True / False
1. The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as
the price of that product changes.
a.
True
b.
False
True
Easy
DISC: Elasticity
United States – BPROG: Analytic
Elasticity
Elasticity: The Measure of Responsiveness
2. The law of demand states that a lower price increases the amount of a commodity that people are willing to buy.
a.
True
b.
False
True
Easy
DISC: Supply and demand
United States – BPROG: Analytic
Supply and demand
Elasticity: The Measure of Responsiveness
3. The demand curve depicts quantities demanded that have been gathered as prices have changed over time.
a.
True
b.
False
False
Difficult
DISC: Supply and demand
United States – BPROG: Analytic
Supply and demand
Elasticity: The Measure of Responsiveness
4. The quantity demanded in a market depends on many things, but the concept of elasticity focuses on the effect of
changes in the price of the good.
a.
True
b.
False
Moderate
Elasticity
5. Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.
a.
True
b.
False
True
Easy
Elasticity
6. Elasticity of demand equals the ratio of the percentage change in quantity demanded to the percentage change in the
price of the good.
a.
True
b.
False
True
Easy
Elasticity
7. Elasticity of demand equals the ratio of the percentage change in the price of a good to the percentage change in the
quantity demanded.
a.
True
b.
False
False
Easy
Elasticity
8. Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.
a.
True
b.
False
True
Easy
Elasticity
9. Elasticity of demand is calculated using percentage changes in both price and quantity.
a.
True
b.
False
True
Easy
Elasticity
10. Price elasticity of demand is a numerical measure of how much quantity demanded rises as price falls or quantity
demanded falls as price rises.
a.
True
b.
False
True
Easy
Elasticity
11. Elasticity computations related to demand carry a minus sign to show that the demand curve is negatively sloped.
a.
True
b.
False
False
Moderate
Elasticity
12. The elasticity formula solves the units problem because percentages are unaffected by the units of measure.
a.
True
b.
False
True
Easy
Elasticity
13. The price elasticity of demand measure is generally stated as an absolute value.
a.
True
b.
False
True
Easy
Elasticity
14. A line that is perfectly elastic has an elasticity of demand of zero.
a.
True
b.
False
False
Moderate
Elasticity
15. Perfectly inelastic demand curves are vertical.
a.
True
b.
False
True
Moderate
Elasticity
16. Perfectly elastic demand curves are vertical.
a.
True
b.
False
False
Moderate
Elasticity
17. A vertical demand curve has an elasticity of demand equal to zero.
a.
True
b.
False
True
Moderate
Elasticity
18. A horizontal demand curve is perfectly elastic because a change in price will not induce a change in quantity
demanded.
a.
True
b.
False
False
Difficult
Elasticity
19. A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity
demanded.
a.
True
b.
False
True
Moderate
Elasticity
20. A straight-line demand curve has the same elasticity throughout its length.
a.
True
b.
False
False
Moderate
Elasticity
21. A straight-line demand curve has an elasticity that becomes smaller as we move from left to right along the schedule.
a.
True
b.
False
True
Moderate
Elasticity
22. A unit-elastic demand curve will be concave toward the origin.
a.
True
b.
False
False
Difficult
Elasticity
23. The unit-elastic demand curve bends in the middle toward the origin of the graph and at either end moves closer to the
axes.
a.
True
b.
False
True
Difficult
Elasticity
24. A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.
a.
True
b.
False
False
Easy
Elasticity
25. A demand curve with an elasticity of 1.0 is a unit-elastic demand curve.
a.
True
b.
False
True
Easy
Elasticity
26. When the goods of competing companies are identical, consumers have no reason to prefer one product over the other
so the demand curve for each manufacturer will be perfectly elastic.
a.
True
b.
False
True
Moderate
Elasticity
27. Elasticity of demand is another way to measure slope.
a.
True
b.
False
False
Moderate
Elasticity
28. The difference between slope and elasticity is that slope measures absolute change and elasticity measures percentage
change.
a.
True
b.
False
True
Easy
Elasticity
29. The slope of the demand curve conveys all the useful information about elasticity.
a.
True
b.
False
False
Moderate
Elasticity
30. The elasticity of a demand curve at any point can be ascertained by its steepness.
a.
True
b.
False
False
Elasticity
31. The elasticity of a straight-line demand curve is the same as its slope.
a.
True
b.
False
False
Moderate
Elasticity
32. The elasticity of any demand curve is the same as its slope.
a.
True
b.
False
False
Moderate
Elasticity
33. As one moves down a straight-line demand curve, the elasticity increases.
a.
True
b.
False
False
Moderate
Elasticity
34. As one moves down a straight-line demand curve, the elasticity decreases.
a.
True
b.
False
True
Moderate
Elasticity
35. As one moves down a straight-line demand curve away from the vertical axis, demand becomes less elastic and then
inelastic.
a.
True
b.
False
True
Difficult
Elasticity
36. Buyers’ expenditures and sellers’ revenues are always identical.
a.
True
b.
False
True
Easy
Elasticity
37. Total expenditure equals price times elasticity.
a.
True
b.
False
False
Moderate
Elasticity
38. Total expenditure equals price times quantity.
a.
True
b.
False
True
Easy
Elasticity
39. Demand elasticity equals quantity times price.
a.
True
b.
False
False
Easy
Elasticity
40. If demand is elastic, an increase in price will decrease total revenue.
a.
True
b.
False
True
Easy
Elasticity
41. If demand is elastic, an increase in price will increase total revenue.
a.
True
b.
False
False
Moderate
Elasticity
42. If demand is elastic, a rise in price will decrease total expenditure.
a.
True
b.
False
True
Moderate
Elasticity
43. If demand is inelastic, a drop in price will raise total expenditure.
a.
True
b.
False
False
Moderate
Elasticity
44. If price goes up 20 percent and quantity demanded declines by 10 percent, total revenue will rise.
a.
True
b.
False
True
Moderate
Elasticity
45. If a demand curve is unit elastic, then P times Q will remain constant when P changes.
a.
True
b.
False
True
Moderate
Elasticity
46. A demand curve with unit elasticity can never touch either the vertical or horizontal axes.
a.
True
b.
False
True
Difficult
Elasticity
47. If demand is unit elastic, then a 10 percent increase in the price will lead to a 10 percent increase in quantity
demanded.
a.
True
b.
False
False
Moderate
Elasticity
48. If demand is unit elastic, then a 10 percent increase in price will lead to a 10 percent drop in quantity demanded.
a.
True
b.
False
True
Moderate
Elasticity
49. A rise in price will always result in an increase in the total amount consumers spend on a product.
a.
True
b.
False
False
Elasticity
50. A price increase will always increase a firm’s revenue.
a.
True
b.
False
False
Moderate
51. A price increase will always cause a firm’s revenue to fall, because they will sell less of the good.
a.
True
b.
False
False
Moderate
Elasticity
52. A tax on cigarettes can be expected to reduce teen smoking more than it reduces adult smoking.
a.
True
b.
False
True
Moderate
Elasticity
53. The elasticity of demand is determined partly by whether the good is a necessity or a luxury.
a.
True
b.
False
True
Easy
Elasticity
54. Necessities such as food and shelter have inelastic demand.
a.
True
b.
False
True
Easy
Elasticity
55. If a product constitutes a large portion of a consumer’s income, demand will be more inelastic.
a.
True
b.
False
False
Moderate
Elasticity
56. If there are many close substitutes available for a good, its elasticity of demand will be higher.
a.
True
b.
False
True
Easy
Elasticity
57. Since an individual spends a small share of her income on salt, the elasticity of demand is likely to be low.
a.
True
b.
False
True
Moderate
58. Elasticity of demand is likely to be higher for less-expensive goods, other things being equal.
a.
True
b.
False
False
Moderate
Elasticity
59. As a price change persists over a long period of time, we should expect the demand elasticity to fall.
a.
True
b.
False
False
Moderate
Elasticity
60. The ratio of the percentage change in quantity demanded to the percentage change in income is known as the cross
elasticity of demand.
a.
True
b.
False
False
Easy
Elasticity
61. Income elasticity of demand describes how change in income affects the quantity demanded of a good.
a.
True
b.
False
True
Moderate
Elasticity
62. Cross-elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price
of another good.
a.
True
b.
False
True
Easy
Elasticity
63. If an increase in quantity demanded of a product reduces the quantity demanded of another, then the two goods are
said to be substitutes.
a.
True
b.
False
True
Easy
64. Cross-elasticity of demand could be used to measure the responsiveness of the quantity demanded of swimming pools
to a change in the price of picnic tables.
a.
True
b.
False
True
Elasticity
65. A negative cross elasticity indicates that two goods are complements.
a.
True
b.
False
True
Moderate
Elasticity
66. Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other.
a.
True
b.
False
False
Moderate
67. Two goods with a low cross elasticity of demand are competing in the same market.
a.
True
b.
False
False
Moderate
Elasticity
68. Demand curves often do not remain stationary; they shift because of changes in other variables.
a.
True
b.
False
69. When price falls, demand rises.
a.
True
b.
False
70. A decrease in the price of a good will cause a movement along the demand schedule to a higher quantity demanded.
a.
True
b.
False
71. A buyer’s response to a change in income is an example of a “change in demand.”
a.
True
b.
False
72. A fall in the price of a competing product will produce an outward shift in the demand curve for most products.
a.
True
b.
False
73. Historical demand curves are always suspect because their demand curves are likely to have shifted over time.
a.
True
b.
False
True
Difficult
74. An accurate demand curve can be derived by examining the quantities of a good that are sold over time as the price
varies.
a.
True
b.
False
False
Easy
75. If demand for a seller’s product is elastic, a price increase will decrease total revenue.
a.
True
b.
False
True
Moderate
76. If demand for a seller’s product is elastic, a price decrease will increase total revenue.