Micro Chapter 18 Elasticity Practice Problems Key

1. The price elasticity of demand is a measure of the:

A) steepness or slope of a demand curve.
B) absolute changes in quantity demanded and price.
C) responsiveness of quantity demanded to a change in price.
D) sensitivity of the quantity demanded for one good to a change in the price of another good.
Answer: C
. !f the price elasticity of demand for a good is ."#$ the demand for the good can be described as:
A) normal. B) elastic. C) inferior. D) inelastic.
Answer: D
%. &hen the price of a product is increased 1' percent$ the quantity demanded decreases 1# percent. !n this
range of prices$ demand for this product is:
A) elastic. B) inelastic. C) cross(elastic. D) unitary elastic.
Answer: A
). A straight(line do*n*ard(sloping demand curve has a price elasticity of demand *hich:
A) decreases as price decreases. C) is +ero at all prices.
B) increases as price decreases. D) is unitary at all prices.
Answer: A
#. Bloc,-s sells #'' bottles of perfume a month *hen the price is .". A huge increase in resource costs causes
price to rise to ./ and Bloc,-s only manages to sell )0' bottles of perfume. The price elasticity of demand
is:
A) .%% and elastic. B) %.' and elastic. C) .%% and inelastic. D) %.' and inelastic.
Answer: C
0. &hen the price of candy bars increased from ..)# to ..## the quantity demanded changed from 1$''' per
day to 1/$''' per day. !n this range the price elasticity of demand for candy bars is:
A) 1. B) . C) '.. D) '.#.
Answer: D
". !f price declines from .)#' to .%#' and$ as a result$ quantity demanded increases from 1'' to 1#''$ price
elasticity of demand is:
A) 1."1. B) .1/. C) 1.1. D) %.).
Answer: B
1. !f a # percent fall in the price of a product causes the quantity demanded of the product to increase by 1'
percent$ the demand is:
A) inelastic. B) elastic. C) unit elastic. D) perfectly elastic.
Answer: B
/. Demand can be said to be inelastic *hen:
A) an increase in price results in a reduction in total revenue.
B) a reduction in price results in an increase in total revenue.
C) a reduction in price results in a decrease in total revenue.
D) the elasticity coefficient e2ceeds one.
Answer: C
1'. !n *hich instances *ill total revenues decline3
A) 4rice rises and E
d
equals .)1. C) 4rice falls and demand is elastic.
B) 4rice rises and demand is of unit elasticity. D) 4rice rises and E
d
equals .)".
Answer: D