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The absolute value of the price elasticity of demand for telescopes is 1.5.Therefore,telescopes can be classified as a luxury.

A) True
B) False

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The price elasticity of demand for Kellogg Corn Flakes is larger in absolute value than the price elasticity for all breakfast cereals.

A) True
B) False

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If the demand for a product is elastic,the quantity demanded changes by a larger percentage than the percentage change in price.

A) True
B) False

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Over longer periods of time,increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?


A) The elasticity coefficient is likely to be higher in the long run than in the short run.
B) The elasticity coefficient is likely to be lower in the long run than in the short run.
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted.
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted.

E) A) and B)
F) B) and D)

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The price elasticity of demand for beef is estimated to be 0.60 (in absolute value) .This means that a 20 per cent increase in the price of beef,holding everything else constant,will cause the quantity of beef demanded to


A) decrease by 12 per cent.
B) decrease by 26 per cent.
C) decrease by 32 per cent.
D) decrease by 60 per cent.

E) B) and D)
F) A) and B)

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A

The larger the share of a good in a consumer's budget,holding everything else constant,the


A) more price elastic is a consumer's demand.
B) more vertical is a consumer's demand curve.
C) more price inelastic is a consumer's demand.
D) more unit-elastic is a consumer's demand.

E) A) and D)
F) B) and D)

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The demand for heating oil in the short run is more elastic than the long-run demand for heating oil.

A) True
B) False

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List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

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1.Availability of close substitutes: If ...

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Suppose the value of the price elasticity of supply is 4.What does this mean?


A) A 4 per cent increase in the price of the good causes quantity supplied to increase by 1 per cent.
B) A 1 per cent increase in the price of the good causes the supply curve to shift upward by 4 per cent.
C) A 1 per cent increase in the price of the good causes quantity supplied to increase by 4 per cent.
D) For every $1 increase in price, quantity supplied increases by 4 units.

E) A) and D)
F) None of the above

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Figure 4-6 Figure 4-6 -Refer to Figure 4-6.A perfectly inelastic supply curve is shown in A) Panel A. B) Panel B. C) Panel C. D) Panel D. -Refer to Figure 4-6.A perfectly inelastic supply curve is shown in


A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

E) All of the above
F) C) and D)

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Holding everything else constant,the demand for a good tends to be more elastic


A) the more substitutes there are for the good.
B) the shorter the time period involved.
C) the more consumers perceive the good to be a necessity.
D) the less important the product is in consumers' budgets.

E) None of the above
F) B) and C)

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Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8000 units to 10 000 units.Use the midpoint formula to calculate the price elasticity of supply.


A) 1.22
B) 1.0
C) 0.82
D) 0.07

E) A) and C)
F) A) and B)

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A

The cross-price elasticity between Gillette razors and a related good is -3.4.What happens to demand for the related good if the price of Gillette razors falls by 10 per cent?


A) The quantity demanded of the related good rises by 3.4 per cent.
B) The quantity demanded of the related good falls by 34 per cent.
C) The quantity demanded of the related good rises by 34 per cent.
D) The quantity demanded of the related good falls by 3.4 per cent.

E) A) and C)
F) All of the above

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The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

A) True
B) False

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Figure 4-1 Figure 4-1 -Refer to Figure 4-1.The demand curve on which elasticity changes at every point is given in A) Panel A. B) Panel B. C) Panel C. D) none of the above graphs. -Refer to Figure 4-1.The demand curve on which elasticity changes at every point is given in


A) Panel A.
B) Panel B.
C) Panel C.
D) none of the above graphs.

E) A) and B)
F) A) and C)

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The price elasticity of supply is calculated as the change in supply divided by the change in price.

A) True
B) False

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False

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then


A) the price elasticity of demand for teapots is greater than 1 in absolute value.
B) the demand for teapots is unit-elastic.
C) the price elasticity of demand for teapots is equal to zero.
D) the price elasticity of demand for teapots is less than 1 in absolute value.

E) C) and D)
F) All of the above

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Suppose when Nablom's Bakery raised the price of its breads by 10 per cent,the quantity demanded fell by 15 per cent.What was the effect on sales revenue?


A) Sales revenue increased.
B) Sales revenue remained unchanged.
C) Sales revenue decreased.
D) It cannot be determined without information on prices.

E) A) and B)
F) A) and D)

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You are the manager of a theatre.At present the theatre charges the same admission price of $8 to all customers,regardless of age.You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults.You tell your supervisor that your proposal is likely to increase revenues.What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.

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You believe that the price elasticity of...

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Which of the following products comes closest to having a perfectly inelastic demand?


A) Petrol
B) Cholesterol medication in general
C) iPhones
D) Bus rides

E) C) and D)
F) A) and B)

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