Question

1.Price elasticity of demand is defined as:

Multiple Choice

a.the slope of the demand curve.

b.the slope of the demand curve divided by the 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.

2. The Midpoint Method for Elasticity uses which of the following?

Multiple Choice

a.Average percentage change in price only

b.Average percentage change in quantity only

c.Average percentage change in both price and quantity

d.Average initial values for both price and quantity

3. Jack Roper’s Barber Shop knows that a 2 percent increase in the price of their haircuts results in a 6 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Jack Roper’s Barber Shop?

Multiple Choice

a.0.15

b.3.0

c.0.10

d.0.05

4. Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo’s demand curve?

Multiple Choice

a.0.235

b.2.00

c.4.25

d.6.33

5. Suppose that Bobo purchases 1 pizza per month when the price is $19 and 3 pizzas per month when the price is $15. What is the price elasticity of Bobo’s demand curve?

Multiple Choice

a.0.235

b.2.00

c.4.25

d.6.33

6. Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi’s demand curve?

Multiple Choice

a.0.1

b.0.8

c.10.0

d.1.0

7. Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi’s demand curve?

Multiple Choice

a.0.1

b.0.8

c.10.0

d.1.0

8. Supply is said to be ______ when the quantity supplied is very responsive to changes in price.

Multiple Choice

a.elastic

b.inelastic

c.unit elastic

d.independent

9.When price increase from $43 to $49, quantity supplied increases from 220 units to 240 units. The price elasticity of supply in this price range is (use the Midpoint Formula):

Multiple Choice

a.0.3

b.0.67

c.1.5

d.3.33

10. When any change in price results in an infinite change in quantity demanded:

Multiple Choice

a.price elasticity of supply is zero.

b.demand is perfectly elastic.

c.demand is perfectly inelastic.

d.price elasticity of supply is infinite.

Answer 1

1.

Since the elasticity of demand can be defined as the measurement of the degree of the responsiveness of the quantity demand due to the change in the price level

Ed = % change in the quantity demand of good X/ % change in the price of good X

Hence option d is the correct answer.

2.

Midpoint formula of price elasticity of demand

Ed= [(Q2-Q1)/Q1] / [P2-P1)/P1]

It means elasticity of demand is the ratio of percentage change in the quantity demand and percentage change in the price.

Hence option c is the correct answer.

3.

Ed=(-6%)/2%

=-3.0

The negative sign only represent the negative relationship between price and quantity demanded.

Hence option b is the correct answer.

4.

P1=19

Q1=1

P2=15

Q2=3

Ed=[(Q2-Q1)/(Q2+Q1)/2] / [(P2-P1)/(P2+P1)/2]

=[(3-1)/(3+1)/2]/ [(15-19)/(19+15)/2)]

=(2/2 ) / (-4/17)

=1/-0.2352

=-4.25

Hence option c is the correct answer.