Question

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.

12. Over a longer period of time:

Multiple Choice

a.demand is more elastic since consumers will rarely change consumption habits after a price change.

b.demand is less elastic since consumers will have more time to alter consumption after a price change.

c.demand is more elastic since consumers will have more time to alter consumption after a price change.

d.demand is less elastic since consumers will have less time to alter consumption after a price change.

13. Taxes on goods with ______ demand curves will tend to raise more tax revenue for the government than taxes on goods with ______ demand curves.

Multiple Choice

a.elastic; unit elastic

b.elastic; inelastic

c.inelastic; elastic

d.unit elastic; inelastic

14. Cross-price elasticity of demand for substitutes is a ______ number and is a ______ number for complements.

Multiple Choice

a.positive; positive

b.negative; negative

c.positive; negative

d.negative; positive

15. A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:

Multiple Choice

a.elasticity of demand for soda 0.5 and is inelastic.

b.elasticity of demand for iced tea is 2 and is elastic.

c.cross-price elasticity of demand for soda is -0.5.

d.cross-price elasticity of demand for iced tea is 2.

Answer 1

5.

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.

6.

7.

8.

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

Es = % change in the quantity supplied of good X/ % change in the price of good X

Hence Supply is said to be elastic when the quantity supplied is very responsive to changes in price.

Hence option a is the correct answer.