Microeconomics Chapter 5 Elasticity and Its Applications Test Questions
and Answers Rated A
The price elasticity of demand measures how between $6 and $12. Then, when the price
much - ANSWER -quantity demanded increases from $8 to $10, - ANSWER -the
responds to a change in price. percent decrease in the quantity demanded
exceeds the percent increase in the price.
If two goods are substitutes, their cross-price
elasticity will be - ANSWER -positive Refer to Figure 5-4. If the price increases in the
region of the demand curve between points A
and B, we can expect total revenue to -
Suppose good X has a positive income elasticity ANSWER -decrease
of demand. This implies that good X could be
(i)a normal good.
(ii)a necessity. Assume that a 4 percent increase in income
(iii)an inferior good. results in a 2 percent increase in the quantity
(iv)a luxury. - ANSWER -(i), (ii), and (iv) demanded of a good. The income elasticity of
only demand for the good is - ANSWER -
positive, and the good is a normal good.
A good will have a more inelastic demand, the -
ANSWER -broader the definition of the Demand is elastic if the price elasticity of demand
market. is - ANSWER -greater than 1.
The price elasticity of demand for a good For which of the following goods is the income
measures the willingness of - ANSWER - elasticity of demand likely lowest? -
consumers to buy less of the good as price rises. ANSWER -housing
Refer to Figure 5-4. Assume the section of the The midpoint method for calculating elasticities is
demand curve from A to B corresponds to prices convenient in that it allows us to -
between $8 and $16. Then, when the price ANSWER -calculate the same value for the
changes between $9 and $10, - ANSWER - elasticity, regardless of whether the price
quantity demanded changes proportionately increases or decreases.
more than the price.
For a good that is a luxury, demand -
If the price elasticity of demand for a good is 0.3, ANSWER -tends to be elastic.
then a 20 percent decrease in price results in a -
ANSWER -6 percent increase in the
quantity demanded. Which of the following is likely to have the most
price inelastic demand? - ANSWER -
toothpaste
Refer to Figure 5-4. Assume the section of the
demand curve from A to B corresponds to prices
1/2
and Answers Rated A
The price elasticity of demand measures how between $6 and $12. Then, when the price
much - ANSWER -quantity demanded increases from $8 to $10, - ANSWER -the
responds to a change in price. percent decrease in the quantity demanded
exceeds the percent increase in the price.
If two goods are substitutes, their cross-price
elasticity will be - ANSWER -positive Refer to Figure 5-4. If the price increases in the
region of the demand curve between points A
and B, we can expect total revenue to -
Suppose good X has a positive income elasticity ANSWER -decrease
of demand. This implies that good X could be
(i)a normal good.
(ii)a necessity. Assume that a 4 percent increase in income
(iii)an inferior good. results in a 2 percent increase in the quantity
(iv)a luxury. - ANSWER -(i), (ii), and (iv) demanded of a good. The income elasticity of
only demand for the good is - ANSWER -
positive, and the good is a normal good.
A good will have a more inelastic demand, the -
ANSWER -broader the definition of the Demand is elastic if the price elasticity of demand
market. is - ANSWER -greater than 1.
The price elasticity of demand for a good For which of the following goods is the income
measures the willingness of - ANSWER - elasticity of demand likely lowest? -
consumers to buy less of the good as price rises. ANSWER -housing
Refer to Figure 5-4. Assume the section of the The midpoint method for calculating elasticities is
demand curve from A to B corresponds to prices convenient in that it allows us to -
between $8 and $16. Then, when the price ANSWER -calculate the same value for the
changes between $9 and $10, - ANSWER - elasticity, regardless of whether the price
quantity demanded changes proportionately increases or decreases.
more than the price.
For a good that is a luxury, demand -
If the price elasticity of demand for a good is 0.3, ANSWER -tends to be elastic.
then a 20 percent decrease in price results in a -
ANSWER -6 percent increase in the
quantity demanded. Which of the following is likely to have the most
price inelastic demand? - ANSWER -
toothpaste
Refer to Figure 5-4. Assume the section of the
demand curve from A to B corresponds to prices
1/2
