Gottheil Quiz: Elasticity

Quiz
Elasticity

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1. For some low-priced goods, on which people spend a tiny fraction of their budgets, the quantity demanded is highly insensitive to changes in price. Such goods include: a. chewing gum
b. combs.
c. metered parking.
d. shoelaces.
e. all of the above.

2. Which of the following statements about people's demand sensitivity to price changes is likely to be false?: a. People are unlikely to be concerned about price changes on nickel-and-dime items.
b. Poor people are more sensitive to price changes than rich people.
c. People are more sensitive to price changes for goods that have readily available close substitutes than for goods that don't.
d. People are more sensitive to price changes for basic goods that are considered necessities than for luxury goods.
e. People are less sensitive to price changes in the short run than in the long run.

3. Which of the following statements involving the price elasticity of demand is correct?: a. The percentage change in price equals the percentage change in quantity demanded divided by the price elasticity of demand.
b. The percentage change in price equals the percentage change in quantity demanded multiplied by the price elasticity of demand.
c. The percentage change in price equals the price elasticity of demand divided by the percentage change in quantity demanded.
d. The price elasticity of demand equals the A/B, where A is the percentage change in price divided by the original price and B is the percentage change in quantity demanded divided by the original quantity.
e. The price elasticity of demand equals the A/B, where A is the percentage change in quantity demanded divided by the original quantity and B is the percentage change in price divided by the original price.

4. Which of the following statements involving cross elasticities of demand is correct?: a. If oranges and peaches are substitutes, an increase in the price of oranges shifts the demand curve for peaches to the left.
b. If oranges and peaches are substitutes, a decrease in the price of oranges shifts the demand curve for peaches to the right.
c. If an increase in the price of good A shifts the demand curve for good B to the right, goods A and B are substitutes.
d. If an increase in the price of good A shifts the demand curve for good B to the right, goods A and B are complements.
e. Both (a) and (b) are correct.

5. Which of the following statements involving cross elasticities of demand is correct?: a. If a decrease in the price of good A shifts the demand curve for good B to the right, goods A and B are substitutes.
b. If a decrease in the price of good A shifts the demand curve for good B to the right, goods A and B are complements.
c. If a decrease in the price of good A shifts the demand curve for good B to the right, goods A and B are normal goods.
d. If a decrease in the price of good A shifts the demand curve for good B to the right, goods A and B are inferior goods.
e. Both (b) and (c) are correct.

6. The price elasticity of demand is defined as: a. the change in the demand for a good divided by the associated change in the good's own price.
b. the change in a good's price divided by the associated change in the demand for the good.
c. the change in the demand for a good divided by the associated change in another good's price.
d. the change in a good's price divided by the associated change in the demand for another good.
e. the percentage change in a good's quantity demanded divided by the percentage change in the good's price.

7. If the (absolute value of the) price elasticity of demand equals 2,: a. a 2% fall in a good's price leads to a 1% rise in the good's quantity demanded.
b. a 1% fall in a good's price leads to a 2% rise in the good's quantity demanded.
c. a 2% rise in a good's price leads to a 1% fall in the good's quantity demanded.
d. a 7% fall in the good's price leads to a 3.5% rise in the good's quantity demanded.
e. all of the above are true, except (b).

8. Which of the following statements about the price elasticity of demand is correct?: a. If the (absolute value of) the price elasticity of demand for scrod equals 2.2, and the price of scrod rises by 3%, its quantity demanded will fall by 1.36%.
b. If the (absolute value of) the price elasticity of demand for cars equals 1.35, and the price of cars falls by 3%, its quantity demanded will rise by 4.05%.
c. If the (absolute value of) the price elasticity of demand for chicken equals 1.2, and the quantity demanded falls by 4%, the price must have risen by 0.3%.
d. If the (absolute value of) the price elasticity of demand for foreign air travel equals 0.7, and the quantity demanded rises by 4%, the price must have fallen by 0.175%.
e. If the (absolute value of) the price elasticity of demand for green peas equals 2.8, and the quantity demanded falls by 14%, the price must have risen by 0.2%.

9. Which of the following statements about the price elasticity of demand is correct?: a. When the percentage change in a good's quantity demanded exceeds the percentage change in the good's price, the (absolute value of the) price elasticity of demand is greater than 1 and demand is said to be elastic.
b. When the percentage change in a good's quantity demanded exceeds the percentage change in the good's price, the (absolute value of the) price elasticity of demand is smaller than 1 and demand is said to be inelastic.
c. When the percentage change in a good's quantity demanded falls short of the percentage change in the good's price, the (absolute value of the) price elasticity of demand is greater than 1 and demand is said to be elastic.
d. When the percentage change in a good's quantity demanded falls short of the percentage change in the good's price, the (absolute value of the) price elasticity of demand is greater than 1 and demand is said to be inelastic.
e. When the percentage change in a good's quantity demanded equals the percentage change in the good's price, the (absolute value of the) price elasticity of demand is equal to 1 and demand is said to be perfectly inelastic.

10. Which of the following statements about the price elasticity of demand is correct?: a. When a change in a good's price does not change that good's quantity demanded, the demand curve must be horizontal.
b. When a change in a good's price does not change that good's quantity demanded, the demand curve must be a rectangular hyperbola.
c. When a change in a good's price does not change that good's quantity demanded, the demand curve must be vertical.
d. When even a tiny rise in a good's price instantly reduces the good's quantity demanded to zero, the price elasticity of demand is said to be unit elastic.
e. When even a tiny rise in a good's price instantly reduces the good's quantity demanded to zero, the price elasticity of demand is said to be perfectly inelastic.

11. Which of the following statements about the price elasticity of demand is correct?: a. When the (absolute value of a good's) price elasticity of demand exceeds 1, an increase in the good's price increases the total revenue of its sellers.
b. When the (absolute value of a good's) price elasticity of demand exceeds 1, a decrease in the good's price decreases the total revenue of its sellers.
c. When the (absolute value of a good's) price elasticity of demand equals 1, an increase in the good's price does not affect the total revenue of its sellers.
d. When the (absolute value of a good's) price elasticity of demand falls short of 1, an increase in the good's price decreases the total revenue of its sellers.
e. All of the above statements are correct.

12. An increase in supply, ceteris paribus, lowers a good's price. If the total revenue of sellers now falls, we know: a. that the good's price elasticity of demand was greater than 1.
b. that the good's price elasticity of demand was equal to 1.
c. that the good's price elasticity of demand was smaller than 1.
d. that the good's demand curve was vertical.
e. that the good's demand curve was a rectangular hyperbola.

13. Along a straight, downward-sloping demand line,: a. the (absolute value of a good's) price elasticity of demand is consistently equal to 1.
b. the (absolute value of a good's) price elasticity of demand is consistently equal to
c. the (absolute value of a good's) price elasticity of demand is constantly changing from point to point.
d. total revenue is maximized where the price elasticity of demand is greatest.
e. total revenue is maximized where the price elasticity of demand is smallest.

14. The major determinants of a good's price elasticity of demand include: a. the slope of the demand curve (whether it vertical, horizontal, downward-sloping).
b. the slope of the supply curve (whether it is vertical, horizontal, upward-sloping).
c. the number of complements with which the good is jointly consumed.
d. the number of substitutes for the good that are available to consumers.
e. the prices of resources that are needed for the good's production.

15. All else being equal, one would expect (the absolute value of) a good's price elasticity of demand to be: a. the higher the more substitutes for the good exist.
b. the higher the greater the percentage of consumers' budgets that is devoted to the good.
c. the higher the more time has passed since a price change.
d. all of the above.
e. none of the above.

16. The percentage change in the price of one good, divided by the percentage change in another good's quantity demanded, is called: a. the price elasticity of demand.
b. the cross elasticity of demand.
c. the income elasticity of demand.
d. the price elasticity of supply.
e. none of the above.

17. Which of the following statements about a good's cross elasticity of demand is correct?: a. It equals the percentage change in quantity demanded divided by the percentage change in the income of its purchasers.
b. It equals the percentage change in the income of its purchasers divided by the percentage change in the quantity demanded.
c. It is positive for normal goods.
d. It is negative for normal goods.
e. It is none of the above.

18. Which of the following statements about a good's income elasticity of demand is correct?: a. It equals the percentage change in quantity demanded divided by the percentage change in the income of its purchasers.
b. It can be positive as well as negative.
c. It is positive for normal goods.
d. It is negative for inferior goods.
e. It is all of the above.

19. Which of the following statements about normal goods is false?: a. Their income elasticity of demand must be greater than 1.
b. Their cross elasticity of demand can be positive.
c. Their cross elasticity of demand can be negative.
d. Their income elasticity can be 0.5.
e. Their income elasticity cannot be zero.

20. Consider Figure 4.1. Let it represent the market for apples, currently in equilibrium at G. The government now imposes a tax per bushel traded equal to AC. What are the consequences?: a. Consumers will face a price of 0B + AC, and quantity demanded will fall along GD and beyond.
b. Consumers will face a price of 0A and quantity demanded will fall along GD.
c. Producers will supply AI = 0K at the new and higher price 0A.
d. There will be a surplus of DI.
e. The government will collect tax revenues of 0AIK.