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Tutorial 6 Questions

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Tutorial 6 Questions

Uploaded by

3299739838
Copyright
© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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Tutorial 6 – Questions

1. In general terms, what does elasticity measure?


a. how price is determined between buyers and sellers in a market
b. how much government intervention is prevalent in a market
c. how competitive a market is
d. how much buyers and sellers respond to changes in market conditions
2. When studying how some event or policy affects a market, on what does
elasticity provide information?
a. the direction and the efficiency of the effect on the market
b. the direction and the magnitude of the effect on the market
c. the magnitude and the efficiency of the effect on the market
d. the efficiency and the equity of the effect on the market

3. What is the concept of elasticity used for?


a. to analyze how much the economy can produce
b. to determine the level of government intervention in the economy
c. to analyze supply and demand with changes in market condition
d. to calculate consumer credit purchases
4. What does the price elasticity of demand measure?
a. how responsive buyers are to a change in income
b. how responsive sellers are to a change in price
c. how responsive buyers are to a change in price
d. how responsive sellers are to a change in buyers' incomes
5. When is demand said to be elastic?
a. if the price of the good responds substantially to changes in demand
b. if demand shifts substantially when the price of the good changes
c. if buyers do not respond to changes in the price of the good
d. if the quantity demanded responds substantially to changes in the price of the good
6. What does inelastic demand mean?
a. consumers hardly respond to a change in price.
b. consumers respond substantially to a change in price.
c. consumers respond directly to a change in income.
d. change in quantity demanded is equal to the change in price.
7. Which term best describes a demand curve that is perfectly elastic?
a. Vertical
b. Horizontal
c. upward sloping
d. relatively steep
8. If a good is a luxury, what would demand for the good tend to be?
a. Inelastic
b. Elastic
c. unit elastic
d. perfectly elastic
9. What happens when the price elasticity of demand increases?
a. The responsiveness of quantity demanded to price decreases.
b. The responsiveness of quantity demanded to price decreases.
c. The percentage change in price over the percentage change in quantity demanded
increases.
d. The responsiveness of quantity demanded to price increases.
10. There are very few, if any, good substitutes for motor oil. What does this imply?
a. The supply of motor oil would tend to be price elastic.
b. The demand for motor oil would tend to be price elastic.
c. The demand for motor oil would tend to be price inelastic.
d. The demand for motor oil would tend to be income elastic.
11. Suppose there is a 3 percent increase in the price of good X and a resulting 6
percent decrease in the quantity of X demanded. What is the price elasticity of
demand for X?
a. 0
b. 2
c. 6
d. Infinite
12. Babar's Bakery made $200 last month selling 100 loaves of bread. This month it
made $350 selling 70 loaves of bread. What is the price elasticity of demand for
Babar's bread?
a. 0.266
b. 0.583
c. 0.776
d. 1.110

13. If the price elasticity of demand for a good is 3.0, what would result from a 10
percent increase in price?
a. a 3 percent decrease in the quantity demanded
b. a 10 percent decrease in the quantity demanded
c. a 30 percent decrease in the quantity demanded
d. a 300 percent decrease in the quantity demanded

14. Refer to Figure 5-1. What is the elasticity of demand from point A to point B,
using the midpoint method?
a. 0.4
b. 1.0
c. 1.5
d. 2.5

15. Refer to Figure 5-1. What is the elasticity of demand from point B to point C,
using the midpoint method?
a. 0.50
b. 0.75
c. 1.00
d. 1.30
16. Refer to Figure 5-4. As price falls from PA to PB, which demand curve is most
elastic?

a. D1
b. D2
c. D3
d. D4

17. When demand is unit elastic, what is the price elasticity and what is the effect on
total revenue of a price change?
a. The price elasticity exactly equals 1 and total revenue does not change when price
changes.
b. The price elasticity exactly equals 1 and total revenue and price move in opposite
directions.
c. The price elasticity exactly equals 1 and total revenue and price move in the same
direction.
d. The price elasticity approaches infinity and total revenue does not change when
price changes.

18. Suppose that you are in charge of pricing at a local sandwich shop. The business
needs to increase revenue and your job is on the line. What should you do?
a. If the demand for sandwiches is elastic, increase the price of sandwiches.
b. If the demand for sandwiches is elastic, decrease the price of sandwiches
c. If the demand for sandwiches is inelastic, do not change the price of sandwiches
d. If the demand for sandwiches is inelastic, decrease the price of sandwiches.

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