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Chapter 04 - Elasticity
137. Refer to the above diagrams. The case of substitute goods is represented by figure:
138. Refer to the above diagrams. The case of a normal good is represented by figure:
139. Refer to the above diagrams. The case of an inferior good is represented by figure:
Chapter 04 - Elasticity
140. Refer to the above diagrams. The case of complementary goods is represented by figure:
141. Refer to the above diagrams. In which case would the coefficient of income elasticity be
positive?
142. Refer to the above diagrams. In which case would the coefficient of income elasticity be
negative?
Chapter 04 - Elasticity
143. Refer to the above diagrams. In which case would the coefficient of cross elasticity of
demand be positive?
144. Refer to the above diagrams. In which case would the coefficient of cross elasticity of
demand be negative?
145. Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent
increase in the quantity demanded of normal good X. The coefficient of cross elasticity of
demand is:
Chapter 04 - Elasticity
146. Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent
decline in the quantity demanded of normal good X. The coefficient of cross elasticity of
demand is:
147. Assume that a 4 percent increase in income across the economy produces an 8 percent
increase in the quantity demanded of good X. The coefficient of income elasticity of demand
is:
148. Assume that a 6 percent increase in income in the economy produces a 3 percent increase
in the quantity demanded of good X. The coefficient of income elasticity of demand is:
Chapter 04 - Elasticity
149. Assume that a 3 percent increase in income across the economy produces a 1 percent
decline in the quantity demanded of good X. The coefficient of income elasticity of demand
for good X is:
150. Which type of goods is most adversely affected by recessions?
151. Which of the following goods (with their respective income elasticity coefficients in
parentheses) will most likely suffer a decline in demand during a recession?
Chapter 04 - Elasticity
152. Which of the following goods will least likely suffer a decline in demand during a
recession?
153. (Consider This) Elastic demand is analogous to a __________ and inelastic demand to a
________.
154. (Consider This) Elasticity can be thought of as degree of relative:
Chapter 04 - Elasticity
155. (Last Word) Suppose that a firm has "pricing power" and can segregate its market into
two distinct groups based on differences in elasticities of demand. The firm might charge:
156. (Last Word) Microsoft charges a substantially lower price for a software upgrade than
for the initial purchase of the software. This implies that Microsoft views the demand curve
for the software upgrade to be:
157. (Last Word) Which of the following is not an example of pricing based on group
differences in elasticity of demand?
Chapter 04 - Elasticity
158. (Last Word) Based on the concept of price elasticity of demand, which of the following
cases is most likely to occur?
159. A linear demand curve has a constant elasticity over the full range of the curve.
160. The greater the ease of shifting resources from product X to Y in the production process,
the greater is the elasticity of supply of product Y.
Chapter 04 - Elasticity
161. If the elasticity coefficient of supply is 0.7, supply is elastic.
162. Antiques tend to have highly inelastic supply curves.
163. The smaller the number of good substitutes for a product, the greater will be the price
elasticity of demand for it.
164. If the demand for wheat is highly price inelastic, an extraordinarily large crop may
reduce farm incomes.
Chapter 04 - Elasticity
165. Generally speaking, the demand for luxury goods is more price elastic than is the
demand for necessities.
166. Generally speaking, the smaller the percentage of one's total budget devoted to a
particular product, the more price elastic will be the demand for that product.
167. If price and total revenue are directly related, demand is inelastic.
168. If price changes and total revenue changes in the opposite direction, demand is relatively
elastic.
Chapter 04 - Elasticity
Answer the question on the basis of the following demand and supply data:
169. Refer to the above data. The demand for this product is elastic in the $8-$7 price range.
171. Cross elasticity of demand measures the effect of a change in the price of one product on
the quantity demanded of another product.
Chapter 04 - Elasticity
172. Income elasticity measures the effect of a change in income on the purchases of some
good or service.
173. If the coefficient of income elasticity of demand is positive, the product is an inferior
good.
174. If the coefficient of cross elasticity of demand is positive, the two products are
complementary goods.
175. An income elasticity coefficient of -1.8 means the product is a normal good.
Chapter 04 - Elasticity
176. A cross elasticity of demand coefficient of +2.5 indicates that the two products are
substitutes.
177. We would expect the coefficient of cross elasticity of demand for DVD players and
DVDs to be positive.
