# Exercise 6 Solution

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• Published : April 20, 2013

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Exercise 6 Solution
Chapter 6 Elasticity: The Responsiveness of Demand and Supply

6.1 The Price Elasticity of Demand and Its Measurement

1) Price elasticity of demand measures
A) how responsive suppliers are to price changes.
B) how responsive sales are to changes in the price of a related good.
C) how responsive quantity demanded is to a change in price.
D) how responsive sales are to a change in buyers' incomes.
Comment: Recurring
Diff: 1Page Ref: 168-169/168-169
Topic: Price Elasticity of Demand
Objective: LO1: Define price elasticity of demand and understand how to measure it.
AACSB: Reflective Thinking
Special Feature: None

2) If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded
A) will increase by 45 percent.
B) will increase by 5 percent.
C) will decrease by 45 percent.
D) will decrease by 5 percent.
Comment: Recurring
Diff: 2Page Ref: 168-169/168-169
Topic: Price Elasticity of Demand
Objective: LO1: Define price elasticity of demand and understand how to measure it.
AACSB: Analytic Skills
Special Feature: None

3) If demand is inelastic, the absolute value of the price elasticity of demand is
A) one.
B) less than one.
C) greater than one.
D) greater than the absolute value of the slope of the demand curve.
Comment: Recurring
Diff: 1Page Ref: 169/169
Topic: Elastic and Inelastic Demand
Objective: LO1: Define price elasticity of demand and understand how to measure it.
AACSB: Reflective Thinking
Special Feature: None

4) If demand is perfectly inelastic, the absolute value of the price elasticity of demand is
A) zero.
B) less than one.
C) more than one.
D) equal to the absolute value of the slope of the demand curve.
Comment: Recurring
Diff: 1Page Ref: 172/172
Topic: Perfectly Inelastic Demand
Objective: LO1: Define price elasticity of demand and understand how to measure it.
AACSB: Reflective Thinking
Special Feature: None

5) Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?

A) It is elastic.
B) It is perfectly elastic.
C) It is perfectly inelastic.
D) The price elasticity coefficient is 0.
Comment: Recurring
Diff: 1Page Ref: 172/172
Topic: Perfectly Inelastic Demand
Objective: LO1: Define price elasticity of demand and understand how to measure it.
AACSB: Reflective Thinking
Special Feature: None

Figure 6-1

6) Refer to Figure 6-1. The demand curve on which elasticity changes at every point is given in
A) Panel A.
B) Panel B.
C) Panel C.
D) none of the above graphs.
Comment: Recurring
Diff: 1Page Ref: 169/169
Topic: Elastic and Inelastic Demand
Skill: Graphing
Objective: LO1: Define price elasticity of demand and understand how to measure it.
AACSB: Reflective Thinking
Special Feature: None
7) Refer to Figure 6-1. A perfectly elastic demand curve is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.
Comment: Recurring
Diff: 1Page Ref: 172/172
Topic: Perfectly Elastic Demand
Skill: Graphing
Objective: LO1: Define price elasticity of demand and understand how to measure it.
AACSB: Reflective Thinking
Special Feature: None

8) Refer to Figure 6-1. A perfectly inelastic demand curve is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.