BEEB1013 Group:

EXERCISE 4: Elasticity

Instruction: Please CIRCLE (O) your answer and give brief

explanation on the empty space surrounding the question how you get
the answer. (SUBMIT ON THE 16 October 2019)
1. In general, the greater the elasticity the: 

A. smaller the responsiveness of price to changes in quantity.

B. smaller the responsiveness of quantity to changes in price.
C. larger the responsiveness of price to changes in quantity.
D. larger the responsiveness of quantity to changes in price.

2. Demand is said to be elastic when the: 

A. percentage change in quantity demanded is less than the percentage change in price.
B. percentage change in quantity demanded is greater than the percentage change in price.
C. change in quantity demanded is less than the change in price.
D. change in quantity demanded is greater than the change in price.

3. In 2004, the Wall Street Journal reported that Starbucks was set to raise some of its prices. The
article stated that "mass-market grocery brands such as Kraft Foods Inc.'s Folgers and Maxwell
House coffees tend to be much more price-elastic" than Starbucks' coffees. This information
about elasticities is telling us that: 

A. Starbucks' coffee is a luxury good, while the grocery brands are inferior goods.
B. Starbucks and the grocery brands are close substitutes.

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C. Starbucks and the grocery brands are poor substitutes.
D. Starbucks' customers are not as responsive to price changes as are the customers of the grocery
brands.

4. If the amount of land supplied remains the same even when the price of land has risen, then
the: 

A. supply of land must be perfectly elastic.

B. supply of land must be perfectly inelastic.
C. demand for land must be perfectly elastic.
D. demand for land must be perfectly inelastic.

5. The short-run elasticity of demand for gasoline sold at gasoline stations is 0.20. If terrorism
causes the supply of gasoline to fall, resulting in a 5 percent drop in quantity, other things the
same, the price per gallon will increase by: 

A. 4 percent.
B. 5 percent.
C. 20 percent.
D. 25 percent.

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BEEB1013 Group:

6. Susan's price elasticity of restaurant meals is 2.27. If the price of a restaurant meal falls by 2%
then the quantity of restaurant meals Susan demands will: 

A. increase by 2.27%.
B. fall by 2.27%.
C. increase by 4.54%.
D. increase by 22.7%.

7. The demand for a good is elastic. Which of the following would be the most likely explanation
for this? 

A. The good is a necessity.

B. The good is broadly defined.
C. The good is a large portion of one's total income.
D. The time interval considered is short.

8. The price elasticity of demand for insulin by diabetics is much smaller than the price elasticity
of demand for leather shoes. This is an example of how the price elasticity of demand: 

A. falls the less specifically the good is defined.

B. rises the less specifically the good is defined.
C. falls the more a good is a necessity.
D. rises the more a good is a necessity.

9. Kuo S. Huang estimates that with every 20% increase in income, the quantity of grapes
purchased rises by 11.2%. From this information one would conclude that grapes are: 

A. a luxury.
B. not demanded.
C. an inferior good.
D. a normal good.

10. If an economist observed that higher hotdog prices lead to an increase in the demand for chili,
she would most likely conclude: 

A. chili and hotdogs are complements.

B. chili and hotdogs are substitutes.
C. chili and hotdogs are both inferior goods
D. chili and hotdogs are both normal goods.

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