1/17/2021 Print Questions

1. Why do we need a units-free measure of the responsiveness of the quantity demanded of a good or service to a change in
its price?

Because elasticity is a units-free measure of the responsiveness of the quantity demanded of a good or service to a change
in its price, _______.

A. elasticity is dependent on the units in which the variable is measured

B. elasticity is equal to the negative of the slope of the demand curve
C. we can compare the responsiveness of the same good when quantity is measured in different
units, or we can compare across different goods
D. elasticity is equal to the slope of the demand curve

2. Define the price elasticity of demand and show how it is calculated.

The price elasticity of demand is a units-free measure of the responsiveness of ______.

A. the quantity demanded of a good to a change in its price when all other influences on buying
plans remain the same
B. the demand for a good when consumers' income changes
C. the quantity demanded of a good to a change in the quantity supplied when all other
influences on buying plans remain the same
D. the demand for a good when the price of one of it substitutes or a complement of it changes

The price elasticity of demand is calculated by dividing the _______ by the _______.

A. change in the price; the change in the quantity demanded

B. percentage change in the quantity demanded; percentage change in the price
C. percentage change in the price; percentage change in the quantity demanded
D. change in the quantity demanded; change in the price

3. What makes the demand for some goods elastic and the demand for other goods inelastic?

The fewer the substitutes for a good or service, the more ______ is the demand for it.

The smaller the proportion of income spent on a good, the more ______ is the demand for it.

A. inelastic; inelastic
B. elastic; elastic
C. elastic; inelastic
D. inelastic; elastic

The shorter the time that has elapsed since a price change, the more _______.

A. linear is the demand curve

B. inelastic is demand
C. elastic is demand
D. non-linear is the demand curve

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4. Why is the demand for a luxury generally more elastic (or less inelastic) than the demand for a necessity?

Demand for a luxury is more ______ than demand for a necessity because a luxury has ______ substitutes.

A. inelastic; more
B. inelastic; fewer
C. elastic; more
D. elastic; fewer

5. What is the total revenue test?

The total revenue test is a method of estimating the price elasticity of demand by observing the ______ that results from
______, when all other influences on the quantity sold remain the same.

A. change in the quantity sold; a change in demand

B. change in total revenue; a change in the price
C. change in the quantity demanded; a change in the price
D. total revenue; the quantity sold at a given price

Demand is elastic if a price (1) increases total revenue.

Demand is inelastic if a price (2) increases total revenue.

Demand is unit elastic if a price (3) leaves total revenue unchanged.

(1) cut (2) cut (3) cut or rise

rise rise cut but not a rise
rise but not a cut

6. What does the income elasticity of demand measure?

The income elasticity of demand is a measure of the responsiveness of the demand for a good or service to a change in
______, other things remaining the same.

A. the price of a substitute or complement

B. income
C. the relative price of another good
D. the total output in the economy

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7. What does the sign (positive/negative) of the income elasticity tell us about a good?

A good with an income elasticity greater than one is ______.

A good with an income elasticity that is positive and less than 1 is ______.

A. a normal good that is income inelastic; a normal good that is income elastic
B. a normal good that is unit elastic; a normal good that is income elastic
C. a normal good that is income elastic; a normal good that is income inelastic
D. an inferior good; a normal good that is income elastic

A good with an income elasticity that is negative is _______.

A. a substitute
B. a normal good
C. an inferior good
D. a complement

An example of an income elastic good is ______ and an example of an income inelastic good is ______.

A. clothing; a telephone
B. airline travel; an automobile
C. a haircut; food
D. tobacco; furniture

8. What does the cross elasticity of demand measure?

The cross elasticity of demand is a measure of the responsiveness of the demand for a good to a change in the ______,
other things remaining the same.

A. price of a normal good or an inferior good

B. quantity demanded of a normal good or an inferior good
C. quantity demanded of a substitute or complement
D. price of a substitute or complement

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9. What does the sign (positive/negative) of the cross elasticity of demand tell us about the relationship between two goods?

If the cross elasticity of demand for ramen noodles with respect to the price of rice is positive, then ramen noodles and rice
are ______.

A. inferior goods
B. normal goods
C. complements
D. substitutes

If the cross elasticity of demand for golf clubs with respect to the price of a golf lesson is negative, then golf clubs and
golf lessons are ______.

A. substitutes
B. normal goods
C. inferior goods
D. complements

10. Why do we need a units-free measure of the responsiveness of the quantity supplied of a good or service to a change in
its price?

Because elasticity of supply is a units-free measure of the responsiveness of the quantity supplied of a good or service to
a change in its price, _______.

A. elasticity of supply is equal to the slope of the supply curve

B. elasticity of supply is dependent on the units in which the variable is measured
C. we can compare the responsiveness of the same good when quantity is measured in
different units, or we can compare across different goods
D. elasticity of supply is equal to the negative of the slope of the supply curve

11. Define the elasticity of supply and show how it is calculated.

Elasticity of supply measures the responsiveness of the quantity supplied to a change in ______, when all other influences
on selling plans remain the same.

A. the price of a substitute

B. the price of a good
C. the price of a complement
D. the consumers' income

The elasticity of supply is calculated by dividing ______ by ______.

A. the change in the price; the change in the quantity supplied

B. the change in the quantity supplied; the change in the price
C. the percentage change in the quantity supplied; the percentage change in the price
D. the percentage change in the price; the percentage change in the quantity supplied

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12. What are the main influences on the elasticity of supply that make the supply of some goods elastic and the supply of
other goods inelastic?

Goods and services that use rare resources in their production have a ______ elasticity of supply.

The greater the amount of time available after a price change, the ______ is the elasticity of supply.

A. high; greater
B. low; greater
C. high; smaller
D. low; smaller

13. Provide examples of goods or services whose elasticities of supply are (a) zero, (b) greater than zero but less than infinity,
and (c) infinity.

The momentary supply of wheat has an elasticity of supply equal to _______.

The short-run supply of wheat has an elasticity of supply equal to _______.

A. zero; zero
B. more than zero but less than infinity; more than zero but less than infinity
C. infinity; more than zero but less than infinity
D. zero; more than zero but less than infinity

The long-run supply of wheat has an elasticity of supply equal to _______.

A. − 1
B. infinity
C. zero
D. negative infinity

14. How does the time frame over which a supply decision is made influence the elasticity of supply? Explain.

In the market for farm crops momentary supply is ______.

In the market for farm crops, short-run supply is ______.

A. positive because the quantity supplied increases immediately as price rises;

negative because the quantity supplied decreases in the short run as the price rises
B. negative because the quantity supplied decreases immediately as price rises;
positive because the quantity supplied increases as price rises in the short run
C. more elastic than short-run supply because supply decisions can be made immediately to
react to current situations;
more elastic than long-run supply because only in the long run are farmers able to implement
all technologically possible knowledge
D. less elastic than short-run supply because the quantity supplied depends on decisions made
earlier;
less elastic than long-run supply because in the long run the quantity supplied responds after
all technologically possible adjustments are made

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1. C.
we can compare the responsiveness of the same good when quantity is measured in different units, or we can compare
across different goods

2. A. the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same

B. percentage change in the quantity demanded; percentage change in the price

3. A. inelastic; inelastic
B. inelastic is demand

4. C. elastic; more

5. B. change in total revenue; a change in the price

(1) cut

(2) rise

(3) cut or rise

6. B. income

7. C. a normal good that is income elastic; a normal good that is income inelastic

C. an inferior good

C. a haircut; food

8. D. price of a substitute or complement

9. D. substitutes

D. complements

10. C.
we can compare the responsiveness of the same good when quantity is measured in different units, or we can compare
across different goods

11. B. the price of a good

C. the percentage change in the quantity supplied; the percentage change in the price

12. B. low; greater

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13. D. zero; more than zero but less than infinity

B. infinity

14. D. less elastic than short-run supply because the quantity supplied depends on decisions made earlier;
less elastic than long-run supply because in the long run the quantity supplied responds after all technologically possible
adjustments are made

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