MPC - SUPPLY & DEMAND & ELASTICITY

1. By 2017, Pepsi and Coke were attempting to increase their profits in the bottled water market by
introducing premium water brands. Pepsi and Coke introduced LIFEWTR and Smartwater, respectively,
while competitors like Nestle and Danone produced their own versions of premium water. The premium
water brands marketed to compete with LIFEWTR and Smartwater would be considered.
A) complements to LIFEWTR and Smartwater.
B) substitutes for LIFEWTR and Smartwater.
C) inferior goods compared to LIFEWTR and Smartwater. TAP WATER
D) normal goods compared to LIFEWTR and Smartwater.

2. If the number of carbonated sodas consumed continues to decline as consumers continue to choose to
buy healthier products, this will likely
A) increase the demand for premium water because premium water and carbonated sodas are considered
complements.
B) increase the demand for premium water because premium water and carbonated sodas are considered
substitutes.
C) decrease the demand for premium water, because premium water is considered inferior good, and
carbonated sodas are considered normal goods.
D) decrease the demand for premium water, because premium water is considered a normal good, and
carbonated sodas are considered inferior goods.

3. Which of the following will shift the demand curve for a good?
A) a change in the technology used to produce the good
B) an increase in the price of the good
C) a decrease in the price of a complementary good
D) a decrease in the price of the good

Figure 3-1
4. Refer to Figure 3-1. An increase in population would be represented by a
movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.

5. Refer to Figure 3-1. A decrease in taste or preference would be represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.

7. Refer to Figure 3-1. A decrease in the price of the product would be represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
8. Refer to Figure 3-1. A decrease in the price of a substitute good (C, D) would be represented by a
movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.

9. Refer to Figure 3-1. A decrease in the price of a complementary good would be represented by a
movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.

10. Refer to Figure 3-1. An increase in the expected future price of the product would be represented by a
movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.

11. Refer to Figure 3-1. If the product represented is a normal good, a decrease in income would be
represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.

12. The Internet has created a new category in the book-selling market, namely, the "barely used" book.
How does the availability of barely used books affect the market for new books?
A) The demand curve for new books shifts to the right.
B) The demand curve for new books shifts to the left.
C) The supply curve for new books shifts to the right.
D) The supply curve for new books shifts to the left.

13. Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas,
potato chips, and pistachios are.
A) substitutes.
B) both inferior goods.
C) complements.
D) both luxury goods.

14. Technological advances have resulted in lower prices for digital cameras. What is the impact of this
on the market for traditional (non-digital) cameras? -> substitute
A) The demand curve for traditional cameras shifts to the right.
B) The supply curve for traditional cameras shifts to the right.
C) The demand curve for traditional cameras shifts to the left.
D) The supply curve for traditional cameras shifts to the left.

15. Technological advancements have led to lower prices and an increase in the sale of digital cameras
(Qd rises). How does this affect the digital photo printing paper market?
A) The demand curve for digital photo printing paper shifts to the right. -> complementary
B) The demand curve for digital photo printing paper shifts to the left.
C) The supply curve for digital photo printing paper shifts to the right.
D) The supply curve for digital photo printing paper shifts to the left.

16. A(n) is represented by a leftward shift of the demand curve while a(n) is represented by a movement
along a given demand curve.
A) decrease in demand; increase in demand
B) decrease in demand; increase in quantity demanded
C) increase in demand; decrease in quantity demanded
D) decrease in quantity demanded; decrease in demand

17. Which of the following would cause a decrease in the supply of milk? -> S moves left
A) an increase in the price of cookies (assuming that milk and cookies are complements) -> D
B) a decrease in the price of milk -> Qd or Qs
C) an increase in the price of a product that producers sell instead of milk Apple: iPhone 12 vs iPhone 12
pro max
D) an increase in the number of firms that produce milk -> S right

Figure 3-2
18. Refer to Figure 3-2. An increase in the price of inputs would be
represented by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.

19. Refer to Figure 3-2. An increase in the number of firms in the

market would be represented by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.

20. Refer to Figure 3-2. An increase in the price of substitutes in production would be represented by a
movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.

21. Refer to Figure 3-2. A decrease in the price of the product would be represented by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.

22. Refer to Figure 3-2. A decrease in productivity would be represented by a movement from
A) A to B.
B) B to A.
C) S1 to S2.
D) S2 to S1.

23. Harvey Rabbit pays for monthly cable TV service. Last week, the cable company informed Harvey
that his monthly cable price would go down because the city council has granted approval for three new
cable companies to service his area. How is the market for cable TV services affected by this? -> number
of sellers increase
A) There is an increase in the supply of cable TV service.
B) There is a decrease in the demand for cable TV service.
C) There is a decrease in the quantity of cable TV services supplied.
D) There is a decrease in the supply of cable TV service.

24. The popularity of digital cameras has enticed large discount stores like Walmart and Costco to offer
digital photo printing services. How does the offering of the printing service by Walmart and Costco
affect the digital photo printing market?
A) The demand curve for digital photo printing services shifts to the right.
B) The demand curve for digital photo printing services shifts to the left.
C) The supply curve for digital photo printing services shifts to the right.
D) The supply curve for digital photo printing services shifts to the left.

25. Which of the following would shift the supply curve for MP3 players to the left?
A) an increase in the price of an input used to produce MP3 players -> S left
B) a decrease in consumer tastes for MP3 players -> D decrease
C) an increase in the number of firms that produce MP3 players -> S right
D) an increase in the productivity of the workers who produce MP3 players -> S right

26. If a firm expects that the price of its product will be higher in the future than it is today, then
A) the firm will go out of business.
B) the firm has an incentive to increase supply now and decrease supply in the future.
C) the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the
future.
D) the firm has an incentive to decrease supply now and increase supply in the future.

27. A decrease in the price of GPS systems will result in

A) a smaller quantity of GPS systems supplied.
B) a larger quantity of GPS systems supplied.
C) a decrease in the demand for GPS systems.
D) an increase in the supply of GPS systems.

28. An increase in the price of pineapples will result in

A) a smaller quantity of pineapples supplied.
B) a larger quantity of pineapples supplied.
C) a decrease in the demand for pineapples.
D) an increase in the supply of pineapples.

29. In 2004, hurricanes damaged a large portion of Florida's orange crop. As a result of this, many orange
growers were not able to supply fruit to the market. If following the hurricane, the price remained at its
pre-hurricane level, we would expect to see.
A) a surplus of oranges.
B) the quantity demanded equal to the quantity supplied.
C) a shortage of oranges.
D) an increase in the demand for oranges.

30. Auctions in recent years have resulted in higher prices paid for letters written by John Wilkes Booth
than those written by Abraham Lincoln. Which of the following events would cause the
price differences in these letters to get smaller?
A) The demand for Booth letters increases.
B) The supply of Lincoln letters increases.
C) The demand for Lincoln letters increases (P increases) and the supply of Booth letters increases (P
decreases)
D) The demand for Lincoln letters decreases and the demand for Booth letters increases

31. In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market
for citrus fruit in 2004
A) the supply curve shifted to the right resulting in an increase in the equilibrium price.
B) the supply curve shifted to the left resulting in an increase in the equilibrium price.
C) the demand curve shifted to the right resulting in an increase in the equilibrium price.
D) the demand curve shifted to the left resulting in a decrease in the equilibrium price.

32. Orange juice drinkers want to consume more orange juice at a lower price. Which of the following
events would have this effect?
A) a decrease in the price of orange juice processing
B) an increase in the cost of fertilizer used for orange groves
C) a decrease in income, assuming orange juice is a normal good
D) a decrease in the population

33. Which of the following would cause the equilibrium price of white bread to decrease and the
equilibrium quantity of white bread to increase?
A) a decrease in the price of flour
B) an increase in the price of flour
C) an increase in the price of rye bread, a substitute for white bread
D) an increase in the price of butter, a complement to white bread

34. Assume that the hourly price for the services of tarot card readers has risen (P rises) and sales of these
services have also risen (Q rises). One can conclude that.
A) the law of demand has been violated.
B) the number of tarot card readers has increased.
C) the demand for tarot card readers has increased.
D) tarot card readers are deliberately charging high prices because they provide services for superstitious
clients.

35. Assume that the price for swimming pool maintenance services has risen and sales of these services
have fallen. One can conclude that.
A) the law of supply has been violated.
B) the demand for swimming pool maintenance services has increased.
C) the supply of swimming pool maintenance services has decreased.
D) swimming pool maintenance services are becoming more technologically advanced.

36. In recent years, the cost of producing organic produce in the United States has decreased largely due
to technological advancement. At the same time, more and more Americans prefer organic produce over
conventional produce. Which of the following best explains the effect of these events on the organic
produce market?
A) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there
has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in
the equilibrium quantity and an uncertain effect on the equilibrium price.
C) Both the supply and demand curves have shifted to the right. As a result, there has been an
increase in both the equilibrium price and the equilibrium quantity.
D) The supply curve has shifted to the left and the demand curve has shifted to the right. As a result, there
has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

37. The cost of producing cigarettes in the United States has increased and at the same time (P rise, Q
fall), more and more Americans are choosing to not smoke cigarettes (P and Q fall). Which of the
following best explains the effect of these events in the cigarette market?
A) The supply curve has shifted to the right and the demand curve has shifted to the left. As a result, there
has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in
the equilibrium quantity and an uncertain effect on the equilibrium price.
C) Both the supply and demand curves have shifted to the left. As a result, there has been a decrease in
the equilibrium quantity and an uncertain effect on the equilibrium price.
D) The supply curve has shifted to the right and the demand curve has shifted to the left. As a result, there
has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

38. An article in the Wall Street Journal in early 2001 noted two developments in the market for laser eye
surgery. The first development concerned side effects from the surgery, including blurred vision (P, Q
fall). The second development was that the companies renting eye-surgery machinery to doctors had
reduced their charges (P fall, Q rise). In the market for laser eye surgeries, these two developments
A) decreased demand and decreased supply, resulting in a decrease in the equilibrium quantity and an
increase in the equilibrium price of laser eye surgeries.
B) decreased demand and increased supply resulting in an increase in both the equilibrium quantity and
the equilibrium price of laser eye surgeries.
C) decreased demand and increased supply, resulting in a decrease in the equilibrium price and an
uncertain effect on the equilibrium quantity of laser eye surgeries.
D) decreased demand and increased supply, resulting in a decrease in both the equilibrium price and the
equilibrium quantity of laser eye surgeries.

39. A decrease in the demand for soft drinks due to changes in consumer tastes (P, Q fall), accompanied
by an increase in the supply of soft drinks as a result of reductions in input prices(P falls, Q rises), will
result in
A) a decrease in the equilibrium quantity of soft drinks and no change in the equilibrium price.
B) a decrease in the equilibrium price of soft drinks and no change in the equilibrium quantity.
C) a decrease in the equilibrium price of soft drinks; the equilibrium quantity may increase or decrease.
D) an increase in the equilibrium quantity of soft drinks; the equilibrium price may increase or decrease.

Figure 3-7
40. Refer to Figure 3-7. Assume that the graphs in this
figure represent the demand and supply curves for bicycle
helmets. Which panel best describes what happens in this
market if there is a substantial increase in the price of
bicycles?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

41. Refer to Figure 3-7. Assume that the graphs in this

figure represent the demand and supply curves for women's
clothing. Which panel best describes what happens in this
market when the wages of seamstresses rise?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

42. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for
almonds. Which panel best describes what happens in this market when there is an increase in the
productivity of almond harvesters?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

43. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for
Fruitopia, a soft drink. Which panel describes what happens in the market for Fruitopia when the price of
Snapple, a substitute product, decreases?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
44. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for
potatoes and that steak and potatoes are complements. What panel describes what happens in this market
when the price of steak rises?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

45. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for
rice. What happens in this market if buyers expect the price of rice to fall?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

46. Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for
used clothing, an inferior good. Which panel describes what happens in this market as a result of a
decrease in income?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)

47. Positive technological change in the production of LCD televisions caused the price of LCD
televisions to fall. Holding everything else constant, how would this affect the market for Blu-ray players
(a complement to LCD televisions)?
A) The supply of Blu-ray players would increase, and the equilibrium price of Blu-ray players would
decrease.
B) The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would
increase.
C) The demand for Blu-ray players would decrease because consumers could afford to buy fewer LCD
televisions and Blu-ray players.
D) The demand for Blu-ray players would increase and the equilibrium price of Blu-ray players would
decrease.

48. An increase in input costs in the production of electric automobiles caused the price of electric
automobiles to rise. Holding everything else constant, how would this affect the market for gasoline-
powered automobiles (a substitute for electric automobiles)?
A) The supply of gasoline-powered automobiles would increase, and the equilibrium price of gasoline-
powered automobiles would decrease.
B) The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-
powered automobiles would increase.
C) The demand for gasoline-powered automobiles would decrease because consumers could afford to buy
fewer gasoline-powered automobiles.
D) The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-
powered automobiles would decrease.
49. Assume that both the demand curve and the supply curve for MP3 players shift to the right but the
demand curve shifts more than the supply curve. As a result
A) both the equilibrium price and quantity of MP3 players will increase.
B) the equilibrium price of MP3 players will increase; the equilibrium quantity may increase or decrease.
C) the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will increase.
D) the equilibrium price of MP3 players will decrease; the equilibrium quantity may increase or decrease.

50. Assume that both the demand curve and the supply curve for MP3 players shift to the right (P, Q
rises) but the supply (P fall, Q rises) curve shifts more than the demand curve. As a result
A) both the equilibrium price and quantity of MP3 players will decrease.
B) the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase.
C) the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease.
D) the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

51. Assume that the demand curve for MP3 players shifts to the right (P, Q rise) and the supply curve for
MP3 players shifts to the left (P rise, Q fall), but the supply curve shifts more than the demand curve. As
a result
A) both the equilibrium price and quantity of MP3 players will decrease.
B) the equilibrium price of MP3 players will decrease; the equilibrium quantity will increase.
C) the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease.
D) the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

52. Assume that the demand curve for MP3 players shifts to the right and the supply curve for MP3
players shifts to the left, but the supply curve shifts less than the demand curve. As a result
A) both the equilibrium price and quantity of MP3 players will decrease.
B) both the equilibrium price and quantity of MP3 players will increase.
C) the equilibrium price of MP3 players may increase or decrease; the equilibrium quantity will decrease.
D) the equilibrium price of MP3 players will increase; the equilibrium quantity will decrease.

53. "The price of compact fluorescent light bulbs fell because of improvements in production technology.
As a result, the demand for incandescent light bulbs decreased. This caused the price of incandescent light
bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs
decreased even further." Evaluate this statement.
A) The statement is false. A decrease in the price of compact fluorescent light bulbs would decrease the
demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not
cause the demand for incandescent light bulbs to decrease.
B) The statement is false because the demand for incandescent light bulbs would increase as the price of
compact fluorescent light bulbs fell.
C) The statement is false because compact fluorescent light bulb producers would not reduce their prices
because of improvements in technology; doing so would reduce their profits.
D) The statement is false because it confuses the law of demand with the law of supply.
Figure 3-8
54. The graph in this figure illustrates an initial competitive
equilibrium in the market for apples at the intersection of D1 and
S1 (point A). If the price of oranges, a substitute for apples,
decreases and the wages of apple workers increase, how will the
equilibrium point change?
A) The equilibrium point will move from A to E.
B) The equilibrium point will move from A to B.
C) The equilibrium point will move from A to C.
D) The equilibrium will first move from A to B, then return to A.

55. Refer to Figure 3-8. The graph in this figure illustrates an

initial competitive equilibrium in the market for apples at the
intersection of D1 and S1 (point A). If there is a shortage of
apples, how will the equilibrium point change?
A) The equilibrium point will move from A to B.
B) The equilibrium point will move from A to C.
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from A to E.

56. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market
for sugar at the intersection of D1 and S1 (point A). If there is an increase in the price of fertilizer used on
sugar cane and there is a decrease in taste for sugar-sweetened soft drinks, how will the equilibrium point
change?
A) The equilibrium point will move from A to B.
B) The equilibrium point will move from A to C.
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from A to E.

57. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market
for sugar at the intersection of D1 and S2 (point B). If there is a decrease in the price of fertilizer used on
sugar cane and there is a decrease in taste for sugar-sweetened soft drinks, how will the equilibrium point
change?
A) The equilibrium point will move from B to A.
B) The equilibrium point will move from B to C.
C) There will be no change in the equilibrium point.
D) The equilibrium point will move from B to E.

58. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market
for apples at the intersection of D2 and S2 (point E). Which of the following changes would cause the
equilibrium to change to point A?
A) a positive change in the technology used to produce apples and a decrease in the price of oranges, a
substitute for apples
B) an increase in the wages of apple workers and a decrease in the price of oranges, a substitute for apples
C) an increase in the number of apple producers and a decrease in the number of apple trees as a result of
disease
D) a decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples
59. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market
for apples at the intersection of D2 and S1 (point C). Which of the following changes would cause the
equilibrium to change to point B?
A) a positive change in the technology used to produce apples and a decrease in the price of oranges, a
substitute for apples
B) an increase in the wages of apple workers and an increase in the price of oranges, a substitute for
apples
C) an increase in the number of apple producers and a decrease in the number of apple trees as a result of
disease
D) a decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples

60. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market
for apples at the intersection of D1 and S2 (point B). Which of the following changes would cause the
equilibrium to change to point C?
A) a positive change in the technology used to produce apples and a decrease in the price of oranges, a
substitute for apples
B) an increase in the wages of apple workers and an increase in the price of oranges, a substitute for
apples
C) an increase in the number of apple producers and a decrease in the number of apple trees as a result of
disease
D) a decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples

61. Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market
for apples at the intersection of D1 and S1 (point A). If there is an increase in the wages of apple workers
and an increase in the price of oranges, a substitute for apples, the equilibrium could move to which
point?
A) none of the points shown
B) B
C) C
D) E

62. Which of the following statements is true?

A) An increase in demand causes a change in equilibrium price; the change in price does not cause a
further change in demand or supply.
B) A decrease in supply causes the equilibrium price to rise; the increase in price then results in a
decrease in demand.
C) If both demand and supply increase there must be an increase in equilibrium price; equilibrium
quantity may either increase or decrease.
D) If demand decreases and supply increases one cannot determine if the equilibrium price will increase
or decrease without knowing which change is greater.

63. Which of the following statements is true?

A) An increase in supply causes a change in equilibrium price; the change in price does not cause a
further change in demand or supply.
B) A decrease in supply causes the equilibrium price to rise; the increase in price then results in a
decrease in demand.
C) If both demand and supply increase there must be an increase in equilibrium price; equilibrium
quantity may either increase or decrease.
D) If demand decreases and supply increases one cannot determine if the equilibrium price will increase
or decrease without knowing which change is greater.

64. A decrease in the equilibrium price for a product will result

A) when the quantity demanded of the product exceeds the quantity supplied.
B) when there is a decrease in supply and a decrease in demand for the product.
C) when there is an increase in supply and a decrease in demand for the product.
D) when there is a decrease in demand and a decrease in the number of firms producing the product.

65. A decrease in the equilibrium quantity for a product will result

A) when the quantity demanded of the product exceeds the quantity supplied.
B) when there is a decrease in supply and a decrease in demand for the product.
C) when there is an increase in supply and a decrease in demand for the product.
D) when there is a decrease in demand and an increase in the number of firms producing the product.

66. The following appeared in a Florida newspaper a week after a hurricane hit the state. "Floridians are
relieved that the storm produced no fatalities, but homeowners face weeks, if not months, of rebuilding.
Matters are made worse by the soaring prices of plywood and other building materials that always follow
a hurricane's path. Complaints of profiteering and price gouging have not deterred firms from raising their
prices by over 100 percent." Which of the following offers the best explanation for the price increases
referred to in the article?
A) The hurricane increased the number of suppliers of building materials.
B) The hurricane created an artificial shortage of building materials.
C) The hurricane caused an increase in the demand for building materials.
D) There was a reduction in supply as firms shipped plywood and other materials to locations not affected
by the storm.

67. In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga caviar, the most
prized of caviars, from the Caspian Sea. What happened in the market for caviar in the United States?
A) The supply curve shifted to the left.
B) The supply curve shifted to the right.
C) The demand curve shifted to the right.
D) The demand curve shifted to the left.

68. In 2016, Philadelphia imposed a tax of 1.5 cents per ounce on sweetened beverages, and PepsiCo
indicated that its sales in Philadelphia fell by 40 percent (% change in Qd) after the tax took effect. If the
price of PepsiCo's sweetened beverages in Philadelphia increased by 32 percent (% change in Price)
following the implementation of the tax, then demand sweetened beverages in Philadelphia would be:
Ed=%change in Qd/%change in Price=-40%/32%=/-1.25/
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
69. Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton
to $180 a ton and the quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the
price elasticity of demand?
A) 0.11
B) 0.37
C) 2.69 >1=> Elastic
D) 9.33

70. Which of the following statements about price elasticity of demand is false?
A) The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope.
B) If the quantity demanded changes by a larger percentage than the percentage change in price, demand
is elastic.
C) The value of the price elasticity of demand along a downward-sloping demand curve is always
negative.
D) A linear downward-sloping demand curve has a varying price elasticity coefficient.

71. If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids,
the demand for her orchids is=> Ed=1.81
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.

72. The price elasticity of demand for beef is estimated to be 0.60 (in absolute value). This means that a
20 percent increase in the price of beef, holding everything else constant, will cause the quantity of beef
demanded to Ed=/-0.6/= Qd%/20%
A) decrease by 12 percent.
B) decrease by 26 percent.
C) decrease by 32 percent.
D) decrease by 60 percent.

73. If the demand for cell phone service is inelastic, then Ed<1=> % change in Qd < % change in Price
A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute
value).
B) the percentage change in quantity demanded is equal to the percentage change in price.
C) the quantity demanded does not change in response to changes in price.
D) the percentage change in quantity demanded is less than the percentage change in price (in absolute
value).

Table 6-1

Price Quantity
$35 40
25 50
74. Refer to Table 6-1. Suppose you own a bookstore. You believe that you can sell 40 copies per day of
the latest John Grisham novel when the price is $35. You consider lowering the price to $25 and believe
this will increase the quantity sold to 50 books per day. Compute the price elasticity of demand using the
midpoint formula and these data. Select the correct implication from your work.
A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered.
B) The demand for the John Grisham book is elastic. Revenue will rise if the price is lowered.
C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is lowered.
D) The demand for the John Grisham book is elastic. Revenue will fall if the price is lowered.

75. Suppose that when the price per ream (500 sheets of paper) of recycled printer paper rises from $4 to
$4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is
the price elasticity of demand (in absolute value) over this range?
A) 0.003
B) 0.41
C) 2.43
D) 4

76. According to a study of the price elasticities of products sold in supermarkets, the price elasticity of
demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity
of demand for toothpaste is so low?
A) The toothpaste industry is highly competitive. -> more elastic
B) Toothpaste is relatively inexpensive. -> incorrect
C) Toothpaste is considered a luxury good. -> incorrect
D) There are few close substitutes for toothpaste.

77. Rank these three items in terms of the elasticity of the demand for them at any given price, from most
elastic to least elastic: hot beverages, coffee, and Peet's Coffee.
A) hot beverages, coffee, Peet's Coffee
B) Peet's Coffee, coffee, hot beverages (more detailed, narrowly, broadly)
C) coffee, Peet's Coffee, hot beverages
D) coffee, hot beverages, Peet's Coffee

78. Most people buy salt infrequently and in small quantities. Even a doubling of the price of salt is likely
to result in a small decline in the quantity of salt demanded. Therefore
A) the demand for salt will be perfectly inelastic. Ed=0=> Qd1=Qd0
B) salt is a normal good. -> Ey or Income
C) the demand for salt is relatively inelastic.
D) the price elasticity of demand for salt is greater than 1 (in absolute value).

Table 6-2

Estimated Price Elasticity of Demand

Coca-Cola -3.0
All carbonated soft drinks -1.5
All soft drinks -0.8
79. Refer to Table 6-2. Assume that an economist has estimated the price elasticity of demand values in
the table above. Use the data in the table to select the correct statement.
A) The demand for Coca-Cola is inelastic.
B) The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more
of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than a luxury.
C) The difference in elasticity values is explained by the fact that the more narrowly we define a market
the more elastic the demand will be.
D) There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks."

80. In general, a "big ticket item" such as a house or new car will -> luxury
A) tend to have a more elastic demand than a lower-priced good. -> procrastination
B) tend to have an inelastic demand because spending on the item takes up a large share of the average
consumer's budget.
C) tend to have an inelastic demand because it has many substitutes. -> preferences
D) tend to have a more inelastic demand the more time that passes.

81. A convenience store owner in Philadelphia was worried that the implementation of the 1.5 cents per
ounce tax on sweetened beverages would cause the quantity demanded to fall by so much that he would
be in a worse situation if he passed the tax on to customers by raising prices than if he did not raise prices.
If raising the price of sweetened beverages would cause the owner to receive less total revenue from the
sale of sweetened beverages, the demand for sweetened beverages is.
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.

Table 6-5

Hourly Rental Quantity Demanded Total revenue

Rate (dollars) (hours)
$60 40 2400
75 32 2400
80 30 2400
100 24 2400
82. Refer to Table 6-5. Katie Graham owns a kayak rental service in Santa Barbara. Table 6.5 shows her
estimated demand schedule for kayak rentals per week. She would like to increase her sales revenue by
changing the price she charges for rentals. At present, she charges $75. Based on the information in the
table, Katie
A) is not able to increase her revenue by changing her price because the demand for kayak rentals is unit
elastic.
B) should lower her price to $60 to increase her revenue because the demand for kayak rentals is price
elastic.
C) should raise her price to $80 to increase her revenue because the demand for kayak rentals is price
inelastic.
D) should raise her price to earn the most revenue.

83. When Nablom's Bakery raised the price of its bread by 10 percent, the quantity demanded fell by 15
percent. What was the effect on sales revenue? => Ed=-15/10=/-1.5/->Elastic
A) Sales revenue increased.
B) Sales revenue remained unchanged.
C) Sales revenue decreased.
D) It cannot be determined without information on prices.

84. If tolls on a toll road can be raised significantly before commuters will consider using a free
alternative, then an increase in tolls will result in
A) a decrease in total revenue.
B) a decrease in non-toll road usage.
C) an increase in total revenue.
D) an increase in toll road usage.

Table 6-6

Price of Book Copies Sold at Total Revenue at

That Price That Price

$14.99 100,000 $1,499,000

9.99 174,000 1,738,000
85. Refer to Table 6-6. Based on the data in the table, between a price of $9.99 and $14.99, the demand
for books is
A) elastic.
B) unit elastic.
C) inelastic.
D) perfectly inelastic.

86. Refer to Table 6-6. Based on the data in the table and using the midpoint formula, between a price of
$9.99 and $14.99, the price elasticity of demand for books is
A) -0.74.
B) -1.16.
C) -1.35.
D) -14.8.

Article Summary
Tickets for the Los Angeles production of the musical 'Hamilton' sold out quickly after going on
sale in April. These tickets, sold through the box office at the Pantages Theater and through authorized
seller Ticketmaster, were priced as low as $85 for mezzanine seats and $125 for orchestra seats. Once the
tickets sold out, the only available seats for the musical which ran from August 11 through December 30,
were through ticket resellers such as StubHub and SeatGeek, with tickets selling at an average price of
$467 to $510.
Ticket prices were the most expensive for August dates, with an average price of $624, and fell
for dates in the following months, with December prices averaging $335.
Source: Nicholas Cheng, "Don't have a ticket to 'Hamilton' yet? It's going to cost you," Los Angeles
Times, August 19, 2017.

87. Refer to the Article Summary. Based on the difference between the face value of 'Hamilton' tickets
sold by the Pantages Theater and Ticketmaster, and the prices being charged by the resellers like StubHub
and SeatGeek, the demand at the face value of the tickets is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.

88. Refer to the Article Summary. How would the Pantages Theater know if it was operating on the
elastic portion of the demand curve for 'Hamilton' tickets?
A) If they increased ticket prices and the total revenue from ticket sales increased.
B) If they increased ticket prices and the total revenue from ticket sales did not change.
C) If they increased ticket prices and the total revenue from ticket sales decreased.
D) If they decreased ticket prices and the total revenue from ticket sales did not change.

89. Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09.
This means that
A) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good.
B) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal
good.
C) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior
good.
D) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a
luxury.

90. Linesha, a college student working part-time, received a wage increase. An avid movie buff, she
increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information
A) DVDs and Blu-ray discs are substitutes.
B) Blu-ray discs are normal goods and DVDs are inferior goods.
C) DVDs and Blu-ray discs are normal goods.
D) the cross-price elasticity between DVDs and Blu-ray discs is negative.

91. Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is
approximately 6. What does this mean?
A) A 1 percent decrease in the price of grapefruit juice leads to a 6 percent decrease in orange juice
consumption.
B) A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice
consumption.
C) If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased.
D) The demand for orange juice is 6 times greater than the demand for grapefruit juice.

92. For people who live near a bus route, a subway station, or a commuter rail line, public transportation
provides a substitute to driving their own cars. So, for these people, the cross-price elasticity of demand
between gasoline and public transportation is.
A) positive.
B) negative.
C) zero.
D) infinity.

93. Suppose the California Nurses Union successfully secured a 12 percent increase in the wages of
registered nurses. If a hospital responds by reducing the quantity of registered nurses hired and increasing
the quantity of physician's assistants hired, what conclusion can you draw?
A) Physician assistants are more valuable in terms of their productivity.
B) The price elasticity of demand for registered nurses is negative while the price elasticity of demand for
physician's assistants is positive.
C) The cross-price elasticity of demand between registered nurses and physician's assistants is positive.
D) The cross-price elasticity of demand between registered nurses and physician's assistants is negative.

94. Last year, Joan bought 50 pounds of hamburgers when her household income was $40,000. This year,
her household income was only $30,000 and Joan bought 60 pounds of hamburger. Holding everything
else constant, Joan's income elasticity of demand for hamburgers is
A) positive, so Joan considers hamburgers to be an inferior good.
B) negative, so Joan considers hamburgers to be an inferior good.
C) positive, so Joan considers hamburgers to be a normal good and a necessity.
D) negative, so Joan considers hamburgers to be a normal good.

95. Which of the following items is likely to have the highest income elasticity of demand?
A) a luxury cruise to several European countries
B) water
C) breakfast cereal
D) a hamburger

96. The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing
A) the percentage change in the quantity demanded of Coca-Cola by the percentage change in the
quantity demanded of Pepsi-Cola.
B) the percentage change in the price of Pepsi-Cola by the percentage change in quantity demanded of
Coca-Cola.
C) the percentage change in the price of Coca-Cola by the percentage change in the price of Pepsi-Cola.
D) the percentage change in the quantity demanded of Coca-Cola by the percentage change in the price of
Pepsi-Cola.

97. To prove that Motrin and Ibuprofen are substitutes, one should measure the ___ and get a ___. (pain
and fever relieve)
A) cross-price elasticity; positive number
B) cross-price elasticity; negative number
C) price elasticity of demand; number greater than 1 (in absolute value)
D) price elasticity of demand; number less than 1 (in absolute value)

___ENJOY___