Foundations of Microeconomics, 5e (Bade/Parkin)
Chapter 5 Elasticities of Demand and Supply
5.1 The Price Elasticity of Demand
1) The price elasticity of demand is a measure of
A) the equilibrium price of a product.
B) buyers’ responsiveness to changes in the price of a product.
C) the amount of a product purchased when income increases.
D) whether a product is a substitute or a complement.
E) how much a change in demand affects the equilibrium price.
2) The price elasticity of demand measures which of the following?
A) the slope of the demand curve
B) the rate at which demand changes when price changes
C) how responsive the quantity demanded is to changes in price
D) the percentage-slope of the demand curve
E) None of these correctly defines what price elasticity of demand measures.
3) The price elasticity of demand measures the extent to which the quantity demanded changes
when
A) the price of the good changes.
B) the price of a related good changes.
C) the expected future price of a good changes.
D) consumer preferences change.
E) both the demand and supply of the good change.
4) The price elasticity of demand measures the ________ that results from a ________.
A) change in quantity demanded; change in price
B) change in price; change in the quantity demanded
C) percentage change in price; percentage change in the quantity demanded
D) percentage change in the quantity demanded; percentage change in price
E) percentage change in the quantity demanded; change in price
5) The elasticity of demand is used to
A) determine if consumers will or will not buy a product.
B) measure how responsive consumers are to a change in price.
C) determine in what direction the demand curve shifts if income changes.
D) find the market equilibrium.
E) determine if a change in price results in a shortage or a surplus.
6) To determine the price elasticity of demand, we
A) need information on consumers’ incomes.
B) need to know how much is available.
C) compare the percentage change in the quantity demanded to the percentage change in the
price.
D) compare the change in the quantity to the change in price.
E) divided the quantity by the price.
7) If the price of a good rises, then moving along a demand curve the percentage change in the
quantity demanded will be
A) positive.
B) negative.
C) zero.
D) either positive, negative, or zero depending on how the demand curve shifted.
E) undefined.
8) If we ignore the negative or positive sign, the midpoint method of calculating a percentage
change in price between two points on a demand curve results in
A) a smaller percentage change if the price rises than if it falls.
B) the same percentage, regardless of whether the price increases or decreases.
C) the price elasticity of demand.
D) the price elasticity of supply.
E) a higher percentage change if the price rises than if it falls.
9) Suppose the price of a box of cereal rises from $4 to $6. Using the midpoint method, what is
the percentage change in price?
A) 50 percent
B) 40 percent
C) 33 percent
D) 67 percent
E) None of the above answers is correct.
10) Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from
1,000 per month to 900 per month. Using the midpoint formula, the ________ percent change in
price lead to a ________ percent change in the quantity demanded.
A) 12.5; 10.5
B) 13.3; 10.0
C) 11.8; 11.1
D) 8.0; 9.5
E) None of the above answers are correct.
11) Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93
per credit hour, using the midpoint method, what is the percentage change in price?
A) 8.99 percent
B) 8.00 percent
C) 9.41 percent
D) 8.62 percent
E) 9.12 percent
12) Using the midpoint method, if the price of an airline ticket from Orlando to Pittsburgh falls
from $275 to $238, the percentage change in price is
A) 1442 percent.
B) 14.42 percent.
C) 15.54 percent.
D) 13.45 percent.
E) 68.00 percent.
13) If the demand for a good is elastic, then
A) people do not change the quantity they demand when the price of the good changes.
B) a change in price leads to a smaller percentage change in the quantity demanded.
C) people substantially decrease the quantity of the good they buy if its price increases by a
small percentage.
D) a change in the quantity demanded is smaller than the change in price.
E) the quantity demanded divided by the price exceeds 1.00.
14) When the percentage change in the quantity demanded exceeds the percentage change in
price, then demand is
A) inelastic.
B) unit elastic.
C) elastic.
D) irrelevant.
E) undefined.
15) If the percentage change in price is 10 percent and the demand is elastic, then the percentage
change in the quantity demanded
A) is greater than 0 percent but less than 10 percent.
B) is larger than 10 percent.
C) equals 0 percent.
D) equals 10 percent.
E) More information is needed to determine the magnitude of the change in the quantity
demanded.
16) If the price of a six-pack of Pepsi falls from $4 to $3 and the quantity purchased increases 80
percent, then demand is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly inelastic.
E) perfectly elastic.
17) Suppose the Chicago Enforcers football team lowers ticket prices by 13 percent and as a
result the quantity of tickets demanded increases by 21 percent. This response means that the
demand for Enforcer tickets is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly inelastic.
E) perfectly elastic.
18) If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for
moose hunting lessons is
A) elastic.
B) unit elastic.
C) inelastic.
D) perfectly unit elastic.
E) perfectly elastic.
19) Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic.
As a result, a 7 percent increase in the price charged by the owner of this stand leads to
A) zero peaches sold by this stand.
B) no change in the quantity demanded at this stand.
C) a 7 percent decrease in the quantity demanded at this stand.
D) a 7 percent decrease in demand at this stand.
E) a virtually infinite increase in the quantity demanded at this stand.
20) When the percentage change in the quantity demanded is less than the percentage change in
price, then demand is
A) inelastic.
B) unit elastic.
C) elastic.
D) irrelevant.
E) undefined.
21) If the percentage change in the quantity demanded is not zero but is less than the percentage
change in the price, demand is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.
22) If the price elasticity of demand for razors is 0.32, the demand for razors is
A) elastic.
B) unit elastic.
C) inelastic.
D) perfectly inelastic.
E) perfectly elastic.
23) Perfectly inelastic demand means that consumers
A) are willing to buy any quantity of the good at a given price, but none at higher prices.
B) decrease their consumption as price rises.
C) increase their consumption as price rises.
D) will buy a certain quantity, regardless of price.
E) will buy a huge, almost infinite amount more, if the price falls just a little.
24) Suppose the demand for rescue services in our national parks is perfectly inelastic. This fact
would mean that a 31 percent increase in rescue fees leads to a
A) 31 percent decrease in the quantity demanded.
B) 31 percent increase in demand.
C) 31 percent decrease in demand.
D) no change in the quantity demanded.
E) decrease in the quantity demanded to 0 rescues.
25) When the percentage change in the quantity demanded equals the percentage change in price,
then demand is
A) inelastic.
B) unit elastic.
C) elastic.
D) irrelevant.
E) undefined.
26) If the price elasticity of demand for opera tickets in Chicago is 1.00, then the demand for
opera tickets in Chicago is
A) unit elastic.
B) elastic.
C) perfectly inelastic.
D) inelastic.
E) perfectly elastic.
27) Suppose a local photographer increases his prices by 8 percent and quantity demanded
decreases by the same percentage. This set of facts indicates that the demand for his services is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic.
28) Which of the following does NOT influence the price elasticity of demand?
A) the amount by which the demand curve shifts when the price of another good changes
B) the number of substitutes available to consumers
C) the price of the good relative to total income
D) the time period buyers have to respond to a price change
E) whether the good is a necessity or a luxury.
29) If a substitute good is easy to find, then demand for a good is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
E) Substitutes don’t have any effect on elasticity.
30) The demand for a good is more elastic if the
A) good is a necessity.
B) good has few substitutes.
C) good is narrowly defined.
D) supply of the good is plentiful.
E) Both answers B and C are correct.
31) If a good has many close substitutes, then its demand is most likely
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
E) elastic or inelastic depending on whether the price of the good is increasing or decreasing.
32) If a product is narrowly defined, it is likely to
A) have many substitutes and therefore its demand is elastic.
B) have few substitutes, and therefore its demand is less elastic.
C) be unique, and therefore its demand is inelastic.
D) be unique and have many substitutes.
E) have a larger proportion of income spent on it.
33) Of the following, which good has the most elastic demand?
A) food
B) breakfast food
C) cereal
D) Post Raisin Bran
E) Post Raisin Brand purchased at a Safeway grocery store
34) The price elasticity of demand for Red Delicious apples, a certain type of apple, is likely
A) elastic.
B) inelastic.
C) perfectly elastic.
D) perfectly inelastic.
E) unit elastic.
35) Which of the following statements is correct?
A) The demand for New Balance shoes is more elastic than the demand for shoes in general.
B) The demand for salt is very elastic.
C) The demand for luxuries is less elastic than the demand for necessities.
D) The demand for a narrowly defined good is less elastic than the demand for a more broadly
defined good.
E) The larger the proportion of income spent on a good, the smaller the elasticity of demand.
36) One reason why the demand for gasoline is inelastic is because
A) substitutes for gas abound.
B) substitutes for gas are hard to find.
C) gasoline is a luxury item.
D) people have a long time to shop around for automobiles that use less gas.
E) buses run on diesel fuel rather than gasoline.
37) The longer the time that has elapsed since the price of a good changed, the
A) more elastic the demand for that good.
B) steeper the demand curve.
C) less elastic the demand for that good.
D) smaller the amount of that good bought.
E) fewer substitutes available for the good.
38) As more time passes, the price elasticity of gasoline
A) increases.
B) decreases.
C) stays the same.
D) becomes perfectly inelastic.
E) becomes perfectly elastic.
39) Demand for a product tends to be more elastic the longer the time period considered because
A) sellers have more time to expand production.
B) buyers have more time to search for substitutes.
C) price increases over time make the price larger relative to buyers’ incomes.
D) the inverse relationship between the price and the quantity demanded weakens over time.
E) buyers get used to the new price.
40) The long-run price elasticity of demand for electricity is ________ than the short-run price
elasticity of demand for electricity.
A) greater than
B) less than
C) equal to
D) not comparable to
E) unrelated to
41) A product’s price elasticity of demand is likely to be greater
A) if it only has a few substitutes.
B) if consumers spend a small proportion of income on the product.
C) the less time consumers have to adjust to price changes.
D) if the product is a luxury good rather than a necessity.
E) Both answers C and D are correct.
42) The demand for luxury suites at basketball games is more elastic if
A) these suites are a necessity.
B) these suites are a luxury item.
C) few close substitutes exist for these suites.
D) basketball fans have little time to look for alternative suites.
E) poorer fans cannot afford luxury suites.
43) The demand for a necessity generally is
A) very elastic.
B) infinitely elastic.
C) unaffected by income.
D) inelastic.
E) unit elastic.
44) The demand for necessities generally is ________ the demand for luxury goods.
A) as elastic as
B) more elastic than
C) less elastic than
D) flatter than
E) not comparable to
45) If a good is a necessity, it has ________ substitutes and its demand is ________.
A) poor; elastic
B) poor; inelastic
C) many; elastic
D) many; inelastic
E) many; precisely unit elastic
46) You are more sensitive to a change in price if you
A) spend a lot of your income on the good.
B) spend a small percentage of your income on the good.
C) buy very little of the good.
D) do not buy the good regularly.
E) have a very inelastic demand for the good.
47) We calculate the price elasticity of demand as the
A) ratio of the percentage change in the quantity demanded to the percentage change in price.
B) change in quantity divided by the change in price.
C) ratio of the percentage change in the price to the percentage change in quantity.
D) percentage change in the quantity demanded divided by the percentage change in income.
E) equilibrium quantity divided by the equilibrium price.
48) What is the formula for the price elasticity of demand? The percentage change in the
A) quantity demanded divided by the percentage change in the price of a substitute or
complement.
B) quantity supplied divided by the percentage change in price.
C) quantity demanded divided by the percentage change in price.
D) quantity demanded divided by the percentage change in income.
E) equilibrium quantity demanded divided by the equilibrium price.
49) Demand is price inelastic if ________ percentage change in the price leads to a ________
percentage change in the quantity demanded.
A) a small; large
B) a large; small
C) any; large
D) Both answers A and B are correct.
E) None of the above answers is correct.
50) If a 10 percent price increase generates a 10 percent decrease in quantity demanded, then
demand is
A) unit elastic.
B) elastic.
C) perfectly inelastic.
D) perfectly elastic.
E) inelastic.
51) If a 10 percent price increase generates a 20 percent decrease in quantity demanded, then
demand is
A) elastic.
B) perfectly inelastic .
C) perfectly elastic.
D) inelastic.
E) unit elastic.
52) If a 30 percent price increase generates a 20 percent decrease in quantity demanded, then
demand is
A) inelastic.
B) elastic.
C) unit elastic.
D) perfectly elastic.
E) perfectly inelastic .
53) The price of furnace filters increased by 5 percent and the quantity demanded did not change.
The price elasticity of demand for furnace filters is
A) perfectly inelastic.
B) inelastic.
C) elastic.
D) unit elastic.
E) perfectly elastic.
54) If a 2 percent change in price leads to a ________ percent change in the quantity demanded,
then demand is ________.
A) 2; elastic
B) 1; unit elastic
C) 3; inelastic
D) 1; inelastic
E) 0; perfectly elastic
55) If a 2 percent change in price leads to a ________ percent change in the quantity demanded,
then demand is ________.
A) 2; elastic
B) 1; unit elastic
C) 3; inelastic
D) 4; elastic
E) 0; perfectly elastic
56) If the price elasticity of demand for a good is 2, then a 10 percent increase in the price of that
good ________ the quantity demanded by ________ percent.
A) increases; 20
B) decreases; 2
C) decreases; 10
D) decreases; 20
E) increases; 8
57) When the price of tacos rise 4 percent, the quantity demanded decreases 10 percent. What is
the price elasticity of demand for tacos?
A) 40.0
B) 25.0
C) 0.4
D) 2.5
E) 10.0
58) Suppose the price of a ticket to a Lenny Kravitz concert is $41 and at that price, the quantity
of tickets demanded is 17,000 per concert. Using the midpoint method of calculating percentage
changes, if Mr. Kravitz raises the price to $48 and the quantity demanded decreases to 16,000,
the price elasticity of demand for his concert tickets is
A) 15.73.
B) 6.06.
C) 1.00.
D) 0.39.
E) 0.93.
59) When the price of a burrito increases from $2 to $4, the quantity demanded decreases from
50 to 40. Using the midpoint method, the price elasticity of demand equals
A) 1/3.
B) 3.
C) 2.
D) 1.
E) 1/2.
60) When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded
increases from 600,000 to 1,000,000 copies each month. Using the midpoint method, the price
elasticity of demand equals
A) 1.
B) 3.
C) 2.
D) 1/3.
E) 1/2.