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Which of the following statements about the price elasticity of demand is correct?


A) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases.
B) Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes.
C) Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y.
D) All of the above are correct.

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

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When quantity demanded responds strongly to changes in price, demand is said to be


A) fluid.
B) elastic.
C) dynamic.
D) highly variable.

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

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Demand is said to be price elastic if


A) the price of the good responds substantially to changes in demand.
B) demand shifts substantially when income or the expected future price of the good changes.
C) buyers do not respond much to changes in the price of the good.
D) buyers respond substantially to changes in the price of the good.

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

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The flatter the demand curve that passes through a given point, the more elastic the demand.

A) True
B) False

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In the market for oil in the short run, demand


A) and supply are both elastic.
B) and supply are both inelastic.
C) is elastic and supply is inelastic.
D) is inelastic and supply is elastic.

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

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Table 5-6  Supply is  Demand is  Scenario A  elastic  elastic  Scenario B  elastic  inelastic  Scenario C  inelastic  elastic  Scenario D  inelastic  inelastic \begin{array}{l|l|l} & \text { Supply is } & \text { Demand is } \\\hline \text { Scenario A } & \text { elastic } & \text { elastic } \\\hline \text { Scenario B } & \text { elastic } & \text { inelastic } \\\hline \text { Scenario C } & \text { inelastic } & \text { elastic } \\\hline \text { Scenario D } & \text { inelastic } & \text { inelastic } \\\hline\end{array} -Refer to Table 5-6. Which scenario describes the market for oil in the short run?


A) A
B) B
C) C
D) D

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

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There are fewer farmers in the United States today than 200 years ago because of


A) improvements in farm technology.
B) increased government regulations in farming.
C) an elastic demand for food.
D) environmental programs designed to reduce soil erosion.

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

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The midpoint method for calculating elasticities is convenient in that it allows us to


A) ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price.
B) calculate the same value for the elasticity, regardless of whether the price increases or decreases.
C) assume that sellers' total revenue stays constant when the price changes.
D) restrict all elasticity values to between 0 and 1.

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

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The price elasticity of demand for eggs


A) is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs.
B) will be lower if there is a new invention that is a close substitute for eggs.
C) will be higher if consumers consider eggs to be a necessity.
D) All of the above are correct.

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

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On a downward-sloping linear demand curve, total revenue reaches its maximum value at the


A) midpoint of the demand curve.
B) lower end of the demand curve.
C) upper end of the demand curve.
D) It is impossible to tell without knowing prices and quantities demanded.

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

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Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is


A) negative, and the good is an inferior good.
B) negative, and the good is a normal good.
C) positive, and the good is an inferior good.
D) positive, and the good is a normal good.

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

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The value of the price elasticity of demand for a good will be relatively large when


A) there are no good substitutes available for the good.
B) the time period in question is relatively short.
C) the good is a luxury rather than a necessity.
D) All of the above are correct.

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

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Elasticity is


A) a measure of how much buyers and sellers respond to changes in market conditions.
B) the study of how the allocation of resources affects economic well-being.
C) the maximum amount that a buyer will pay for a good.
D) the value of everything a seller must give up to produce a good.

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

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Along the elastic portion of a linear demand curve, total revenue rises as price rises.

A) True
B) False

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Between 1950 and today there was a


A) 20 percent drop in the number of farmers, but farm output more than tripled.
B) 30 percent drop in the number of farmers, but farm output more than tripled.
C) 50 percent drop in the number of farmers, but farm output more than doubled.
D) 70 percent drop in the number of farmers, but farm output more than doubled.

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

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When a supply curve is relatively flat,


A) sellers are not very responsive to changes in price.
B) supply is relatively inelastic.
C) supply is relatively elastic.
D) Both a and b are correct.

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

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Figure 5-13 Figure 5-13 -Refer to Figure 5-13. Over which range is the supply curve in this figure the least elastic? A) $16 to $40 B) $40 to $100 C) $100 to $220 D) $220 to $430 -Refer to Figure 5-13. Over which range is the supply curve in this figure the least elastic?


A) $16 to $40
B) $40 to $100
C) $100 to $220
D) $220 to $430

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

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Suppose that 500 candy bars are demanded at a particular price. If the price of candy bars rises from that price by 10 percent, the number of candy bars demanded falls to 480. Using the midpoint approach to calculate the price elasticity of demand, it follows that the


A) demand for candy bars in this price range is unit elastic.
B) price increase will decrease the total revenue of candy bar sellers.
C) price elasticity of demand for candy bars in this price range is about 0.41.
D) price elasticity of demand for candy bars in this price range is about 0.24.

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

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The greater the price elasticity of demand, the


A) more likely the product is a necessity.
B) smaller the responsiveness of quantity demanded to a change in price.
C) greater the percentage change in price over the percentage change in quantity demanded.
D) greater the responsiveness of quantity demanded to a change in price.

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

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Scenario 5-3 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-3. Total consumer spending on milk will


A) increase, and total consumer spending on beef will increase.
B) increase, and total consumer spending on beef will decrease.
C) decrease, and total consumer spending on beef will increase.
D) decrease, and total consumer spending on beef will decrease.

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

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