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Economics: Prices and Markets Tutorial: Elasticity: Multiple Choice Questions

This document contains a 12 question multiple choice quiz about economics concepts related to prices, markets, and elasticity. Specifically, it tests understanding of the definitions of price elasticity of demand, unit elasticity, complementary and substitute goods, income elasticity, and elasticity of supply. It provides questions that require applying these elasticity concepts to scenarios about how quantity, price, and total revenue change in response to shifts in supply or changes in other economic factors.

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Bloss Marome
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105 views2 pages

Economics: Prices and Markets Tutorial: Elasticity: Multiple Choice Questions

This document contains a 12 question multiple choice quiz about economics concepts related to prices, markets, and elasticity. Specifically, it tests understanding of the definitions of price elasticity of demand, unit elasticity, complementary and substitute goods, income elasticity, and elasticity of supply. It provides questions that require applying these elasticity concepts to scenarios about how quantity, price, and total revenue change in response to shifts in supply or changes in other economic factors.

Uploaded by

Bloss Marome
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Economics: Prices and Markets

Tutorial: Elasticity

Multiple Choice Questions

1. The price elasticity of demand measures:


a. How often the price of a good changes
b. The slope of a budget curve
c. How sensitive the quantity demanded is to changes in demand
d. The responsiveness of the quantity demanded to changes in price

2. If a rightward shift of the supply curve causes a 6 percent decrease in the price and a
5 percent increase in the quantity demanded, the price elasticity of demand is:
a. 0.30.
b. 0.60.
c. 0.83.
d. 1.20.

3. Suppose a rise in the price of peaches from R5.50 to R6.50 per bushel decreases the
quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is:
a. 0.5.
b. 1.0.
c. 2.0.
d. 1000.0.

4. Demand is perfectly inelastic when:


a. Shifts in the supply curve cause no change in price
b. The good in question has perfect substitutes
c. Shifts of the supply curve cause no change in quantity demanded
d. Shifts of the supply curve cause no change in the total revenue from sales

5. The demand for movies is unit elastic if:


a. A 5 percent decrease in the price causes an infinite increase in the quantity
demanded
b. A 5 percent increase in the price causes a 5 percent decrease in the quantity
demanded
c. Any increase in the price causes a 1 percent decrease in the quantity demanded
d. A 5 percent increase in the price causes a 5 percent increase in total revenue

6. Demand is inelastic if:


a. Large shifts of the supply curve cause only small changes in price
b. The good in question has close substitutes
c. A leftward shift of the supply curve raises the total revenue
d. The smaller angle between the vertical axis and the demand curve is less than 45
degrees
2

7. Producers’ total revenue will decrease if:


a. Income increases and the good is normal
b. The price rises and demand is elastic
c. The price rises and demand is inelastic
d. Income falls and the good is inferior

8. The elasticity of demand for HP computers is probably:


a. Inelastic and smaller than the elasticity of demand for computers overall
b. Elastic and smaller than the elasticity of demand for computers overall
c. Inelastic but larger than the elasticity of demand for computers overall
d. Elastic and larger than the elasticity of demand for computers overall

9. If goods A and B are complements:


a. The cross elasticity of demand between A and B is negative
b. The cross elasticity of demand between A and B is positive
c. Their income elasticity’s of demand are both greater than 1
d. Their income elasticity’s of demand are both less than 1

10. If a rise in the price of good B causes the quantity demanded for good A to increase:
a. A and B are substitutes
b. A and B are complements
c. A is a substitute for B, but B is a complement to A
d. B is a substitute for A, but A is a complement to B

11. Joan’s income has just risen from R940 per week to R1, 060 per week. As a result,
she decides to purchase 12 percent more butter per week. The income elasticity of
Joan’s demand for butter is:
a. 0.75.
b. 0.90.
c. 1.00.
d. 1.33.

12. If a 5 percent increase in the price results in a 9 percent increase in quantity supplied,
the elasticity of supply is:
a. 0.30.
b. 0.55.
c. 1.20.
d. 1.80.

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