Question 1

The price of wheat rises by 20%. If the price elasticity of demand for wheat is 0.50, what is the percentage change in quantity demanded for wheat?

Accepted Answer

$$-10\%$$

Question 2

If the income elasticity of demand for peanut butter is $$-3$$, what type of good is peanut butter?

Accepted Answer

An inferior good

Question 3

If the cross-price elasticity of demand between two products is $$-3.0$$, then the two products are:

Accepted Answer

Complements

Question 4

If the price elasticity of supply is $$0.4$$, then a $$20\%$$ increase in price will change the quantity supplied by:

Accepted Answer

$$8\%$$

Question 5

A perfectly inelastic supply curve is:

Accepted Answer

Vertical

Question 6

If the supply of Good B is perfectly elastic and price falls, the quantity supplied will:

Accepted Answer

Fall to zero

Question 7

When the elasticity of demand for a product is less than the elasticity of supply, consumers pay ________ of the tax on the product.

Accepted Answer

A smaller share

Question 8

If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in quantity demanded of 25 percent, the price elasticity of demand is:

Accepted Answer

$$-1.25$$

Question 9

The disappearance of the family farm can be partially attributed to the fact that the elasticity of demand for wheat is ________, while the income elasticity for wheat is ________.

Accepted Answer

Low; low

Question 10

If the income elasticity of SUVs is greater than 1, what is the good considered?

Accepted Answer

A luxury good

Question 11

The price elasticity of supply always has a:

Accepted Answer

Positive value

Question 12

If prices rise, the quantity supplied will be greater. This is an example of:

Accepted Answer

The law of supply

Question 13

Consumers with ________ demand will be willing to pay more for a good or service.

Accepted Answer

Inelastic

Question 14

The ________ is a measure of responsiveness of the change in quantity demanded of a good to the change in its price.

Accepted Answer

Price elasticity of demand

Question 15

An increase in the price of a substitute for iPads will lead to ________ in the quantity demanded of iPads, so the cross-price elasticity of demand will be ________.

Accepted Answer

An increase; positive

Question 16

The more substitutes that exist for a particular product, the ________ the price elasticity of demand.

Accepted Answer

Greater

Question 17

At current prices of a highly addictive drug, the demand for the drug is highly price:

Accepted Answer

Inelastic

Question 18

Along a linear demand curve, the slope ________ while the price elasticity of demand ________.

Accepted Answer

Is constant; changes

Question 19

When you compute a price elasticity of demand, the answer is always:

Accepted Answer

Negative

Question 20

Economists avoid confusion over units in the computation of elasticity by using:

Accepted Answer

Percentages

Elasticity in Macroeconomics: Price, Income, and Cross-Price Elasticity

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