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Tutorial 4-Chapter 4-Elasticity of DD & Ss

This document discusses price elasticity of demand and supply through a multiple choice question format. It covers key concepts such as: - Price elasticity of demand refers to the percentage change in quantity demanded given a percentage change in price. - Demand is price elastic when a decrease in price causes an increase in total revenue. - Price elasticity helps firms determine how price changes will affect their revenues. - The responsiveness of suppliers to changing prices is called the supply elasticity. - Governments can shift most of a tax burden to consumers by taxing goods with inelastic demand curves and steep supply curves.

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153 views3 pages

Tutorial 4-Chapter 4-Elasticity of DD & Ss

This document discusses price elasticity of demand and supply through a multiple choice question format. It covers key concepts such as: - Price elasticity of demand refers to the percentage change in quantity demanded given a percentage change in price. - Demand is price elastic when a decrease in price causes an increase in total revenue. - Price elasticity helps firms determine how price changes will affect their revenues. - The responsiveness of suppliers to changing prices is called the supply elasticity. - Governments can shift most of a tax burden to consumers by taxing goods with inelastic demand curves and steep supply curves.

Uploaded by

krsuicide
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Price Elasticity of Demand and Supply

TUTORIAL 4-Chapter 4 -Price Elasticity of Demand and Supply

MULTIPLE CHOICE
1. Price elasticity of demand refers to the ratio of the:
a. percentage change in price of a good in response to a percentage change in quantity
demanded.
b. percentage change in price of a good to a percentage increase in income.
c. percentage change in the quantity demanded of a good to a percentage change in its price.
d. none of the above.

2. If demand is price elastic, a decrease in price causes:


a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue.
d. an increase in quantity, but anything can happen to revenue.

3. If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is
evidence that demand is:
a. price elastic.
b. price inelastic.
c. unit elastic with respect to price.
d. perfectly inelastic.

4. A perfectly elastic demand curve has an elasticity coefficient of:


a. 0.
b. 1.
c. less than 1.
d. infinity.

5. If the percentage change in the quantity demanded of a good is less than the percentage change in
price, price elasticity of demand is:
a. elastic.
b. inelastic.
c. perfectly inelastic.
d. unitary elastic.

6. The price elasticity of demand for a vertical demand curve is:


a. perfectly elastic.
b. perfectly inelastic.
c. unitary elastic.
d. elastic.

7. If demand for a good is price elastic, then the price elasticity will be:
a. equal to one.
b. equal to zero.
c. greater than one.
d. less than one.

8. Elasticity measures how “sensitive” consumers are by measuring their change in __________ as
the price of the product changes.
a. attitude
Price Elasticity of Demand and Supply

b. income
c. quantity demanded
d. supply

9. Another word for elasticity is:


a. responsiveness.
b. happiness.
c. bonus
d. profit.

10. Firms would like to know the price elasticity of demand for their products because it helps
determine the effect of price changes on the firms’:
a. property taxes.
b. competitors’ profits.
c. quantity supplied.
d. revenues.

11. The responsiveness of suppliers to changing prices is called the:


a. cross elasticity.
b. supply elasticity.
c. supply period.
d. long-run.

12. If the price elasticity of supply equals zero, this implies that:
a. suppliers can easily change the quantity supplied of the product as the price of the
product changes.
b. the period under consideration is a very long-run time period.
c. the supply curve is perfectly vertical.
d. the percentage change in quantity supplied exceeds the percentage change in product price.

13. Price elasticities of supply are always:


a. the same as price elasticities of demand.
b. negative numbers.
c. positive numbers.
d. greater than one.

14. If the government wants to raise tax revenue and shift most of the tax burden to the consumers, it
would impose a tax on a good with a:
a. flat (elastic) demand curve and a steep (inelastic) supply curve.
b. steep (inelastic) demand curve and a flat (elastic) supply curve.
c. steep (inelastic) demand curve and steep (inelastic) demand curve.
d. flat (elastic) demand curve and a flat (elastic) supply curve.

15. A law requiring sellers to pay the government a tax per pack on cigarettes has the effect of:
a. shifting the supply curve to the right.
b. shifting the demand curve to the right.
c. shifting the supply curve to the left.
d. shifting the demand curve to the left.
Price Elasticity of Demand and Supply

END OF QUESTION PAPER

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