Elasticity and Its Application 1137
Table 5-1
Good
Price Elasticity of Demand
A
1.9
B
0.8
73.
Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?
a.
A is a luxury and B is a necessity.
b.
A is a good after an increase in income and B is that same good after a decrease in income.
c.
A has fewer substitutes than B.
d.
A is a good immediately after a price increase and B is that same good 3 years after the price
increase.
74.
Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?
a.
A is laundry detergent and B is Tide.
b.
A is Diet Pepsi and B is soda.
c.
A is food and B is a yacht.
d.
A is toilet paper and B is candles.
75.
Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?
a.
A is pens and B is pencils.
b.
A is a Snickers bar and B is a Milky Way bar.
c.
A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline
ticket from
Chicago to New York demanded by a business traveler.
d.
A is a bottle of water demanded by a tourist in a desert and B is a bottle of water demanded by
a tourist in a
rain forest.
76.
Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in
the quantity of X
demanded. Price elasticity of demand for X is
a.
0.
b.
1.
c.
6.
d.
36.
77.
If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a
a.
0.2 percent decrease in the quantity demanded.
b.
5 percent decrease in the quantity demanded.
c.
20 percent decrease in the quantity demanded.
d.
40 percent decrease in the quantity demanded.
78.
If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a
a.
0.1 percent decrease in the quantity demanded.
b.
1 percent decrease in the quantity demanded.
c.
2.5 percent decrease in the quantity demanded.
d.
10 percent decrease in the quantity demanded.
79.
If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a
a.
0.5 percent decrease in the quantity demanded.
b.
2 percent decrease in the quantity demanded.
c.
5 percent decrease in the quantity demanded.
d.
50 percent decrease in the quantity demanded.
80.
If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a
a.
0.015 percent increase in the quantity demanded.
b.
0.6 percent increase in the quantity demanded.
c.
6 percent increase in the quantity demanded.
d.
66 percent increase in the quantity demanded.
Elasticity and Its Application 1141
81.
If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a
a.
0.4 percent increase in the quantity demanded.
b.
2.5 percent increase in the quantity demanded.
c.
3.6 percent increase in the quantity demanded.
d.
6 percent increase in the quantity demanded.
82.
If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a
a.
0.6 percent increase in the quantity demanded.
b.
1.5 percent increase in the quantity demanded.
c.
2 percent increase in the quantity demanded.
d.
6 percent increase in the quantity demanded.
83.
If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a
a.
0.1 percent increase in the quantity demanded.
b.
1 percent increase in the quantity demanded.
c.
3 percent increase in the quantity demanded.
d.
4 percent increase in the quantity demanded.
84.
If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a
a.
0.33 percent increase in the quantity demanded.
b.
3 percent increase in the quantity demanded.
c.
30 percent increase in the quantity demanded.
d.
48 percent increase in the quantity demanded.
85.
If the price elasticity of demand for a good is 0.4, then which of the following events is consistent
with a 2 percent
decrease in the quantity of the good demanded?
a.
a 0.8 percent increase in the price of the good
b.
a 2.4 percent increase in the price of the good
c.
a 5 percent increase in the price of the good
d.
a 8 percent increase in the price of the good
86.
For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity
demanded. Which of
the following statements is most likely applicable to this good?
a.
There are no close substitutes for this good.
b.
The good is a luxury.
c.
The market for the good is broadly defined.
d.
The relevant time horizon is short.
87.
For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity
demanded. Which of
the following statements is most likely applicable to this good?
a.
There are many substitutes for this good.
b.
The good is a necessity.
c.
The market for the good is broadly defined.
d.
The relevant time horizon is short.
88.
For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity
demanded. Which of
the following statements is most likely applicable to this good?
a.
There are many close substitutes for this good.
b.
The good is a luxury.
c.
The market for the good is broadly defined.
d.
The relevant time horizon is long.
89.
For a particular good, an 8 percent increase in price causes a 12 percent decrease in quantity
demanded. Which of
the following statements is most likely applicable to this good?
a.
There are no close substitutes for this good.
b.
The good is a necessity.
c.
The market for the good is broadly defined.
d.
The relevant time horizon is long.
90.
For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity
demanded. Which of
the following statements is most likely applicable to this good?
a.
There are many close substitutes for this good.
b.
The good is a luxury.
c.
The market for the good is broadly defined.
d.
The relevant time horizon is long.
91.
For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity
demanded. Which of
the following statements is most likely applicable to this good?
a.
There are many substitutes for this good.
b.
The good is a necessity.
c.
The market for the good is narrowly defined.
d.
The relevant time horizon is long.
92.
For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity
demanded. Which of
the following statements is most likely applicable to this good?
a.
The relevant time horizon is short.
b.
The good is a necessity.
c.
The market for the good is broadly defined.
d.
There are many close substitutes for this good.
Elasticity and Its Application 1147
93.
For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity
demanded. Which of
the following statements is most likely applicable to this good?
a.
The relevant time horizon is short.
b.
The good is a luxury.
c.
The market for the good is narrowly defined.
d.
There are many close substitutes for this good.
94.
If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price
elasticity of
demand is
a. 0.75.
b. 1.25.
c. 1.33.
d. 1.60.
95.
If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price
elasticity of
demand is
a. 0.75.
b. 1.25.
c. 1.33.
d. 1.60.
96.
If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price
elasticity of
demand is
a. 0.50.
b.
1.
c.
1.5.
d.
2.
97.
If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price
elasticity of demand is
a. 0.02.
b. 0.33.
c.
3.
d.
4.
98.
Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The price
elasticity of demand for
this good is
a.
inelastic and equal to 6.
b.
elastic and equal to 6.
c.
inelastic and equal to 0.17.
d.
elastic and equal to 0.17.
99.
Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The price
elasticity of demand
for this good is
a.
inelastic and equal to 0.67.
b.
elastic and equal to 0.67.
c.
inelastic and equal to 1.50.
d.
elastic and equal to 1.50.
100.
If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in
a.
a 20 percent increase in the quantity demanded.
b.
an 18 percent increase in the quantity demanded.
c.
a 2 percent increase in the quantity demanded.
d.
a 1.8 percent increase in the quantity demanded.
101.
If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity
demanded must be the
result of
a.
a 0.2 percent increase in the price.
b.
a 2.5 percent increase in the price.
c.
a 5 percent increase in the price.
d.
a 20 percent increase in the price.
102.
If the price elasticity of demand for a good is 0.8, then a 12 percent increase in the quantity
demanded must be the
result of
a.
a 0.06 percent decrease in the price.
b.
a 1.5 percent decrease in the price.
c.
a 9.6 percent decrease in the price.
d.
a 15 percent decrease in the price.
103.
If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity
demanded must be the
result of
a.
a 0.1 percent decrease in the price.
b.
a 1 percent decrease in the price.
c.
a 10 percent decrease in the price.
d.
a 19.6 percent decrease in the price.
104.
Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government
policy aimed at
reducing smoking changed the price of a pack of cigarettes from $2 to $6.
According to the midpoint method, the
government policy should have reduced smoking by
a.
30%.
b.
40%.
c.
80%.
d. 250%.
105.
Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy
aimed at reducing
beer consumption changed the price of a case of beer from $10 to $20.
According to the midpoint method, the
government policy should have reduced beer consumption
by
a.
30%.
b.
40%.
c.
60%.
d.
74%.
Table 5-2
Price
Quantity
$250
0
$200
30
$150
70
$100
110
$50
150
$0
190
106.
Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the
absolute value of the price
elasticity of demand is
a.
5.3.
b.
2.8.
c.
0.8.
d. 0.36.
107.
Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the
absolute value of the price
elasticity of demand is
a.
0.4.
b.
0.9.
c.
1.1.
d.
2.
108.
Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute
value of the price
elasticity of demand is
a. 0.31.
b. 0.46.
c. 1.25.
d. 2.17
Elasticity and Its Application 1155
109.
Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the price
elasticity of demand
is
a.
zero.
b.
unit elastic.
c.
inelastic.
d.
elastic.
110.
Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the price
elasticity of demand
is
a.
zero.
b.
inelastic.
c.
unit elastic.
d.
elastic.
1156 Elasticity and Its Application
Table 5-3
Consider the following demand schedule.
Price
Quantity Demanded
$0
1,000
$3
800
$6
600
$9
400
$12
200
$15
0
111.
Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand between
$0 and $3?
a. 0.11
b.
0.22
c.
0.40
d.
2.00
112.
Refer to Table 5-3. Using the midpoint method, in which range is demand most elastic?
a.
$0 to $3
b.
$3 to $6
c.
$9 to 12
d.
$12 to $15