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Chapter 04 - Elasticity
90. Elasticity of supply will increase when:
Chapter 04 - Elasticity
91. Refer to the above graphs. For which graph is the supply perfectly inelastic?
92. Refer to the above graphs. Which graph shows the immediate market period for supply?
93. Refer to the above graphs. Which graph depicts a situation where sellers are increasing
their output because their product is becoming more popular among buyers?
Chapter 04 - Elasticity
94. The price of gold is often volatile because:
95. The main reason for the high price of antiques is that:
96. A glass company making windows for houses also makes windows for other things (cars,
boats, planes, etc.). We would expect its supply curve for house windows to be:
Chapter 04 - Elasticity
97. If a 10 percent increase in the price of one good results in an increase of 5 percent in the
quantity demanded of another good, then it can be concluded that the two goods are:
98. If a 10 percent increase in the price of one good results in no change in the quantity
demanded of another good, then it can be concluded that the two goods are:
99. A remote island nation is discovered, and on this island the cross elasticity of demand for
coconut milk and fruit punch is +1.0. This indicates that the two goods are:
Chapter 04 - Elasticity
100. Cross elasticity of demand is:
101. The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is
likely to be:
102. The cross elasticity of demand between digital cameras and memory cards is likely to
be:
Chapter 04 - Elasticity
103. If a 10 percent increase in the price of one good results in a decrease of 5 percent in the
quantity demanded of another good, then it can be concluded that the two goods are:
104. A 3 percent increase in the price of tea causes a 6 percent increase in the demand for
coffee. The cross elasticity of demand for coffee with respect to the price of tea is:
105. The cross elasticity of demand for product X with respect to the price of product Y is -
1.2. It can be inferred that X and Y are:
Chapter 04 - Elasticity
106. Most goods can be classified as normal goods rather than inferior goods. The definition
of a normal good suggests that:
107. If the demand for a product increases proportionately faster than the increase in
consumers' incomes, then the income elasticity of demand for the product is:
108. A negative income elasticity of demand coefficient indicates that:
Chapter 04 - Elasticity
109. The income elasticity of demand for a food is roughly 1. A consumer's monthly income
is $2,000, of which 20 percent is spent on food. If the income of this consumer doubles, the
amount she'll spend on food will be:
110. A consumer's weekly income is $300 and the consumer buys 5 bars of chocolate per
week. When income increases to $330, the consumer buys 6 bars per week. The income
elasticity of demand for chocolate by this consumer is about:
111. Which pair of variables might be positively or negatively related depending on the
characteristic of the product?
Chapter 04 - Elasticity
112. The relationship between a consumer's monthly income and monthly consumption of
four products, A-D, is shown below.
Which product listed is an example of an inferior good?
113. For which product is the income elasticity of demand most likely to be negative?
Chapter 04 - Elasticity
114. Estimates of the income elasticity of demand for health care indicate that it is about 1.
These estimates suggest that spending on health care would:
Answer the question based on information in the following table.
115. Refer to the above table. Which product would be an inferior good?
Chapter 04 - Elasticity
117. Refer to the above table. Which product is a normal good but least responsive to a
change in income?
118. The income elasticity of demand for jewelry is 2. Other things equal, a 10 percent
increase in consumer income will:
Chapter 04 - Elasticity
119. Airlines charge business travelers more than leisure travelers because there is a more:
120. Movie theaters charge lower prices to see a movie in the afternoon than in the evening
because there is an:
121. When universities announce a large tuition increase and follow it with an announcement
that more financial aid will be available, they are assuming that students who pay full tuition:
Chapter 04 - Elasticity
122. If the percentage change in quantity demanded is less than the percentage change in
price, then demand is said to be elastic.
123. Along a straight-line demand curve, demand tends to be elastic at lower prices and
inelastic at higher prices.
124. A good with a price-elasticity coefficient of 0.75 has a demand that is price-inelastic.
125. If the quantity demanded for good A increases from 40 to 60 when price decreases from
$9 to $7, price elasticity of demand in this price range is 1.6.
Chapter 04 - Elasticity
126. In the price range where demand is elastic, if the seller of the good raises its price, then
total revenues will increase.
127. If the price-elasticity coefficient for a product is 0.68 and the seller wants to raise
revenues by changing its price, then the seller should cut the price of the product.
128. Whenever a product is put on special sale at a discounted price, total revenue from the
product increases. This indicates that the coefficient of elasticity for the product is greater
than 1.
129. When demand is price-elastic, an increase in price will lead to increased total consumer
spending for the product.
130. Price elasticity of demand tends to be low for goods with few close substitutes.
131. Given: The demand for most agricultural products is inelastic. Therefore, an increase in
supply will increase the total income of producers of agricultural products.
132. A state government seeking to increase its excise-tax revenues is more likely to increase
the tax rate on items with elastic demand.
133. The demand for cocaine among addicts is relatively elastic.
134. One reason the luxury tax on yachts imposed by the U.S. Congress in 1991 failed to
produce much tax revenue was that the demand for yachts was quite inelastic.
135. Price elasticity of supply decreases over a longer time period.
136. The supply of antiques is highly inelastic so increases in demand would have a small
effect on price.
137. If changes in demand cause significant changes in equilibrium price, then supply must be
quite inelastic.
Chapter 04 - Elasticity
138. The supply of tickets to a major sporting event held in a stadium, such as the Super Bowl
or a World Series game, is perfectly inelastic.
139. We would expect the cross-elasticity of demand between popcorn and potato chips to be
negative.
140. We would expect the income elasticity of demand for steak to be positive, and that for
hamburger to be negative.
141. An inferior good has an income elasticity coefficient that is greater than zero but less
than one.
