Home Chapter 5 Self-Study Quiz

Self-Study Quiz

This activity contains 33 questions.

When a good has few close substitutes readily available:

 Proportional changes in quantity demanded tend to be greater than proportional changes in price. Quantity demanded is not nearly as responsive to a change in price. Elasticity cannot be measured. Price tends to remain the same, regardless of quantity demanded.

Elasticity is:

 Any measure that effectively prevents the responsiveness in quantity demanded to sudden price changes. A general concept used to quantify the response in one variable when another variable changes. A specific qualitative concept that can be used to predict changes in supply and demand without the need for measurement. Equivalent to the slope of the demand curve as a measure of responsiveness.

The slope of a demand curve is:

 A poor measure of the responsiveness compared to elasticity. The best way of measuring the responsiveness in quantity demanded to changes in price. Equivalent to elasticity as a measure of responsiveness. A measure of the proportional change in quantity demanded, given a proportional change in price. A negative value, while demand elasticity is always a positive value.

Which of the following statements concerning the value of demand elasticity is/are true?

 The value of demand elasticity is always negative. Demand elasticity is either greater than one, equal to one, or less than one. In other words, the actual value of elasticity is always compared to one. The value of elasticity can be quickly inferred by looking at the inclination of the demand curve, whether it is relatively flat, steep, horizontal, or vertical. Elasticity of demand is stated in absolute terms. All of the above.

When the percentage change in quantity demanded is greater than the percentage change in price:

 The value of demand elasticity is greater than one. There are few substitutes for the good in question. The demand curve is relatively steep. There is little responsiveness in quantity demanded to changes in price. All of the above.

Which of the following is true when the percentage change in quantity demanded is the same as the percentage change in price?

 The demand for the product in question is unitary elastic. Price elasticity of demand equals zero. The demand curve is vertical. All of the above.

Refer to the figure below. Only one of the statements below is entirely correct. Which one?

 There are perfect substitutes for the good with the horizontal demand curve, while no substitutes exist for the good with the vertical demand curve. The value of elasticity equals zero for the horizontal demand curve, and infinity for the vertical demand curve. The horizontal demand curve is a perfectly inelastic, and the vertical demand curve is perfectly elastic. All of the above.

How is the responsiveness of quantity demanded to a change in price measured?

 By dividing the percentage change in the quantity demanded of a product by the percentage change in the product’s price. By dividing the percentage change in the product’s price by the percentage change in the quantity demanded of a product. By multiplying the percentage change in the quantity demanded of a product by the percentage change in the product’s price. By multiplying the percentage change in the product’s price by the percentage change in the quantity demanded of a product.

Refer to the figure below. Use the information on the graph to determine the validity of the statements below.

 According to the point elasticity formula, the value of elasticity between points A and B equals 0.25. According to the point elasticity formula, the proportional change in price between points A and B equals 20%. According to the point elasticity formula, the proportional change in quantity demanded between points A and B equals 5%. The slope of this demand curve is –2. All of the statements above are correct.

Refer to the figure below. Using the arc elasticity formula, the value of price elasticity of demand equals:

 0.27. 3.7. 6.0. 2.5. None of the above.

Refer to the figure below. The demand curve in this graph is:

 Relatively elastic, because the decrease in price results in an increase in quantity demanded. Perfectly inelastic, because a decrease in price leads to an increase in quantity demanded. Perfectly elastic, because the increase in supply causes equilibrium price to decrease. Relatively inelastic, because a proportionally large change in price leads to a proportionally smaller change in quantity demanded.

Finish the following sentence. A value of price elasticity of demand equal to 2 means that:

 quantity demanded falls by two times the amount of an increase in price. demand is relatively inelastic. price rises twice as fast as an increase in demand. when price increases, quantity demanded increases by twice as much. percentage quantity demanded falls by two times the percentage increase in price.

Refer to the figure. Using the midpoint formula, calculate the values of elasticity between points A and B, and then between points C and D. Those values are, respectively:

 –0.15 and –3.40 –6.4 and –0.294 –0.1 and –4.54 Incorrect. Apply the midpoint formula to compute the value of elasticity between A and B, and then between C and D. Then compare. –0.5 and –0.5. Elasticity is the same for both sets of points because the demand curve is linear; thus, the slope of the line remains constant.

When demand is elastic, a decrease in price leads to:

 A decrease in total revenue. A change in revenue, without a change in quantity demanded. An increase in quantity demanded, but no change in revenue. An increase in total revenue.

Refer to the figure below. Which move leads to a decrease in revenue?

 The move from C to D. The move from A to B. Both the move from A to B and the move from C to D result in lower revenue because price is lower in both cases. Neither the move from A to B nor the move from C to D decreases revenue because the quantity sold is increasing in both cases.

Which of the following is the most obvious factor affecting demand elasticity?

 Market supply. The availability of substitutes. Preferences. Income.

Which of the following is a true statement?

 When an item represents a small portion of our total budget, demand for that item is likely to be inelastic. The more time that passes, the more inelastic the demand for a product becomes. The fewer substitutes available for a product, the greater the price elasticity of demand. All of the above.

A measure of the response of the quantity of one good demanded to a change in the price of another good is called:

 Elasticity of supply. Elasticity of substitution. Income elasticity. Cross-price elasticity of demand.

In which of the following markets is the elasticity of supply likely to be positive?

 In output markets. In input markets. In both input markets and output markets. In neither input markets nor output markets. Supply elasticity is always negative.

Elasticity of labor supply measures:

 The response of labor supplied to a change in the price of labor. The percentage change in the wage rate divided by the percentage change in the quantity of labor supplied. The responsiveness of demand to changes in income. All of the above.

Fill in the blanks in the table below. Use the midpoint formula to compute elasticity values. For simplicity, round the values of elasticity to the nearest one-tenth.

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Explain why, in the mid seventies, an oil cartel was likely to be more effective than a banana cartel.

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at the end.

Describe the differences between demand elasticity in the short run and demand elasticity in the long run.

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at the end.