Elasticity and Its Application 1157
1158 Elasticity and Its Application
Table 5-4
The following table shows the demand schedule for a particular good.
Price
Quantity
$20
0
$16
3
$12
6
$8
9
$4
12
$0
15
113.
Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when
price rises from $12
to $16?
a.
0.43
b.
0.67
c.
2.33
d.
4
114.
Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price
elasticity of demand is
a. 0.4
b.
1
c.
1.5
d.
2.33
115.
Refer to Table 5-4. Using the midpoint method, when price falls from $8 to $4, the price
elasticity of demand is
a. 0.43
b.
0.67
c.
1
d.
2.33
Figure 5-1
116.
Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to
a.
0.33.
b. 0.67.
c. 1.5
d. 2.67.
117.
Refer to Figure 5-1. Between point A and point B, the slope is equal to
a.
-1/4, and the price elasticity of demand is equal to 2/3.
b.
-1/4, and the price elasticity of demand is equal to 3/2.
c.
-3/2, and the price elasticity of demand is equal to 1/4.
d.
-2/3, and the price elasticity of demand is equal to 3/2.
118.
Refer to Figure 5-1. Between point A and point B on the graph, demand is
a.
perfectly elastic.
b.
inelastic.
c.
unit elastic.
d.
elastic, but not perfectly elastic.
119.
Elasticity of demand is closely related to the slope of the demand curve. The more responsive
buyers are to a
change in price, the
a.
steeper the demand curve will be.
b.
flatter the demand curve will be.
c.
further to the right the demand curve will sit.
d.
closer to the vertical axis the demand curve will sit.
120.
Elasticity of demand is closely related to the slope of the demand curve. The less responsive
buyers are to a change
in price, the
a.
steeper the demand curve will be.
b.
flatter the demand curve will be.
c.
further to the right the demand curve will sit.
d.
closer to the vertical axis the demand curve will sit.
121.
The flatter the demand curve through a given point, the
a.
greater the price elasticity of demand at that point.
b.
smaller the price elasticity of demand at that point.
c.
closer the price elasticity of demand will be to the slope of the curve.
d.
greater the absolute value of the change in total revenue when there is a movement from that
point upward
and to the left along the demand curve.
122.
The smaller the price elasticity of demand, the
a.
steeper the demand curve will be through a given point.
b.
flatter the demand curve will be through a given point.
c.
more strongly buyers respond to a change in price between any two prices P1 and P2.
d.
smaller the decrease in equilibrium price when the supply curve shifts rightward from S1 to
S2.
123.
As we move downward and to the right along a linear, downward-sloping demand curve,
a.
both slope and elasticity remain constant.
b.
slope changes but elasticity remains constant.
c.
both slope and elasticity change.
d.
slope remains constant but elasticity changes.
124.
The difference between slope and elasticity is that slope
a.
is a ratio of two changes, and elasticity is a ratio of two percentage changes.
b.
is a ratio of two percentage changes, and elasticity is a ratio of two changes.
c.
measures changes in quantity demanded more accurately than elasticity.
d.
None of the above is correct; there is no difference between slope and elasticity.
125.
Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a
result,
a.
the equilibrium quantity decreases, and the equilibrium price is unchanged.
b.
the equilibrium price increases, and the equilibrium quantity is unchanged.
c.
the equilibrium quantity and the equilibrium price both are unchanged.
d.
buyers’ total expenditure on the good is unchanged.
126.
A perfectly elastic demand implies that
a.
buyers will not respond to any change in price.
b.
any rise in price above that represented by the demand curve will result in a quantity
demanded of zero.
c.
quantity demanded and price change by the same percent as we move along the demand
curve.
d.
price will rise by an infinite amount when there is a change in quantity demanded.
127.
The case of perfectly elastic demand is illustrated by a demand curve that is
a.
vertical.
b.
horizontal.
c.
downward-sloping but relatively steep.
d.
downward–sloping but relatively flat.
128.
When small changes in price lead to infinite changes in quantity demanded, demand is perfectly
a.
elastic, and the demand curve will be horizontal.
b.
inelastic, and the demand curve will be horizontal.
c.
elastic, and the demand curve will be vertical.
d.
inelastic, and the demand curve will be vertical.
129.
For a horizontal demand curve,
a.
the slope is undefined, and the price elasticity of demand is equal to 0.
b.
the slope is equal to 0, and the price elasticity of demand is undefined.
c.
both the slope and price elasticity of demand are undefined.
d.
both the slope and price elasticity of demand are equal to 0.
130.
Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a
result,
a.
the equilibrium quantity decreases, and the equilibrium price is unchanged.
b.
the equilibrium price increases, and the equilibrium quantity is unchanged.
c.
the equilibrium quantity and the equilibrium price both are unchanged.
d.
buyers’ total expenditure on the good is unchanged.
131.
In the case of perfectly inelastic demand,
a.
the change in quantity demanded equals the change in price.
b.
the percentage change in quantity demanded equals the percentage change in price.
c.
infinitely-large changes in quantity demanded result from very small changes in the price.
d.
quantity demanded stays the same whenever price changes.
132.
When demand is perfectly inelastic, the demand curve will be
a.
negatively sloped, because buyers decrease their purchases when the price rises.
b.
vertical, because buyers purchase the same amount as before whenever the price rises or
falls.
c.
positively sloped, because buyers increase their purchases when price rises.
d.
positively sloped, because buyers increase their total expenditures when price rises.
133.
When demand is perfectly inelastic, the price elasticity of demand
a.
is zero, and the demand curve is vertical.
b.
is zero, and the demand curve is horizontal.
c.
approaches infinity, and the demand curve is vertical.
d.
approaches infinity, and the demand curve is horizontal.
134.
A perfectly inelastic demand implies that buyers
a.
decrease their purchases when the price rises.
b.
purchase the same amount as before when the price rises or falls.
c.
increase their purchases only slightly when the price falls.
d.
respond substantially to an increase in price.
135.
Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he
is telling the truth,
Marcus’s
a.
demand for cigarettes is perfectly inelastic.
b.
price elasticity of demand for cigarettes is infinite.
c.
income elasticity of demand for cigarettes is 0.
d.
More than one of the above is correct.
136.
Jerome says that he will spend exactly $25 each month on new apps for his mobile device,
regardless of the price
of apps. Jerome’s demand for apps is
a.
perfectly elastic.
b.
unit elastic.
c.
perfectly inelastic.
d.
somewhat inelastic, but not perfectly inelastic.
137.
For a vertical demand curve,
a.
the slope is undefined, and the price elasticity of demand is equal to 0.
b.
the slope is equal to 0, and the price elasticity of demand is undefined.
c.
both the slope and price elasticity of demand are undefined.
d.
both the slope and price elasticity of demand are equal to 0.
138.
In which of these instances is demand said to be perfectly inelastic?
a.
An increase in price of 2% causes a decrease in quantity demanded of 2%.
b.
A decrease in price of 2% causes an increase in quantity demanded of 0%.
c.
A decrease in price of 2% causes a decrease in total revenue of 0%.
d.
An increase in price of 2% causes a decrease in quantity demanded of 1/2%.
139.
Demand is said to have unit elasticity if the price elasticity of demand is
a.
less than 1.
b.
greater than 1.
c.
equal to 1.
d.
equal to 0.
140.
Demand is said to be unit elastic if quantity demanded
a.
changes by the same percent as the price.
b.
changes by a larger percent than the price.
c.
changes by a smaller percent than the price.
d.
does not respond to a change in price.
141.
If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are
used to compute
the elasticity, then demand is
a.
perfectly inelastic, and the demand curve is vertical.
b.
elastic, and the demand curve is a straight, downward-sloping line.
c.
perfectly elastic, and the demand curve is horizontal.
d.
elastic, and the demand curve is something other than a straight, downward-sloping line.
142.
When quantity moves proportionately the same amount as price, demand is
a.
elastic, and the price elasticity of demand is 1.
b.
perfectly elastic, and the price elasticity of demand is infinitely large.
c.
perfectly inelastic, and the price elasticity of demand is 0.
d.
unit elastic, and the price elasticity of demand is 1.
143.
When we move upward and to the left along a linear, downward-sloping demand curve, price
elasticity of demand
a.
first becomes smaller, then larger.
b.
always becomes larger.
c.
always becomes smaller.
d.
first becomes larger, then smaller.
144.
The price elasticity of demand changes as we move along a
a.
horizontal demand curve.
b.
vertical demand curve.
c.
linear, downward-sloping demand curve.
d.
All of the above are correct.
Figure 5-2
145.
Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most
elastic demand?
a.
D1
b.
D2
c.
D3
d.
All of the above are equally elastic.
146.
Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to
calculate three
different values of the price elasticity of demand. Which of the three demand
curves would produce the smallest
elasticity?
a.
D1
b.
D2
c.
D3
d.
All of the above are equally elastic.
1176 Elasticity and Its Application
Figure 5-3
147.
Refer to Figure 5-3. The demand curve representing the demand for a luxury good with
several close substitutes
is
a.
A.
b.
B.
c.
C.
d.
D.