Chapter 19 Demand and Supply Elasticity 21
14) If a one percent increase in the price of bananas leads to a one percent decrease in the quantity
of bananas demanded, then the demand for bananas is
A) elastic. B) inelastic.
C) unit elastic. D) perfectly inelastic.
15) A perfectly horizontal demand curve has
A) zero elasticity. B) some positive finite elasticity.
C) negative elasticity. D) perfect elasticity.
16) If the demand curve for a product is horizontal, then
A) the demand for the product is perfectly inelastic.
B) the demand for the product is perfectly elastic.
C) only a certain amount of the product will be consumed regardless of price.
D) the price elasticity of the product approaches zero.
17) A vertical demand curve has
A) infinite elasticity. B) positive elasticity.
C) zero elasticity. D) negative elasticity.
18) If the demand curve for a product is vertical, then
A) the demand for the good is perfectly elastic.
B) consumers are highly responsive to price changes.
C) its price elasticity of demand is equal to zero.
D) consumers may purchase all they want to at the established market price.
19) If the quantity demanded of a product is the same for each possible price, demand is
A) unit elastic. B) elastic.
C) perfectly elastic. D) perfectly inelastic.
20) If there is no response in quantity demanded to a change in price, demand is
A) perfectly inelastic. B) perfectly elastic.
C) elastic. D) unit elastic.
21) A perfectly elastic demand curve
A) shows that a slight change in income will lead to a large reduction in price.
B) is a horizontal line drawn across from the quantity axis.
C) shows that a slight increase in price will reduce quantity demanded to zero.
D) has a slope of 1.
22) A demand relationship that is a vertical line up from the quantity axis is
A) perfectly elastic. B) unit elastic.
C) perfectly inelastic. D) somewhat elastic.
23) The price elasticity of demand along a vertical demand curve is
A) elastic at high prices and inelastic at low prices.
B) infinite.
C) one.
D) zero.
24) A perfectly elastic demand curve is
A) vertical. B) horizontal.
C) a rectangular hyperbola. D) a downward sloping straight line.
25) A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer s quantity
demanded falls to zero if the price rises even a fraction of a cent. The consumer s demand curve
is
A) horizontal and is perfectly inelastic.
B) horizontal and is perfectly elastic.
C) vertical and is perfectly elastic.
D) downward sloping from higher prices down to $10 and then horizontal.
Price Quantity Demanded
Per Unit Per Week
$10.00 25
9.50 30
9.00 35
8.50 40
8.00 45
7.50 50
7.00 55
6.50 60
6.00 65
5.50 70
5.00 75
26) Refer to the above table. For which prices is demand elastic?
A) In a range of prices below $6.50 B) In a range of prices above $6.50
C) In a range of prices between $5 and $10 D) In a range of prices above $9.00
27) Refer to the above table. For which prices is demand inelastic?
A) In a range of prices below $6.00 B) In a range of prices above $6.00
C) In a range of prices between $5 and $1 D) In a range of prices above $9.00
28) Refer to the above table. For which prices is demand unit elastic?
A) In a range of prices below $6.50
B) In a range of prices above $6.50
C) In a range of prices between $5 and $10
D) In a range of prices between $6 and $6.50
29) Refer to the above table. At a price below $5, the absolute price elasticity of demand is
A) 1.0. B)
b
elow 1.
C)
b
etween 0.8 and 1.0. D) greater than 1.
30) To say that demand is inelastic means that
A) people do not like the good very much.
B) quantity demanded not very responsive to price changes.
C) relatively small changes in price lead to relatively large changes in quantity demanded.
D) relatively small changes in quantity demanded lead to relatively small changes in price.
31) A demand relationship in which a given percentage change in price will result in a larger
percentage change in quantity demanded is
A) elastic. B) unit elastic.
C) inelastic. D) consistent with zero elasticity.
32) A demand relationship in which the quantity demanded changes exactly in proportion to the
change in price is
A) elastic. B) unit elastic.
C) inelastic. D) consistent with zero elasticity.
33) A demand relationship in which a given percentage change in price will result in a less than
proportionate percentage change in quantity demanded is
A) elastic. B) unit elastic.
C) inelastic. D) consistent with zero elasticity.
34) When demand is elastic,
A) a proportionately small change in price leads to a proportionately large change in quantity
supplied.
B) a proportionately small change in price leads to a proportionately small change in quantity
supplied.
C) a proportionately small change in price leads to a proportionately large change in quantity
demanded.
D) a proportionately small change in price leads to a proportionately small change in quantity
demanded.
35) When demand is elastic,
A) quantity demanded is very responsive to a change in price.
B) quantity demanded is not very responsive to a change in price.
C) the proportional change in quantity demanded is equal to the proportional change in
price.
D) producers react quickly to price changes.
36) When demand is inelastic,
A) quantity demanded is very responsive to a change in price.
B) quantity demanded is not very responsive to a change in price.
C) the proportional change in quantity demanded is equal to the proportional change in
price.
D) producers react quickly to price changes.
37) If demand is unit elastic, then
A) a ten percent increase in price leads to a one percent decrease in quantity demanded.
B) the percentage change in quantity demanded equals the percentage change in price.
C) a two percent increase in price leads to a two percent decrease in quantity demanded.
D) an increase in price of any amount leads to quantity demanded falling to zero.
38) The absolute price elasticity of demand for a vertical demand curve
A) is infinite.
B) is 1.0.
C) is 0.
D) depends on where one is on the demand curve.
39) Refer to the above figure. Demand is
A) perfectly elastic.
B) unitary elastic.
C) perfectly inelastic.
D) undetermined without more information.
40) Refer to the above figure. Demand is
A) perfectly elastic.
B) unitary elastic.
C) perfectly inelastic.
D) undetermined without more information.
41) When the absolute price elasticity of demand equals 1, demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) undetermined without more information.
42) When the absolute price elasticity of demand is greater than 1, demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) undetermined without more information.
43) When the absolute price elasticity of demand is less than 1, demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) undetermined without more information.
44) When the absolute price elasticity of demand equals 2.5, demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) undetermined without more information.
45) When the absolute price elasticity of demand equals 0.67, demand is
A) elastic.
B) unit elastic.
C) inelastic.
D) undetermined without more information.
46) Moving down a straight line demand curve, the absolute price elasticity of demand
A) increases. B) is constant.
C) decreases. D) varies in uncertain ways.
47) If the absolute price elasticity of demand for a product is less than 1, then
A) the absolute price elasticity of demand is inelastic and consumers are relatively insensitive
to price changes.
B) the absolute price elasticity of demand is inelastic and consumers are relatively sensitive to
price changes.
C) the absolute price elasticity of demand is elastic and consumers are relatively insensitive to
price changes.
D) the absolute price elasticity of demand is elastic and consumers are relatively sensitive to
price changes.
48) If the absolute price elasticity of demand for a product is greater than 1, then
A) the absolute price elasticity of demand is inelastic and consumers are relatively insensitive
to price changes.
B) the absolute price elasticity of demand is inelastic and consumers are relatively sensitive to
price changes.
C) the absolute price elasticity of demand is elastic and consumers are relatively insensitive to
price changes.
D) the absolute price elasticity of demand is elastic and consumers are relatively sensitive to
price changes.
49) In an extreme hypothetical instance in which the price change of a good elicited no change in
quantity demanded, we would say that the item is
A) perfectly elastic. B) perfectly inelastic.
C) infinitely elastic. D) unitary elastic.
50) If demand is elastic and the price of a product decreases by 10 percent, then
A) the change in quantity demanded is less than 10 percent.
B) the change in quantity demanded is equal to 10 percent.
C) the change in quantity demanded is greater than 10 percent.
D) the decrease in quantity demanded is greater than 0 percent.
51) If demand is inelastic and the price of a product decreases by 10 percent, then
A) the change in quantity demanded is less than 10 percent.
B) the change in quantity demanded is equal to 10 percent.
C) the change in quantity demanded is greater than 10 percent.
D) the decrease in quantity demanded is greater than 0 percent.
52) Whenever the absolute value of the price elasticity of demand is greater than 1, but less than
infinite,
A) demand is inelastic. B) demand is unit elastic.
C) demand is elastic. D) demand is perfectly elastic.
53) A perfectly inelastic demand curve is
A) a horizontal straight line.
B) a vertical straight line.
C) a downward sloping straight line that intersects the horizontal axis at the origin.
D) an upward sloping straight line that crosses the vertical axis.
54) If a 5 percent change in the price of a good elicited a 5 percent change in the quantity demanded
of the good, we would say that over this range of prices the good has a(n)
A) elastic demand. B) inelastic demand.
C) perfectly elastic demand. D) unit elasticity of demand.
55) When demand is unit elastic, a 10 percent change in the price of the good
A) will cause a change in quantity demanded of less than 10 percent.
B) will cause a change in quantity demanded equal to 10 percent.
C) will cause a change in quantity demanded greater than 10 percent.
D) will not cause any change in quantity demanded.
56) We say that a good has elastic demand whenever the absolute value of the price elasticity of
demand is greater than 1. A 1 percent change in price therefore causes
A) exactly a 1 percent change in the quantity demanded.
B) a change of less than 1 percent in the quantity demanded.
C) a greater than 1 percent change in quantity demanded.
D) a change that cannot be determined based on 1 percent.
57) Demand is said to be inelastic when
A) a given percentage change in price will result in a less than proportionate percentage
change in the quantity demanded.
B) demand exhibits zero responsiveness to price changes.
C) small price increases will lead to zero quantity demanded.
D) a given percentage change in price will result in a greater than proportionate percentage
change in the quantity demanded.
58) A perfectly elastic demand would imply what kind of demand curve?
A) horizontal B) vertical
C) upward sloping D) downward sloping
59) If an item has an absolute price elasticity of demand that is greater than 1, we say the demand
for the item is
A) elastic. B) inelastic.
C) perfectly inelastic. D) unit elastic.
60) The slope of the perfectly inelastic demand curve is ________, the slope of the perfectly elastic
demand curve is ________.
A) undefined, zero B) one, one
C) zero, undefined D) one, zero
61) If a good has an absolute price elasticity of 2, the demand for the good is
A) unit elastic. B) inelastic.
C) perfectly elastic. D) elastic.
62) If a good has an absolute price elasticity of 1, the demand for the good is
A) unit elastic. B) inelastic.
C) perfectly elastic. D) elastic.
63) If a good has an absolute price elasticity of 0, the demand for the good is
A) unit elastic. B) inelastic.
C) perfectly inelastic. D) elastic.
64) A perfectly inelastic demand curve exhibits
A) zero responsiveness to changes in price.
B) zero quantity demanded when there is a slight change in price.
C) a change in quantity demanded that is proportional to the change in price.
D) a change in quantity demanded that is always twenty percent of the change in price.
65) A perfectly elastic demand curve exhibits
A) zero responsiveness to changes in price.
B) that quantity demanded will decrease to zero when there is a slight increase in the price
level.
C) a change in quantity demanded that is proportional to the change in price.
D) a change in quantity demanded that is always twenty percent of the change in price.
66) When the price of a ukulele is $1000, 60 ukuleles are demanded; and when the price of a ukulele
goes up to $1200, 30 ukuleles are demanded. In the price range between $1000 and $1200 the
demand for ukuleles is
A) elastic. B) inelastic.
C) unit elastic. D) perfectly elastic.
67) Explain the three possible ranges for price elasticity of demand.
68) What does a perfectly elastic demand curve look like? A perfectly inelastic demand curve?
Explain.
69) Unit elasticity of demand can be found everywhere along a straight line demand curve with a
slope of 1. Do you agree or disagree? Explain.
19.3 Elasticity and Total Revenues
1) When total revenue and price are inversely related, demand is
A) unit elastic. B) inelastic. C) elastic. D) not related.
2) When total revenue and price are directly related, demand is
A) unit elastic. B) inelastic. C) elastic. D) not related.
3) When total revenue remain unchanged when there is a change in price, demand is
A) unit elastic. B) inelastic. C) elastic. D) not related.
4) No matter what the price of coffee is in the cafeteria, Jack spends $20 a week on coffee. We can
conclude that the absolute value of the price elasticity of demand for coffee for Jack is
A) greater than 1. B) equal to 1. C) less than 1. D) equal to 0.
5) A firm could lower prices and still increase revenue if
A) demand is elastic. B) elasticity of demand is equal to unity.
C) demand is inelastic. D) elasticity of demand is equal to zero.
6) Suppose that the demand for pizza is inelastic. If a pizzeria decided to lower the price of pizza,
total revenue would
A) increase. B) decrease. C) stay the same. D)
b
e maximized.
7) If the price elasticity of demand for apples is greater than 1, an increase in apple prices will
A) raise total revenue.
B) lower total revenue.
C) not affect total revenue.
D) either raise or lower total revenue, but it is impossible to determine which.
8) If a seller lowers the price of a product when demand is price inelastic, the seller can expect
revenues to
A) rise.
B) fall.
C) stay the same.
D) either rise or fall, but it is impossible to determine which.
9) Which of the following is NOT characteristic of a good with elastic demand?
A) The absolute price elasticity of demand is less than 1.
B) Total revenue decreases if price is increased.
C) Buyers are relatively sensitive to price changes.
D) The percentage change in quantity demanded is greater than the percentage change in
price.
10) If demand for a good is perfectly inelastic, then
A) a price increase would cause a fall in quantity demanded.
B) a price increase would cause no change in quantity demanded.
C) a price increase would cause an increase in quantity demanded.
D) a price increase would cause a fall in total revenue.
11) If the market price of a product falls and as a result total revenue of firms falls, we can conclude
that
A) demand is elastic in this price range.
B) the product s price is above the midpoint of its demand curve.
C) demand is inelastic in this price range.
D) the demand curve is horizontal.
12) If the absolute price elasticity of demand for concert tickets is 0.75, an increase in ticket prices
will
A) increase total revenue. B) decrease total revenue.
C) not change the elasticity of demand. D) not change total revenue.
13) Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to
increase the total revenues from subscriptions, the publishers should
A) increase the price of the newsletters.
B) reduce the price of the newsletters.
C) sell the newsletters on the inelastic portion of its demand curve.
D) keep the price the same.
14) An increase in total revenue will result if
A) demand is inelastic and price increases.
B) demand is elastic and price increases.
C) demand is inelastic and price decreases.
D) demand is unitary elastic and price decreases.
15) An increase in total revenue will result if
A) demand is inelastic and price decreases.
B) demand is elastic and price decreases.
C) demand is elastic and price decreases.
D) demand is unitary elastic and price increases.
16) A decrease in total revenue will result if
A) demand is inelastic and price decreases.
B) demand is elastic and price decreases.
C) demand is inelastic and price decreases.
D) demand is unitary elastic and price decreases.
17) A decrease in total revenue will result if
A) demand is inelastic and price decreases.
B) demand is elastic and price increases.
C) demand is elastic and price decreases.
D) demand is unitary elastic and price decreases.
18) When demand is perfectly inelastic, an increase in price will
A) leave total revenue unchanged.
B) increase total revenue.
C) decrease total revenue.
D) either increase total revenue or decrease total revenue, but it is impossible to tell which.
19) When demand is elastic, a decrease in price will
A) decrease total revenue. B) not change total revenue.
C) increase total revenue. D) reduce quantity demanded.
20) Given a price elasticity of demand of 0.33, a decrease in price will
A) reduce total revenue. B) increase total revenue.
C) leave total revenue unchanged. D) decrease quantity.
21) If the absolute price elasticity of demand of a good is 1.46, then the total revenues will increase if
its market price
A) increases.
B) decreases.
C) stays the same.
D) changes, but we can t tell without more information if the price increases or decreases.
22) If a price decrease of a product significantly raises its revenues, then the absolute price elasticity
of demand for that product must be
A) less than one. B) equal to one.
C) greater than one. D) an example of unit elasticity.
23) The range to the left of the midpoint on a linear demand curve is
A) elastic. B) infinite. C) one. D) inelastic.
24) The range to the right of the midpoint on a linear demand curve is
A) elastic. B) infinite. C) one. D) inelastic.
25) The price elasticity of demand along a linear demand curve is
A) more elastic at higher prices than at low prices.
B) infinite.
C) one.
D) constant.
26) In the above figure, over the price range P1P2
,
demand is
A) unit elastic. B) elastic.
C) inelastic. D) perfectly elastic.
27) In the above figure, over the price range P5P6
,
demand is
A) unit elastic. B) elastic.
C) perfectly inelastic. D) inelastic.
28) In the above figure, through which range would the demand for this good be most inelastic?
A) A B B) B E C) E F D) G H