Question 1

Suppose the demand for a good is given by $$D = 20 - 2p. $$Calculate the own-price elasticity of demand as the price increases from $$p = 1 to$$ $$p = 3. $$Which of the following is closest to the average elasticity over this range?

Accepted Answer

$$-0.67$$

Question 2

A perfectly vertical demand curve implies that the own-price elasticity of demand is:

Accepted Answer

Zero

Question 3

If the demand curve for a good is $$D = 240 - 20p$$ and the supply curve is $$S = 20p$$, what is the own-price elasticity of demand when the price increases from $$p = 6 to$$ $$p = 8$$?

Accepted Answer

$$-0.75$$

Question 4

With a downward-sloping straight-line demand curve, price elasticity of demand is:

Accepted Answer

Increasing to the midpoint of the curve and then decreasing

Question 5

The demand curve for a good is $$D = 160 - 2p. At $$what price are total expenditures (i.e., $$E = p 	imes Q) $$maximized?

Accepted Answer

$$40$$

Question 6

Suppose the supply curve for a product is $$S = 2p - 40$$ and the demand curve is $$D = 40 - 2p + m$$, where $$m is $$income. If income increases from $$m = 40 to$$ $$m = 80$$, what is the income elasticity of demand at the original equilibrium price?

Accepted Answer

$$1.0$$

Question 7

The income elasticity of demand for a necessity good is:

Accepted Answer

Less than 1

Question 8

If the price of good X rises from $$10 to$$ $$15$$, the quantity demanded for good X decreases from $$50 to$$ $$45$$ and the demand for good Y increases from $$80 to$$ $$120. $$What is the cross-price elasticity of demand for good Y?

Accepted Answer

$$2.0$$

Question 9

When sellers expect the price to fall, the supply curve will shift _____ and the elasticity of supply will _____.

Accepted Answer

Left; decrease

Question 10

The incidence of a per-unit subsidy is least favourable for buyers when supply is _____ and demand is _____.

Accepted Answer

Inelastic; elastic

Question 11

Consumers will bear a larger burden of an excise tax if:

Accepted Answer

Demand is relatively inelastic, and supply is relatively elastic

Question 12

Suppose the market supply curve for some good is upward sloping. If the imposition of an excise tax causes no change in the equilibrium quantity sold in the market, the good's demand curve must be:

Accepted Answer

Vertical

Question 13

If the own-price elasticity of demand for a good is $$-0.5$$, and the own-price elasticity of supply is $$2.0$$, who bears the greater burden of a per-unit tax imposed on the good?

Accepted Answer

Consumers

Question 14

If the price elasticity of demand is greater than 1, a decrease in price will:

Accepted Answer

Increase total revenue

Question 15

Good W has an income elasticity of $$-2.0. $$Good X has an income elasticity of $$0. $$Good Y has an income elasticity of $$0.6. $$Good Z has an income elasticity of $$1.0. $$Which good is a necessity?

Accepted Answer

Good Y

Question 16

If the supply curve is perfectly horizontal, the own-price elasticity of supply is:

Accepted Answer

Infinity

Question 17

Suppose the demand curve is $$D = 12 - 2p$$ and the supply curve is $$S = 2p. If $$the government introduces a $$t = 2$$ per-unit tax, who bears the greater incidence of the tax?

Accepted Answer

Consumers

Question 18

The revenue associated with a per-unit tax will be the biggest when:

Accepted Answer

Both supply and demand are highly inelastic

Question 19

If the cross-price elasticity of demand between two goods is positive, the goods are:

Accepted Answer

Substitutes

Question 20

If the own-price elasticity of demand for a good is $$-1$$, and the own-price elasticity of supply is $$1$$, what fraction of a per-unit tax will be borne by consumers?

Accepted Answer

$$0.5$$

Microeconomics Study Guide: Elasticity, Supply & Demand, and Incidence

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