HW3 Ch 5 Elasticity Homework

B. elastic

When the quantity demanded responds strongly to changes in price, demand is said to be ________.

A. highly variable

B. elastic

C. dynamic

D. fluid

D. other flavors of ice cream are good substitutes for this particular flavor

The demand for Chocolate Chip Cookie Dough ice cream is likely to be quite elastic because ______.

A. ice cream must be eaten quickly

B. this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers

C. the market is broadly defined

D. other flavors of ice cream are good substitutes for this particular flavor

C. Tommy Hilfiger blue jeans

For which of the following goods would demand be most price elastic?

A. clothing

B. blue jeans

C. Tommy Hilfiger blue jeans

D. all the other three would have the same price elasticity of demand since they are all related

B. buyers tend to be much more sensitive to a change in price when given more time to react

When the price of gasoline rises, the quantity of gasoline demanded falls slightly in the first few months but substantially over a ten-year period. This is because ________.

A. buyers tend to be much less sensitive to a change in price when given more time to react

B. buyers tend to be much more sensitive to a change in price when given more time to react

C. buyers will have substantially more income over a ten-year period

D. the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline

B. 1

Suppose there is a 6 percent increase in the price of Good X and, as a result, there is a 6 percent decrease in quantity of Good X demanded. Price elasticity of demand for Good X is _______.

A. 0

B. 1

C. 6

D. 36

D. 0.64

Suppose the price of Twinkies decreases from $1.45 to $1.25 and, as a result, the quantity of Twinkies demanded increases from 2,000 to 2,200. If one uses the midpoint formula, the price elasticity of demand for Twinkies in the given price range is _______.

A. 2.00

B. 1.55

C. 1.00

D. 0.64

D. 2.5

Refer to Figure 5-2. The price elasticity of demand between point A and point B, using the midpoint method, is ______.

A. 1

B. 1.5

C. 2

D. 2.5

B. the equilibrium price increases and the equilibrium quantity stays unchanged

Suppose the demand for a good is perfectly price inelastic. Suppose also that the supply of the good decreases (that is, shifts left) for some reason. As a result, _______. (Hint: draw a supply-demand diagram with a perfectly price inelastic demand. Then figure out what would happen if the supply curve shifted left.)

A. the equilibrium quantity decreases and the equilibrium price stays unchanged

B. the equilibrium price increases and the equilibrium quantity stays unchanged

C. the equilibrium quantity and the equilibrium price both stay unchanged

D. buyers’ total expenditure on the good stays unchanged

A. the equilibrium quantity decreases and the equilibrium price stays unchanged

Suppose the demand for a good is perfectly price elastic. Suppose also that the supply of the good decreases (shifts left) for some reason. As a result, _______. (Hint: draw a supply-demand diagram with a perfectly price elastic demand. Then figure out what would happen if the supply curve shifted left)

A. the equilibrium quantity decreases and the equilibrium price stays unchanged

B. the equilibrium price increases and the equilibrium quantity stays unchanged

C. the equilibrium quantity and the equilibrium price both stay unchanged

D. buyers’ total expenditure on the good stays unchanged

B. unit elastic with respect to price

Jean-Paul says that he will spend exactly 75 cents a day on M&Ms, regardless of the price of M&Ms. Jean-Paul’s demand for M&Ms is _______. (Hint: in this case, the sellers’ total revenue will remain unchanged at 75 cents for all relevant prices)

A. perfectly elastic with respect to price

B. unit elastic with respect to price

C. perfectly inelastic with respect to price

D. none of the other choices are correct

A. increase by $20. As price and revenue are moving in the same direction in this case, demand must be price inelastic in this price range

Refer to Figure 5-6. If price increases from $10 to $15, then total revenue will ________.

A. increase by $20. As price and revenue are moving in the same direction in this case, demand must be price inelastic in this price range.

B. increase by $5. As price and revenue are moving in the same direction in this case, demand must be price inelastic in this price range.

C. decrease by $20. As price and revenue are moving in opposite directions in this case, demand must be price elastic in this price range

D. decrease by $10. As price and revenue are moving in opposite directions in this case, demand must be price elastic in this price range

A. an increase in the total revenue of donut sellers

If the demand for donuts is elastic with respect to price, then a decrease in the price of donuts will lead to a more proportionate increase in the quantity sold. Consequently, there will be ________.

A. an increase in the total revenue of donut sellers

B. a decrease in the total revenue of donut sellers

C. no change in the total revenue of donut sellers

D. there is not enough information to answer this question

A. an increase in price will increase total revenue. This is because the decrease in quantity demanded will be proportionately less than the increase in price

If demand is inelastic with respect to price in a certain price range, then, within this price range, _______.

A. an increase in price will increase total revenue. This is because the decrease in quantity demanded will be proportionately less than the increase in price.
B. an increase in price will decrease total revenue. This is because the decrease in quantity demanded will be proportionately more than the increase in price.

C. a decrease in price will increase total revenue. This is because the increase in quantity demanded will be proportionately less than the decrease in price

D. a decrease in price will not affect total revenue. This is because the quantity demanded will increase by the same proportion as the decrease in price

C. negative. So, Joan considers hamburger to be an inferior good

Last year, Joan bought 50 pounds of hamburger when her household income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan’s income elasticity of demand for hamburger is _______.

A. positive. So, Joan considers hamburger to be an inferior good

B. positive. So, Joan considers hamburger to be a normal good and a necessity

C. negative. So, Joan considers hamburger to be an inferior good

D. negative. So, Joan considers hamburger to be a normal good, but not a necessity

B. tend to have a higher price elasticity of demand

A good that has a higher income elasticity of demand (than other goods) will _________.

A. tend to have a lower price elasticity of demand

B. tend to have a higher price elasticity of demand

C. tend to have a higher cross price elasticity of demand

D. be hard to represent by a demand curve in the usual way

C. the quantity demanded of one good changes in response to a change in the price of another good

Cross-price elasticity of demand measures how _______.

A. the price of one good changes in response to a change in the price of another good

B. the quantity demanded of one good changes in response to a change in the quantity demanded of another good

C. the quantity demanded of one good changes in response to a change in the price of another good

D. strongly normal or inferior a good is

D. complements or substitutes

The cross-price elasticity of demand between two goods can tell us whether these goods are _______.

A. normal or inferior

B. elastic or inelastic

C. luxuries or necessities

D. complements or substitutes

B. complements

If the cross-price elasticity of two goods is negative, then an increase in the price of one good leads to a decrease in the quantity demanded of the other good. Therefore, these two goods are _______.

A. necessities

B. complements

C. normal goods

D. inferior goods

C. rise; fall

Suppose the demand for crude oil is price inelastic in the short run and price elastic in the long run. If the Organization of Petroleum Exporting Countries (OPEC) succeeds in getting its member nations to reduce their output of crude oil, it is likely that the total revenue from OPEC’s sale of crude oil will _____ in the short run and _____ in the long run.

A. fall; rise

B. fall; fall

C. rise; fall

D. rise; rise

D. demand for marijuana is price inelastic

If marijuana is legalized, it is likely that there will be an increase in the supply of marijuana. Supporters of marijuana legalization argue that legalization would significantly reduce the total revenue of the criminal organizations that currently supply marijuana. This argument relies on the belief that the ________.

A. demand for marijuana is price elastic

B. supply for marijuana is price inelastic

C. supply for marijuana is price elastic

D. demand for marijuana is price inelastic