Question 1

A grocery store increases the price of ground beef from $$2.00/lb to 2.20/lb$$, and sales drop from 100 lbs/day to 80 lbs/day. Using the arc elasticity formula, what is the own-price elasticity of demand for ground beef?

Accepted Answer

$$\frac{(80-100)}{(80+100)/2} \div \frac{(2.20-2.00)}{(2.20+2.00)/2}$$

Question 2

If the own-price elasticity of demand for rice is $$-0.1467$$, what happens to the quantity demanded if the price of rice drops by 10%?

Accepted Answer

Quantity demanded increases by 1.467%

Question 3

Which of the following best describes a good with an income elasticity less than zero?

Accepted Answer

Inferior good

Question 4

The Dixie Chicken sells 1,500 platters at $$3.50 each. The own-price elasticity is -0.30$. If the price rises to 4.00$, what is the expected new quantity sold?

Accepted Answer

1,440 platters

Question 5

If the cross-price elasticity of demand for hamburger with respect to the price of hamburger buns is $$-0.60$$, what does this indicate about the relationship between these products?

Accepted Answer

They are complements

Question 6

Suppose the price flexibility of demand for a product is $$-4.0. If $$supply increases by 2%, what is the expected percentage change in price?

Accepted Answer

$$-8\%$$

Question 7

Which formula correctly represents the income elasticity of demand using the arc elasticity approach?

Accepted Answer

$$\frac{Q_2$-Q_1$}{(Q_2$+Q_1$)/2} \div \frac{I_2$-I_1$}{(I_2$+I_1$)/2}$$

Question 8

If the cross-price elasticity between Pepsi and Coca Cola is $$0.7$$, and the price of Coca Cola rises by 5%, what is the expected percentage change in Pepsi sales?

Accepted Answer

Increase by 3.5%

Question 9

A product has an own-price elasticity of $$-0.25. $$What is its price flexibility?

Accepted Answer

$$-4.0$$

Question 10

If a good has an income elasticity of $$0.3645$$ and consumer income rises by 5%, what is the expected percentage change in quantity demanded?

Accepted Answer

Increase by 1.8%

Question 11

Which of the following is true for a perfectly inelastic demand curve?

Accepted Answer

Quantity demanded does not change as price changes

Question 12

If the own-price elasticity of demand for wheat is $$-0.1092$$, what does this imply about the demand for wheat?

Accepted Answer

Demand is inelastic

Question 13

A retailer sells 2,000 platters at $$3.50 each. The own-price elasticity is -1.25$. If the price rises to 4.10$, what is the expected new quantity sold?

Accepted Answer

1,575 platters

Question 14

Which of the following best describes a normal good?

Accepted Answer

A good with positive income elasticity

Question 15

If the cross-price elasticity between two goods is positive, what does this indicate?

Accepted Answer

The goods are substitutes

Question 16

Which market is riskier for producers: elastic or inelastic demand?

Accepted Answer

Elastic demand

Question 17

If a government subsidy increases supply in a market with inelastic demand, what is the likely effect on producer revenue?

Accepted Answer

Producer revenue decreases

Question 18

Which formula represents the arc cross-price elasticity of demand?

Accepted Answer

$$\frac{Q_2$-Q_1$}{(Q_2$+Q_1$)/2} \div \frac{P_2$-P_1$}{(P_2$+P_1$)/2}$$

Question 19

If a product has an own-price elasticity of $$-1$$, what happens to total revenue when price changes?

Accepted Answer

Total revenue remains unchanged

Question 20

Which of the following causes a movement along the demand curve?

Accepted Answer

A change in the price of the good itself

Measurement and Interpretation of Elasticities in Agricultural Economics

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