Chapter 04 – Elasticity
1. The price elasticity of demand coefficient measures:
2. The basic formula for the price elasticity of demand coefficient is:
Chapter 04 – Elasticity
3. The demand for a product is inelastic with respect to price if:
4. If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80
will:
5. Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded
increases from 110 to 118. Then the price elasticity of demand is:
Chapter 04 – Elasticity
6. Which of the following is not characteristic of the demand for a commodity that is elastic?
7. If the demand for product X is inelastic, a 4 percent increase in the price of X will:
8. If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then:
Chapter 04 – Elasticity
9. A perfectly inelastic demand schedule:
10. The larger the coefficient of price elasticity of demand for a product, the:
11. Most demand curves are relatively elastic in the upper-left portion because the original
price:
Chapter 04 – Elasticity
12. The price elasticity of demand for widgets is 0.80. Assuming no change in the demand
curve for widgets, a 16 percent increase in sales implies a:
13. Suppose Aiyanna’s Pizzeria currently faces a linear demand curve and is charging a very
high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices
by 5 percent per week for an indefinite period of time. We can expect that each successive
week:
14. The price elasticity of demand of a straight-line demand curve is:
Chapter 04 – Elasticity
15. A leftward shift in the supply curve of product X will increase equilibrium price to a
greater extent the:
16. If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon
will:
17. The price elasticity of demand is generally:
Chapter 04 – Elasticity
18. For a linear demand curve:
19. The price of product X is reduced from $100 to $90 and, as a result, the quantity
demanded increases from 50 to 60 units. Therefore demand for X in this price range:
Chapter 04 – Elasticity
20. The above diagram shows two product demand curves. On the basis of this diagram we
can say that:
21. Suppose we find that the price elasticity of demand for a product is 3.5 when its price is
increased by 2 percent. We can conclude that quantity demanded:
22. The price elasticity of demand for beef is about 0.60. Other things equal, this means that a
20 percent increase in the price of beef will cause the quantity of beef demanded to:
Chapter 04 – Elasticity
23. If a demand for a product is elastic, the value of the price elasticity coefficient is:
24. The concept of price elasticity of demand measures:
Chapter 04 – Elasticity
25. Refer to the above diagram. Between prices of $5.70 and $6.30:
26. Refer to the above diagram and assume a single good. If the price of the good decreases
from $6.30 to $5.70, consumer expenditure would:
27. Refer to the above diagram and assume a single good. If the price of the good increased
from $5.70 to $6.30 along D1, the price elasticity of demand along this portion of the demand
curve would be:
Chapter 04 – Elasticity
28. Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a
result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion
of the demand curve, price elasticity of demand is:
29. If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded
increases from 100 to 125, then:
30. A perfectly inelastic demand curve:
Chapter 04 – Elasticity
31. If quantity demanded is completely unresponsive to price changes, demand is:
32. A firm can sell as much as it wants at a constant price. Demand is thus:
33. A demand curve which is parallel to the horizontal axis is:
Chapter 04 – Elasticity
Answer the question on the basis of the following demand schedule:
34. Refer to the above data. If this demand schedule were graphed, we would find that:
35. Refer to the above data. The price elasticity of demand is relatively elastic:
Chapter 04 – Elasticity
36. Refer to the above data. The price elasticity of demand is relatively inelastic:
37. Refer to the above data. The price elasticity of demand is unity:
38. Refer to the above data. Which of the following is correct?
Chapter 04 – Elasticity
39. In which price range of the accompanying demand schedule is demand elastic?
40. When the percentage change in price is greater than the resulting percentage change in
quantity demanded:
Chapter 04 – Elasticity
41. Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for
products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total
revenue in the case(s) of:
Chapter 04 – Elasticity
42. Suppose that the above total revenue curve is derived from a particular linear demand
curve. That demand curve must be:
43. Suppose the above total revenue curve is derived from a particular linear demand curve.
That demand curve must be:
44. Suppose the above total revenue curve is derived from a particular linear demand curve.
That demand curve must be:
Chapter 04 – Elasticity
45. Which of the following statements is not correct?
46. In which of the following instances will total revenue decline?
47. If a firm’s demand for labor is elastic, a union-negotiated wage increase will:
Chapter 04 – Elasticity
48. The Illinois Central Railroad once asked the Illinois Commerce Commission for
permission to increase its commuter rates by 20 percent. The railroad argued that declining
revenues made this rate increase essential. Opponents of the rate increase contended that the
railroad’s revenues would fall because of the rate hike. It can be concluded that:
49. If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and
$11,000 worth of it when its price is $6, then:
50. Suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10
percent, the quantity demanded will increase by:
Chapter 04 – Elasticity
51. Refer to the above diagram which is a rectangular hyperbola, that is, a curve such that
each rectangle drawn from any point on the curve will be of identical area. If this rectangular
hyperbola was a demand curve, we could say that it would be: