Elasticity Quiz

Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. In general, elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive. c. how fast the price of a good responds to a shift of the supply curve or demand curve. d. how much buyers and sellers respond to changes in market conditions. 2. If demand is inelastic, then a. buyers do not respond much to a change in price. b. buyers respond substantially to a change in price, but the response is very slow. c. buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. d. the demand curve is very flat. 3. A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is a. inelastic. b. unit elastic. c. elastic. d. highly responsive to changes in income. 4. There are very few, if any, good substitutes for motor oil. Therefore, a. the demand for motor oil would tend to be inelastic. b. the demand for motor oil would tend to be elastic. c. the demand for motor oil would tend to respond strongly to changes in prices of other goods. d. the supply of motor oil would tend to respond strongly to changes in peoples tastes for large cars relative to their tastes for small cars. 5. When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bubble gum is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic. 6. If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then a. the demand for the good is said to be elastic. b. the demand for the good is said to be inelastic. c. the law of demand does not apply to the good. d. the demand curve for the good shifts only slightly in response to a change in price. 7. Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is a. 0. b. 1. c. 6. d. 36. Figure 5-5

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8. Refer to Figure 5-5. When the price is $30, total revenue is a. $3,000. b. $5,000. c. $7,000. d. $9,000. 9. Refer to Figure 5-5. When price falls from $50 to $40, it can be inferred that demand between those two prices is a. inelastic, since total revenue decreases from $8,000 to $5,000. b. inelastic, since total revenue increases from $5,000 to $8,000. c. elastic, since total revenue increases from $5,000 to $8,000. d. unit elastic, since total revenue increases from $5,000 to $8,000. 10. Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is a. negative and therefore the good is an inferior good. b. negative and therefore the good is a normal good. c. positive and therefore the good is a normal good. d. positive and therefore the good is an inferior good. 11. Muriel's income elasticity of demand for football tickets is 1.50. All else equal, this means that if her income increases by 20 percent, she will buy a. 150 percent more football tickets. b. 50 percent more football tickets. c. 30 percent more football tickets. d. 20 percent more football tickets. 12. Frequently, in the short run, the quantity supplied of a good is a. impossible, or nearly impossible, to measure. b. not very responsive to price changes. c. determined by the quantity demanded of the good. d. determined by psychological forces and other non-economic forces.

Elasticity Quiz Answer Section

MULTIPLE CHOICE 1. ANS: MSC: 2. ANS: MSC: 3. ANS: MSC: 4. ANS: MSC: 5. ANS: TOP: 6. ANS: MSC: 7. ANS: MSC: 8. ANS: MSC: 9. ANS: MSC: 10. ANS: TOP: 11. ANS: MSC: 12. ANS: MSC: D DIF: 1 REF: 5-0 Definitional A DIF: 2 REF: 5-1 Definitional A DIF: 2 REF: 5-1 Interpretive A DIF: 2 REF: 5-1 Interpretive B DIF: 2 REF: 5-1 Price elasticity of demand, Midpoint method B DIF: 1 REF: 5-1 Definitional B DIF: 2 REF: 5-1 Applicative D DIF: 1 REF: 5-1 Interpretive C DIF: 2 REF: 5-1 Applicative C DIF: 2 REF: 5-1 Income elasticity of demand, Normal goods C DIF: 2 REF: 5-1 Applicative B DIF: 2 REF: 5-2 Interpretive TOP: Elasticity TOP: Inelastic demand TOP: Price elasticity of demand TOP: Price elasticity of demand MSC: Applicative TOP: Inelastic demand TOP: Price elasticity of demand TOP: Total revenue TOP: Elastic demand, Total revenue MSC: Applicative TOP: Income elasticity of demand TOP: Short run, Quantity supplied