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Topics: Supply and demand, Price elasticity of demand, Consumer theory Pages: 9 (5715 words) Published: October 30, 2014
Elasticity and Its Applications Multiple Choice 1.In general, elasticity is a measure of a.the extent to which advances in technology are adopted by producers. b.the extent to which a market is competitive. c.how fast the price of a good responds to a shift of the supply curve or demand curve. d.how much buyers and sellers respond to changes in market conditions. 2.How does the concept of elasticity allow us to improve upon our understanding of supply and demand a.Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept. b.Elasticity provides us with a better rationale for statements such as an increase in x will lead to a decrease in y than we would have in the absence of the elasticity concept. c.Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage. d.Without elasticity, it is very difficult to assess the degree of competition within a market. 3.The price elasticity of demand measures a.buyers responsiveness to a change in the price of a good. b.the extent to which demand increases as additional buyers enter the market. c.how much more of a good consumers will demand when incomes rise. d.the movement along a supply curve when there is a change in demand. 4.If demand is inelastic, then a.buyers do not respond much to a change in price. b.buyers respond substantially to a change in price, but the response is very slow. c.buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. d.the demand curve is very flat. 5.For a good that is a necessity, a.quantity demanded tends to respond substantially to a change in price. b.demand tends to be inelastic. c.the law of demand often does not apply. 6.Other things equal, the demand for a good tends to be more inelastic, the a.fewer the available substitutes. b.longer the time period considered. c.more the good is considered a luxury good. d.more narrowly defined is the market for the good. 7.Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because a.buyers tend to be much less sensitive to a change in price when given more time to react. b.buyers tend to be much more sensitive to a change in price when given more time to react. c.buyers will have substantially more income over a ten-year period. d.the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline. 8.Economists compute the price elasticity of demand as the a.percentage change in price divided by the percentage change in quantity demanded. b.change in quantity demanded divided by the change in the price. c.percentage change in quantity demanded divided by the percentage change in price. d.percentage change in quantity demanded divided by the percentage change in income. 9.The price elasticity of demand for a good measures the willingness of a.consumers to move away from the good as price rises. b.consumers to avoid monopolistic markets in favor of competitive markets. c.firms to produce more of a good as price rises. d.firms to cater to the tastes of consumers. 10.Suppose the price of Twinkies decreases from 1.45 to 1.25 and, as a result, the quantity of Twinkies demanded increases from 2,000 to 2,200. Using the midpoint method, the price elasticity of demand for Twinkies in the given price range is a.2.00. b.1.55. c.1.00. d.0.64. 11.Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 1.5. Which of the following events is consistent with a 3.5 percent increase in the price of the good a.The quantity of the good demanded decreases from 25,294 to 24,000. b.The quantity of the good demanded decreases from 50,000 to 48,847. c.The quantity of the...
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