Question 1

Suppose the price of a product increases from $$50 to 53$$, and as a result, the quantity demanded falls from 250 units to 230 units. Using the midpoint method, what is the price elasticity of demand?

Accepted Answer

$$1.7$$

Question 2

If a good is considered a necessity, what would you expect about the price elasticity of demand for that good?

Accepted Answer

It is likely to be inelastic

Question 3

Which of the following best describes the slope of a perfectly elastic demand curve?

Accepted Answer

Horizontal

Question 4

If the demand for a good is inelastic, what will happen to total revenue if the price increases?

Accepted Answer

Total revenue will increase

Question 5

Suppose the cross-price elasticity of demand between two goods is positive. What does this indicate about the relationship between the two goods?

Accepted Answer

They are substitutes

Question 6

A decrease in supply will cause the largest increase in price when:

Accepted Answer

Demand is inelastic and supply is elastic

Question 7

If the income elasticity of demand for bus rides is $$-0.5$$, what does this imply about bus rides?

Accepted Answer

Bus rides are an inferior good

Question 8

Suppose the price elasticity of demand for a product is $$0.8. If $$the firm wants to increase its total revenue, what should it do?

Accepted Answer

Increase the price

Question 9

Which of the following statements about elasticity is correct?

Accepted Answer

The more substitutes a good has, the more elastic its demand

Question 10

If the price elasticity of demand for a good is $$1.2$$, what does this mean?

Accepted Answer

Demand is elastic

Question 11

Suppose a government legalizes marijuana, causing a significant increase in supply. If the demand for marijuana is price inelastic, what is the likely effect on total revenue for marijuana sellers?

Accepted Answer

Total revenue will decrease

Question 12

If the demand for a good is perfectly inelastic, what is the value of the price elasticity of demand?

Accepted Answer

$$0$$

Question 13

Which of the following would make the demand for a good more elastic?

Accepted Answer

The good has many close substitutes

Question 14

Suppose the price of bubble gum falls from $$0.50 to 0.40$$, and the quantity demanded increases from 400 to 600 packs per day. Using the midpoint method, what is the price elasticity of demand?

Accepted Answer

$$2.5$$

Question 15

If the income elasticity of demand for concert tickets is $$1.5$$, what does this imply about concert tickets?

Accepted Answer

Concert tickets are a luxury good

Question 16

If the price elasticity of demand for a good is $$0.5$$, and the price increases by 10%, what will happen to the quantity demanded?

Accepted Answer

It will decrease by 5%

Question 17

Which of the following best explains why the demand for gasoline is more elastic in the long run than in the short run?

Accepted Answer

Consumers have more time to find alternatives and adjust their behavior

Question 18

If the price elasticity of demand for a good is $$1$$, what does this mean about total revenue when the price changes?

Accepted Answer

Total revenue remains unchanged

Question 19

Suppose a new technology increases the supply of wheat, and the demand for wheat is inelastic. What is the likely effect on farmers' total revenue?

Accepted Answer

Total revenue will decrease

Question 20

If the price elasticity of demand for a good is $$0$$, which of the following is true?

Accepted Answer

Quantity demanded does not change as price changes

Weekly Assignment 3 Microeconomics Study Guide: Price Elasticity of Demand and Related Concepts

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