Page 1
1.
The price elasticity of demand measures the responsiveness of the change in the:
A)
quantity demanded to a change in the price.
B)
price to a change in the quantity demanded.
C)
slope of the demand curve to a change in the price.
D)
slope of the demand curve to a change in the quantity demanded.
2.
When the price goes down, the quantity demanded goes up. The price elasticity of
demand measures:
A)
how much the price goes down.
B)
how much the equilibrium price goes up.
C)
the responsiveness of the price change to an income change.
D)
the responsiveness of the quantity change to the price change.
3.
If the price of a good increases by 20% and the quantity demanded changes by 15%,
then the price elasticity of demand is equal to:
A)
0.75.
B)
approximately 0.33.
C)
approximately 1.33.
D)
1.
4.
The price elasticity of demand is computed as the percentage change in the _____
divided by the percentage change in _____.
A)
quantity demanded; the quantity supplied
B)
price; the quantity demanded
C)
quantity demanded; income
D)
quantity demanded; the price
5.
The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The
price elasticity of demand is equal to _____, and demand is described as _____.
A)
0.2; inelastic
B)
5; inelastic
C)
0.2; elastic
D)
5; elastic
6.
The ratio of the percentage change in quantity demanded to the percentage change in
price is the _____ elasticity of demand.
A)
price
B)
quantity
C)
income
D)
cross-price
Page 2
7.
The price elasticity of demand measures the:
A)
responsiveness of the change in quantity demanded to a change in price.
B)
change in price versus a change in quantity demanded.
C)
responsiveness of the change in the slope of the demand curve to a change in price.
D)
change in the slope of the demand curve versus a change in the quantity demanded.
8.
The price elasticity of demand is measured by _____ the percentage change in _____
the percentage change in _____.
A)
dividing; price by; quantity demanded
B)
dividing; quantity demanded by; price
C)
subtracting; price from; quantity demanded
D)
adding; price to; quantity demanded
9.
For a normal demand curve, the price elasticity of demand will:
A)
always be positive.
B)
always be greater than 1.
C)
usually be equal to 1.
D)
always be negative.
10.
The price elasticity of demand can be found by:
A)
examining only the slope of the demand curve.
B)
measuring absolute changes in price and quantity demanded.
C)
comparing the percentage change in quantity demanded to the percentage change
in price.
D)
knowing that when price changes, quantity demanded goes in the opposite
direction.
11.
If the price of a good increases by 15% and quantity demanded changes by 20%, then
the price elasticity of demand is equal to:
A)
0.75.
B)
approximately 0.33.
C)
approximately 1.33.
D)
1.
Page 3
12.
The price elasticity of demand measures the:
A)
responsiveness of quantity demanded to a change in price.
B)
responsiveness of price to a change in quantity demanded.
C)
extent to which prices are flexible and respond to market forces.
D)
responsiveness of demand when price is held constant and demand increases or
decreases.
13.
Suppose the price of gasoline increases 10% and quantity of gasoline demanded in
Orlando drops 5% per day. Demand for gasoline in Orlando is:
A)
price elastic.
B)
price inelastic.
C)
price unit-elastic.
D)
perfectly price inelastic.
14.
If the estimated price elasticity of demand for foreign travel is 4:
A)
a 20% decrease in the price of foreign travel will increase quantity demanded by
80%.
B)
the demand for foreign travel is inelastic.
C)
a 10% increase in the price of foreign travel will increase quantity demanded by
40%.
D)
a 20% increase in the price of foreign travel will increase quantity demanded by
80%.
15.
Egg producers know that the price elasticity of demand for eggs is 0.1. If they want to
increase sales by 5%, they will have to lower price by:
A)
0.1%.
B)
1%.
C)
5%.
D)
50%.
16.
Gas prices recently increased by 25%. In response, purchases of gasoline decreased by
5%. According to this finding, the price elasticity of demand for gas is:
A)
5.
B)
2.
C)
0.2.
D)
0.5.
Page 4
17.
The only producer of chocolate bunnies in the world, Choco’s Bunny Company, recently
expanded its production capacity from 1,000 to 2,000 bunnies per day. If the price
elasticity of demand for bunnies is 3.33, by how much will the company have to reduce
its price to sell the additional 1,000 bunnies (by the midpoint method)?
A)
2.5%
B)
25%
C)
125%
D)
20%
18.
The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs
at $150 per chair. Using the midpoint formula, what do they think is the price elasticity
of demand?
A)
2.5.
B)
1.4.
C)
0.7.
D)
0.5.
19.
The publisher of an economics textbook finds that, when the book’s price is lowered
from $70 to $60, sales rise from 10,000 to 15,000. By the midpoint method, the price
elasticity of demand is:
A)
500.
B)
50.
C)
3.5.
D)
2.6.
20.
Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity
demanded increases to 130. The price elasticity of demand between $10 and $8, by the
midpoint method, is approximately:
A)
1.17.
B)
1.50.
C)
0.85.
D)
1.00.
21.
Use of the midpoint method to calculate the price elasticity of demand eliminates the
problem of computing:
A)
different elasticities, depending on whether price decreases or increases.
B)
different elasticities because price and quantity are inversely related on the demand
curve.
C)
total revenue when price falls and demand is inelastic.
D)
total revenue when price falls and demand is elastic.
Page 5
22.
A men’s tie store sold an average of 30 ties per day at $5 per tie but sold 50 of the same
ties per day at $3 per tie. The price elasticity of demand, by the midpoint method, is:
A)
greater than zero but less than 1.
B)
equal to 1.
C)
greater than 1 but less than 3.
D)
greater than 3.
23.
A men’s tie store sold an average of 30 ties per day at $5 per tie. The same store sold 60
of the same ties per day at $3 per tie. In this case, the price elasticity of demand (by the
midpoint method) is:
A)
greater than zero but less than 1.
B)
equal to 1.
C)
greater than 1 but less than 3.
D)
greater than 3.
24.
A shirt manufacturer sold 10 dozen shirts per day at $4 per shirt but sold 15 dozen shirts
per day at $3 per shirt. The price elasticity of demand (by the midpoint method) is:
A)
greater than zero but less than 1.
B)
equal to 1.
C)
greater than 1 but less than 3.
D)
greater than 3.
25.
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity
demanded increases from 190 bags to 210 bags, then the price elasticity of demand (by
the midpoint method) is:
A)
0.
B)
0.5.
C)
1.
D)
2.
26.
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity
demanded increases from 180 bags to 220 bags, then the price elasticity of demand (by
the midpoint method) is:
A)
0.
B)
0.5.
C)
1.
D)
2.
Page 6
27.
If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the quantity
demanded increases from 180 bags to 220 bags, then the price elasticity of demand (by
the midpoint method) is:
A)
0.5.
B)
1.
C)
2.
D)
greater than 2.
28.
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity
demanded does not change, then the price elasticity of demand (by the midpoint
method) is:
A)
0.
B)
0.5.
C)
1.
D)
2.
29.
If the price of chocolate-covered peanuts decreases from $1.10 to $0.95 and the quantity
demanded increases from 190 bags to 215 bags, then the price elasticity of demand (by
the midpoint method) is:
A)
1.25.
B)
0.52.
C)
0.84.
D)
2.
30.
If the price of chocolate-covered peanuts decreases from $2.00 to $1.55 and the quantity
demanded increases from 180 bags to 220 bags, then the price elasticity of demand (by
the midpoint method) is:
A)
0.
B)
0.50.
C)
0.79.
D)
2.
31.
If the price of chocolate-covered peanuts decreases from $1.15 to $1.05 and the quantity
demanded increases from 190 bags to 220 bags, then the price elasticity of demand (by
the midpoint method) is:
A)
0.5.
B)
1.
C)
2.
D)
between 1 and 2.
Page 7
32.
If the price of chocolate-covered peanuts decreases from $1.15 to $0.90 and the quantity
demanded increases from 0 bags to 400 bags, then the price elasticity of demand (by the
midpoint method) is:
A)
0.5.
B)
1.
C)
2.
D)
greater than 2.
33.
The price of notebooks is $5, and at that price consumers demand 12 notebooks. If the
price rises to $7, consumers will decrease quantity demanded to 4 notebooks. Using the
midpoint formula, what is the price elasticity of demand for notebooks?
A)
0.33
B)
3
C)
0.17
D)
6
34.
When the price of pencils decreases from $3 to $1, the quantity demanded increases
from 100 to 200 pencils. By the midpoint method, the price elasticity of demand equals:
A)
0.17.
B)
0.5.
C)
0.67.
D)
1.5.
35.
If the price of tacos increases from $1 to $2 and customers decrease their consumption
from 10 tacos to 8 tacos, what is the price elasticity of demand (by the midpoint
method)?
A)
1.5
B)
1
C)
0.33
D)
0.5
36.
If the price of burritos increases from $4 to $6 and customers decrease their
consumption from 20 to 10 burritos, what is the price elasticity of demand (by the
midpoint method)?
A)
1.67
B)
0.67
C)
3
D)
2
Page 8
37.
Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity
demanded increases to 130. The price elasticity of demand (using the midpoint formula)
between $10 and $8 is approximately:
A)
1.17.
B)
1.50.
C)
0.85.
D)
1.00.
Use the following to answer questions 38-45:
38.
(Ref 11-1 Table: Price Elasticity) Use Table 11-1: Price Elasticity. What is the price
elasticity of demand (using the midpoint formula) between $2.50 and $2.25?
A)
9
B)
19
C)
119
D)
0.5
39.
(Ref 11-1 Table: Price Elasticity) Use Table 11-1: Price Elasticity. What is the price
elasticity of demand (using the midpoint formula) between $2.25 and $2.00?
A)
4.00
B)
5.67
C)
9.00
D)
17.60
Page 9
40.
(Ref 11-1 Table: Price Elasticity) Use Table 11-1: Price Elasticity. What is the price
elasticity of demand (using the midpoint formula) between $2.00 and $1.75?
A)
2.33
B)
3.00
C)
4.00
D)
0.125
41.
(Ref 11-1 Table: Price Elasticity) Use Table 11-1: Price Elasticity. What is the price
elasticity of demand (using the midpoint formula) between $1.75 and $1.50?
A)
0.42
B)
1.50
C)
1.86
D)
0.08
42.
(Ref 11-1 Table: Price Elasticity) Use Table 11-1: Price Elasticity. What is the price
elasticity of demand (using the midpoint formula) between $1.50 and $1.25?
A)
1.00
B)
1.22
C)
1.50
D)
1.75
43.
(Ref 11-1 Table: Price Elasticity) Use Table 11-1: Price Elasticity. What is the price
elasticity of demand (using the midpoint formula) between $1.25 and $1.00?
A)
0.60
B)
0.82
C)
1.00
D)
1.60
44.
(Ref 11-1 Table: Price Elasticity) Use Table 11-1: Price Elasticity. What is the price
elasticity of demand (using the midpoint formula) between $1.00 and $0.75?
A)
0.54
B)
0.66
C)
0.75
D)
1.00
Page 10
45.
(Ref 11-1 Table: Price Elasticity) Use Table Ref 11-1: Price Elasticity. What is the price
elasticity of demand (using the midpoint formula) between $0.75 and $0.50?
A)
0.25
B)
0.33
C)
0.43
D)
0.52
Use the following to answer question 46:
46.
(Ref 11-2 Table: Market for Pizza) Refer to Table 11-2: Market for Pizza and use the
midpoint method. The price elasticity of demand for pizza between $14 and $12 per
pizza when income is $1,000 per month is:
A)
0.6.
B)
1.
C)
1.6.
D)
2.
Page 11
Use the following to answer question 47:
230. (Ref 11-3 Figure: The Demand Curve for Crossings) Use Figure 11-3: The Demand Curve
for Crossings. This graph examines the demand for crossing a bridge over a very large river. By
the midpoint method, the price elasticity of demand between $0.90 and $1.10 is approximately:
A) 0.1.
B) 0.2.
C) 1.
D) 1.9.
Ans: C
Refer To: Ref 11-3 Figure: The Demand Curve for Crossings
bloomslevel: Applying
modulename: Module 11
levelofdifficulty: Moderate
questiontype: Multiple Choice
sequence: 6230
topic: Calculating the Price Elasticity of Demand
47.
(Ref 11-3 Figure: The Demand Curve for Bridge Crossings) Use Figure 11-3: The
Demand Curve for Bridge Crossings. By the midpoint method, the price elasticity of
demand between $0.90 and $1.10 in the figure is _____, since the price elasticity is
_____.
A)
price-elastic; less than 1
B)
price unit-elastic; equal to 1
C)
price-elastic; a negative number
D)
price-inelastic; less than 1
Page 12
Use the following to answer questions 48-49:
48.
(Ref 11-4 Figure: The Demand Curve for Oil) Use Figure 11-4: The Demand Curve for
Oil. The price elasticity of demand between $20 and $21, by the midpoint method, is
approximately:
A)
0.21.
B)
0.49.
C)
2.1.
D)
4.9.
49.
(Ref 11-4 Figure: The Demand Curve for Oil) Use Figure 11-4: The Demand Curve for
Oil. The price elasticity of demand between $20 and $21 is _____ since the price
elasticity is _____.
A)
price-elastic; less than 1.
B)
price unit-elastic; equal to 1.
C)
price-inelastic; a negative number.
D)
price-inelastic; less than 1.
Page 13
Use the following to answer questions 50-58:
50.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. The
price elasticity of demand for the segment AB, by the midpoint method, is:
A)
13.
B)
11.
C)
0.91.
D)
0.1.
51.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. The
price elasticity of demand for the segment BC, by the midpoint method, is:
A)
greater than 3.33.
B)
3.33.
C)
3.
D)
0.33.
52.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. The
price elasticity of demand for the segment EF, by the midpoint method, is:
A)
1.3.
B)
1.
C)
0.7.
D)
0.33.
Page 14
53.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. By
the midpoint method, the price elasticity of demand for the segment AB is:
A)
less than the price elasticity of demand for the segment BC.
B)
less than the price elasticity of demand for the segment EF.
C)
zero.
D)
greater than the price elasticity of demand for the segment BC.
54.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. By
the midpoint method, the price elasticity of demand for the segment BC is:
A)
less than the price elasticity of demand for the segment AB.
B)
zero.
C)
greater than 3.5.
D)
less than the price elasticity of demand for the segment CD.
55.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. By
the midpoint method, the price elasticity of demand for the segment CD is:
A)
0.71.
B)
1
C)
1.4.
D)
0.29.
56.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. By
the midpoint method, the price elasticity of demand for the segment DE is
approximately:
A)
0.29.
B)
0.71.
C)
1.
D)
greater than 10.
57.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. By
the midpoint method, the price elasticity of demand for the segment EF is:
A)
greater than 1.
B)
less than the price elasticity of demand for segment FG.
C)
less than the price elasticity of demand for segment DE.
D)
greater than the price elasticity of demand for segment AB.
Page 15
58.
(Ref 11-5 Figure: The Demand for Shirts) Use Figure 11-5: The Demand for Shirts. The
price elasticity of demand, by the midpoint method, for the segment FG is
approximately:
A)
0.
B)
0.09.
C)
0.5.
D)
greater than 1.
Use the following to answer questions 59-60:
59.
(Ref 11-6 Figure: The Demand for e-Books) Use Figure 11-6: The Demand for e-Books.
What is the price elasticity of demand (by the midpoint method) when the price
decreases from $6 to $4?
A)
0.55
B)
0.5
C)
1
D)
0.67
60.
(Ref 11-6 Figure: The Demand for e-Books) Use Figure 11-6: The Demand for e-Books.
What is the price elasticity of demand (by the midpoint method) when the price
increases from $6 to $8?
A)
0.55
B)
0.5
C)
2.33
D)
0.67
Page 16
Use the following to answer questions 61-65:
61.
(Ref 11-7 Figure: The Demand Curve) Use Figure 11-7: The Demand Curve. By the
midpoint method, the price elasticity of demand between $8 and $9 is approximately:
A)
0.18.
B)
0.56.
C)
1.80.
D)
5.67.
62.
(Ref 11-7 Figure: The Demand Curve) Use Figure 11-7: The Demand Curve. By the
midpoint method, the price elasticity of demand between $1 and $2 is approximately:
A)
0.18.
B)
0.56.
C)
1.80.
D)
5.67.
63.
(Ref 11-7 Figure: The Demand Curve) Use Figure 11-7: The Demand Curve. By the
midpoint method, the price elasticity of demand between $3 and $4 is approximately:
A)
0.19.
B)
0.54.
C)
1.00
D)
1.86.
64.
(Ref 11-7 Figure: The Demand Curve) Use Figure 11-7: The Demand Curve. By the
midpoint method, the price elasticity of demand between $6 and $8 is approximately:
A)
0.23.
B)
0.45.
C)
2.33.
D)
4.50.
Page 17
65.
(Ref 11-7 Figure: The Demand Curve) Use Figure 11-7: The Demand Curve. By the
midpoint method, the price elasticity of demand between $6 and $7 is approximately:
A)
0.19.
B)
1.00.
C)
1.86.
D)
5.40.
Use the following to answer question 66:
66.
(Ref 11-8 Figure: The Market for Lattes) Use Figure 11-8: The Market for Lattes. What
is the price elasticity of demand between $2 and $2.50 per cup, using the midpoint
formula?
A)
0.33
B)
1.00
C)
2.51
D)
3.00
67.
Consider the gasoline market. Suppose the quantity demanded is 5,000 gallons at $3.00
per gallon and the price elasticity of demand for gasoline is 0.5. Now suppose the price
rises to $3.15 per gallon. How many gallons of gas will be sold at this higher price?
(Use the conventional method, not the midpoint method, of calculating price elasticity
of demand.)
68.
A university bookstore decreased the price of a sweatshirt from $20 to $18 and
discovered that sweatshirt sales increased from 100 per week to 120 per week. Use the
midpoint formula to compute the price elasticity of demand for sweatshirts.
Page 18
69.
When the absolute value of the percentage change in quantity demanded is less than the
absolute value of the percentage change in price, demand is:
A)
inelastic.
B)
elastic.
C)
unit-elastic.
D)
unknown.
70.
If the price elasticity of demand between two points on a demand curve is 0.75, then the
demand between those two points is:
A)
price unit-elastic.
B)
price-inelastic.
C)
price-elastic.
D)
unknown.
71.
If the absolute value of the price elasticity of demand is greater than 1:
A)
small percentage changes in the price will lead to much larger percentage changes
in the quantity demanded.
B)
small percentage changes in the price will lead to even smaller changes in the
percentage change in the quantity demanded.
C)
percentage changes in the price will lead to equal percentage changes in the
quantity demanded.
D)
changes in the price will have no impact on changes in the quantity demanded.
72.
Suppose the price of e-books is initially $20 but decreases to $15. The absolute value of
the percentage change in price (by the midpoint method) is approximately _____%.
A)
28
B)
10
C)
5
D)
15
73.
If you wanted to make sure that your calculation of elasticity between two points was
the same, regardless of your initial point, you would use:
A)
the absolute value of elasticity.
B)
supply elasticity.
C)
the midpoint formula calculation of elasticity.
D)
the point formula calculation of elasticity.
Page 20