Q&A Hero

Q: If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand for the DVD for the movie The Hangover should be A) less then 0.8 in absolute value. B) greater than 0.8 in absolute value. C) equal to 1 in absolute value. D) equal to zero because the DVD of this movie has been out for several years.

Q: Which of the following is not a determinant of a good's price elasticity of demand? A) the slope of the demand curve B) the share of the good in the consumer's total budget C) whether the good is a luxury or a necessity D) the passage of time

Q: Which of the following statements is true? A) In general, if a product has few substitutes it will have an elastic demand. B) The more time that passes the more inelastic the demand for a product becomes. C) The demand curve for a necessity is more elastic than the demand curve for a luxury. D) The more narrowly we define a market, the more elastic the demand for a product will be.

Q: The most important determinant of the price elasticity of demand for a good is A) the definition of the market for a good. B) the availability of substitutes for the good. C) the share of the good in the consumer's budget. D) whether the good is a necessity or a luxury.

Q: 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.

Q: 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 C) coffee, Peet's Coffee, hot beverages D) coffee, hot beverages, Peet's Coffee

Q: If the market for a product is broadly defined, then A) the good has many complements. B) there are few substitutes for the product and the demand for the product is relatively inelastic. C) there are many substitutes for the product and the demand for the product is relatively elastic. D) the expenditure on the good is likely to make up a large share of one's budget.

Q: Which of the following would result in a higher absolute value of the price elasticity of demand for a product? A) A wide variety of substitutes are available for the good. B) The time period under consideration is short. C) The good is a necessity. D) The expenditure on the good is small relative to one's budget.

Q: With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services? A) It has become more price inelastic. B) It has become more price elastic. C) It has become more income elastic. D) The absolute value of the price elasticity coefficient has probably gone down.

Q: If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because A) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. B) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. C) sales revenue in the building industry will fall sharply. D) profits will fall by a greater amount in the long run than in the short run.

Q: 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. B) Toothpaste is relatively inexpensive. C) Toothpaste is heavily endorsed by dentists. D) There are few close substitutes for toothpaste.

Q: According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don't respond that much to lower rates. "We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy," says Jim Schultenover, a vice president for Ritz-Carlton. Source: Jesse Drucker, "In Times of Belt-Tightening, We Seek Reasonable Rates," Wall Street Journal, April 6, 2001. Based on the information above, the demand for hotel rooms is A) elastic. B) unit-elastic. C) inelastic. D) perfectly elastic.

Q: The demand for gasoline in the short run is A) elastic because people can easily switch to public transportation. B) perfectly inelastic because people have no choice but to buy gasoline. C) unit-elastic because people tend to consume a stable amount of gasoline per period. D) inelastic because there are no good substitutes for gasoline.

Q: The demand for all carbonated beverages is likely to be ________ the demand for Dr. Pepper. A) more elastic than B) perfectly elastic compared to C) less elastic than D) perfectly inelastic compared to

Q: Which of the following goods would have the most inelastic demand? A) ski vacations B) bread C) luxury cars D) big screen TVs

Q: A demand curve that is horizontal indicates that the commodity A) has few substitutes. B) must be very cheap. C) is a necessity. D) has a large number of substitutes.

Q: Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant? A) Demand is likely to be perfectly inelastic. B) Demand is likely to be perfectly elastic. C) Demand is likely to be relatively elastic. D) Demand is likely to be relatively inelastic.

Q: When there few close substitutes available for a good, demand tends to be A) perfectly inelastic. B) perfectly elastic. C) relatively inelastic. D) relatively elastic.

Q: Which of the following statements about the price elasticity of demand iscorrect? A) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. B) The absolute value of the elasticity of demand ranges from zero to one. C) Demand is more elastic in the long run than it is in the short run. D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

Q: Which of the following products comes closest to having a perfectly inelastic demand? A) gasoline B) cholesterol medication in general C) iPhones D) bus rides

Q: The U.S. government's focus on supply reduction efforts in its "war on drugs" has been relatively unsuccessful at addressing illegal drug use. Some economists believe that a successful anti-drug program must concentrate on reducing demand; for example, through drug education and voluntary treatment programs for addicts. a. Suppose the price elasticity of demand for cocaine is -0.5. What will happen to the equilibrium price, quantity and total revenue from cocaine sales if the government succeeds in its efforts to reduce demand? What is likely to happen to the incentive to sell cocaine? b. Suppose the government continues to concentrate its efforts on supply reduction and is able to reduce the supply of cocaine. As a result of the reduction in supply the price of cocaine increases by 25 percent. If the price elasticity of demand is -0.5, what is likely to happen to the incentive to sell cocaine? c. Based on your answers, explain why one approach might be preferred over the other.

Q: The current price of canvas messenger bags is $36 each and sales of the bags equal 400 per week. If the price elasticity of demand is -2.5 and the price changes to $44, how many messenger bags will be sold per week? Use the midpoint formula.

Q: Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million gallons a day were sold. In October 2004, the price averaged $2.15 a gallon and 14 million gallons were sold. If the demand for gasoline did not shift between these two months, use the midpoint formula to calculate the price elasticity of demand. Indicate whether demand was elastic or inelastic.

Q: When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Q: What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Q: Briefly explain the economic concept of elasticity.

Q: If at a price of $10, a vendor sells 5 units of a product and at a price of $8, 6 units are sold, then, using the midpoint formula, the demand for this good is inelastic.

Q: If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.

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

Q: If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one.

Q: Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets. Based on this information, the demand for Yoshi's jazz performance is elastic.

Q: If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.

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

Q: The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.

Q: Suppose that when the price per ream 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

Q: A newspaper story on the effect of higher milk prices on the market for ice cream contained the following: "As a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . . . And ice cream consumption is down 3 percent." Source: John Curran, "Ice Cream, They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press, July 23, 2001. Based on the information given, what is the price elasticity of demand for ice cream? A) 0.75 (in absolute value) B) 1.33 (in absolute value) C) 12% D) We do not have enough information to calculate the elasticity.

Q: A perfectly elastic demand curve is A) vertical. B) horizontal. C) curvilinear. D) upward sloping.

Q: Of the following, which is the best example of good with a perfectly inelastic demand? A) the demand for tickets in New York City when the Mets or Yankees are in the World Series B) the demand for gasoline C) a diabetic's demand for insulin D) the demand for a college education by a student who has a full scholarship to an Ivy League school

Q: Table 6-1 Price Quantity $35 40 25 50 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 mid-point 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.

Q: We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because A) there has never been evidence of a perfectly inelastic demand curve. B) an inelastic demand curve may be perfectly inelastic at some times but not others. C) perfectly inelastic demand curves are rare. D) an inelastic demand curve may be elastic at high prices.

Q: 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.

Q: Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true? A) The slope and the price elasticity of demand are constant at all points along the demand curve for sunblock. B) The slope is constant, but the price elasticity of demand is not constant at all points along the demand curve for sunblock. C) The slope is not constant, but the price elasticity of demand is constant at all points along the demand curve for sunblock. D) The slope of the demand curve for sunblock is constant and equal to zero; demand is perfectly inelastic.

Q: Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic, and that the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes? A) The demand for cantaloupes at $2.00 must be inelastic. B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. C) The demand for cantaloupes at $2.00 must be elastic. D) The demand for cantaloupes at $2.00 must be unit-elastic.

Q: When the price of pistachio nuts is $7.50 per lb. the quantity demanded is 48 lbs. When the price of peaches is $9.00 per lb. the quantity demanded is 40 lbs. When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is A) relatively, but not perfectly, elastic. B) unit-elastic. C) completely inelastic. D) relatively, but not perfectly, inelastic.

Q: The midpoint formula is used to measure the elasticity of demand between two points on a demand curve A) when demand is elastic. B) in special cases when the percentage change in the quantity demanded is equal to the percentage change in price. C) to ensure that the elasticity has a negative value. D) to ensure that we have only one value of the price elasticity of demand between two points on a demand curve.

Q: Figure 6-6 Refer to Figure 6-6. As price falls from PA to PB, the quantity demanded increases most along D1; therefore, A) D1 is unit elastic. B) D1 is more inelastic than D2 or D3. C) D1 is more elastic than D2 or D3 D) D1 is elastic at PA but inelastic at PB.

Q: If the demand for cell phone service is inelastic, then 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).

Q: If the demand for a steak is unit-elastic, then A) the percentage change in quantity demanded is 1 percent greater than the percentage change in price. B) the percentage change in quantity demanded is equal to the percentage change in price. C) the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). D) quantity demanded does not respond to changes in price.

Q: If the demand for iPods is price elastic, then 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 less than the percentage change in price (in absolute value). C) the percentage change in quantity demanded is equal to the percentage change in price. D) quantity demanded is not responsive to changes in price.

Q: Figure 6-5 Refer to Figure 6-5. The section of the demand curve labeled "A" represents A) the inelastic section of the demand curve. B) the unit-elastic section of the demand curve. C) the elastic section of the demand curve. D) the perfectly elastic section of the demand curve.

Q: If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is A) horizontal. B) downward sloping. C) curvilinear. D) vertical.

Q: Carrie Bradshaw claims that when it comes to buying shoes, "price is no object." If this is true, then her demand for shoes is A) perfectly elastic. B) perfectly inelastic. C) unit-elastic. D) horizontal.

Q: A linear downward sloping demand curve has price elasticities (in absolute values) that A) increase as price decreases. B) remain constant along the demand curve. C) decrease as price decreases. D) are greater than or equal to 1.

Q: When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is A) inelastic. B) elastic. C) unit-elastic. D) perfectly inelastic.

Q: If demand is perfectly elastic, the absolute value of the price elasticity coefficient is A) infinity. B) zero. C) more than one. D) equal to the absolute value of the slope of the demand curve.

Q: If the absolute value of the price elasticity of demand for aspirin equals 0.8 then A) aspirin is a normal good. B) the demand for aspirin is inelastic. C) aspirin has few substitutes. D) the demand for aspirin is elastic.

Q: 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 every thing else constant, will cause the quantity of beef demanded to A) decrease by 12 percent. B) decrease by 26 percent. C) decrease by 32 percent. D) decrease by 60 percent.

Q: For a given demand curve, will there be a greater loss of economic efficiency from a binding price floor when supply is elastic or inelastic? Illustrate your answer with a demand and supply graph. In your graph you must show two supply curves, one elastic and the other inelastic.

Q: If the slope of a demand curve is equal to -0.1 then A) demand is inelastic. B) we don't know whether the demand is elastic or inelastic. C) the demand is elastic at low prices and inelastic at high prices. D) as price increases by 10 percent quantity demanded decreases by 1 percent.

Q: Suppose the current price of copper is $3 per pound and the quantity supplied is 200 pounds per day. If the price of copper falls to $2.50 per pound, the quantity supplied drops to 180 pounds per day. Use the midpoint formula to calculate the price elasticity of supply for copper.

Q: The slope of a demand curve is not used to measure the price elasticity of demand because A) the slope of a linear demand curve is not constant. B) the slope of a line cannot have a negative value. C) the measurement of slope is sensitive to the units chosen for price and quantity. D) the slope of the demand curve does not tell us how much quantity changes as price changes.

Q: Suppose the current price of oil is $90 a barrel and the quantity supplied is 800 million barrels per day. If the price elasticity of supply for oil in the short run is estimated at 0.5, use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $98 a barrel.

Q: To calculate the price elasticity of demand we divide A) the percentage change in quantity demanded by the percentage change in price. B) the percentage change in price by the percentage change in quantity demanded. C) rise by the run. D) the average price by the average quantity demanded.

Q: Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

Q: In September 2012, the average price of gasoline in the United States was $3.91 per gallon, and consumers purchased nearly 5 percent less gasoline than they had during September 2011, when the average price of gasoline was $3.66 per gallon. Based on these figures, from September 2011 to September 2012, the demand for gasoline was A) elastic. B) inelastic. C) unit elastic. D) perfectly elastic.

Q: There are a limited number of original Picasso paintings. This means that the supply of original Picasso paintings is perfectly inelastic.

Q: The price elasticity of demand is equal to A) the value of the slope of the demand curve. B) the change in quantity demanded divided by the change in price. C) the percentage change in price divided by the percentage change in quantity demanded. D) the percentage change in quantity demanded divided by the percentage change in price.

Q: Supply is elastic whenever the elasticity value for supply is positive and greater than 1.

Q: Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price. A) slope B) efficiency C) relativity D) elasticity

Q: The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Q: For consumers who opt to pay a $10 monthly fee to have unlimited texting on their cell phones, but choose not to pay a $5 monthly fee to have unlimited call minutes, the unlimited texting option has a ________ than the unlimited minutes option. A) higher price elasticity of demand B) higher cross-price elasticity of demand C) lower price elasticity of demand D) lower cross-price elasticity of demand

Q: Suppose the supply curve for digital cameras shifts to the right. This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Q: At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised her price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is A) perfectly elastic. B) inelastic. C) perfectly inelastic. D) unit-elastic.

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

Q: If at a price of $50, Ghani sells 20 hand-made leather cell-phone covers but at a price of $60, zero units are sold. Based on this information, the demand for his cell-phone covers is A) elastic or perfectly inelastic. B) elastic or perfectly elastic. C) unit-elastic. D) perfectly inelastic.

Q: Which of the following statements is true? A) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. B) The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. C) The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly. D) Over short periods of time increases in the demand for oil are greater than increases in the supply of oil. Over the long run increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.

Q: 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 A) elastic. B) inelastic. C) unit-elastic. D) perfectly elastic.

Q: Shifts in the supply of oil have caused large changes in price since the 1970s because A) the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time. B) the supply of oil is very elastic while the demand for oil is inelastic over short periods of time. C) both the supply of oil and the demand for oil are inelastic over short periods of time. D) the supply of oil and the demand for oil are perfectly elastic over short periods of time.

Q: Consider the following types of demand curves: a. a vertical demand curve b. a horizontal demand curve c. a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve? A) a only B) b only C) a and b only D) a, b, and c

Q: The process involved in bringing oil to world markets can take years. Substitutes for oil-based products such as gasoline are limited. As a result A) the supply of oil is very elastic and the demand for oil is very elastic over short periods of time. B) the supply of oil is very inelastic and the demand for gasoline is inelastic over short periods of time. C) the supply of oil and the demand for oil shift to the right over short periods of time. D) the supply of oil and the demand for oil are both perfectly elastic over short periods of time.