.
box seats at a major league baseball game
47. Which of the following is likely to have the most price inelastic demand?
a.
tablet computers
b.
leather boots
c.
lightbulbs
d.
optional textbooks
48. Which of the following is likely to have the most price inelastic demand?
a.
strawberry-banana milk shakes
b.
gasoline in the short run
c.
diamond earrings
d.
box seats at a major league baseball game
49. Which of the following is likely to have the most price inelastic demand?
a.
chocolate
b.
Godiva chocolate
c.
Hershey’s chocolate
d.
All three would have the same elasticity of demand because they are all related.
50. Which of the following is likely to have the most price inelastic demand?
a.
yoga mats
b.
prescription medicine
c.
protein powder
d.
gym memberships
51. Which of the following is likely to have the most price inelastic demand?
a.
athletic shoes
b.
running shoes
c.
Nike running shoes
d.
Nike Shox running shoes
52. Which of the following is likely to have the most price inelastic demand?
a.
lattés
b.
filet mignon
c.
Grey Goose® vodka
d.
milk
53. For which of the following goods is the price elasticity of demand most inelastic?
a.
pizza
b.
large pizza
c.
large pepperoni pizza
d.
Domino’s large pepperoni pizza
54. A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is
a.
inelastic.
b.
unit elastic.
c.
elastic.
d.
highly responsive to changes in income.
55. There are very few, if any, good substitutes for motor oil. Therefore, the
a.
demand for motor oil would tend to be inelastic.
b.
demand for motor oil would tend to be elastic.
c.
demand for motor oil would tend to respond strongly to changes in prices of other goods.
d.
supply of motor oil would tend to respond strongly to changes in people’s tastes for large cars relative to their
tastes for small cars.
56. There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would
tend to be
a.
elastic.
b.
unit elastic.
c.
inelastic.
d.
highly responsive to changes in income as well as changes in prices.
57. Economists compute the price elasticity of demand as the
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.
58. The midpoint method is used to compute elasticity because it
a.
automatically computes a positive number instead of a negative number.
b.
results in an elasticity that is the same as the slope of the demand curve.
c.
gives the same answer regardless of the direction of change.
d.
automatically rounds quantities to the nearest whole unit.
59. The midpoint method for calculating elasticities is convenient in that it allows us to
a.
ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in
price.
b.
calculate the same value for the elasticity, regardless of whether the price increases or decreases.
c.
assume that sellers’ total revenue stays constant when the price changes.
d.
restrict all elasticity values to between 0 and 1.
60. Which of the following expressions is valid for the price elasticity of demand?
a.
Price elasticity of demand = .
b.
Price elasticity of demand = .
c.
Price elasticity of demand = .
d.
Price elasticity of demand = .
61. Which of the following expressions can be used to compute the price elasticity of demand?
a.
Price elasticity of demand = • .
b.
Price elasticity of demand = • .
c.
Price elasticity of demand = • .
d.
Price elasticity of demand = • .
62. When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the
quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for
candy bars is
a.
inelastic.
b.
elastic.
c.
unit elastic.
d.
perfectly inelastic.
63. Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of
bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken
nuggets in the given price range is
a.
0.35.
b.
0.43.
c.
2.33.
d.
2.89.
64. Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of
the following events is consistent with a 10 percent decrease in the quantity of the good demanded?
a.
a 7.5 increase in the price of the good
b.
a 13.33 percent increase in the price of the good
c.
an increase in the price of the good from $7.50 to $10
d.
an increase in the price of the good from $10 to $17.50
65. Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the
following events is consistent with a 0.1 percent increase in the price of the good?
a.
The quantity of the good demanded decreases from 250 to 150.
b.
The quantity of the good demanded decreases from 200 to 100.
c.
The quantity of the good demanded decreases by 0.05 percent.
d.
The quantity of the good demanded decreases by 0.2 percent.
66. When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity
demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about
a.
0.22.
b.
0.67.
c.
1.33.
d.
1.50.