Question 1

The current price of wheat is $1.00 per bushel, and the price elasticity of demand for wheat is known to be 0.50. If a bad harvest causes the supply of wheat to decrease and as a result the price of wheat rises by 20%, what will be the percentage change in quantity demanded for wheat?

Accepted Answer

$$-10\%$$

Question 2

If the price elasticity of demand for wheat is $$0.5$$ and the price increases by $$20\%$$, what will happen to total farm revenue?

Accepted Answer

Total revenue will increase because demand is inelastic.

Question 3

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 4

What is the cross-price elasticity of demand for two goods that are unrelated?

Accepted Answer

$$0$$

Question 5

If prices rise, the quantity supplied will be greater:

Accepted Answer

if the supply curve is upward sloping

Question 6

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

Accepted Answer

inelastic

Question 7

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

Accepted Answer

fall to zero

Question 8

The price elasticity of supply always has a:

Accepted Answer

positive value

Question 9

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

Accepted Answer

less than; less

Question 10

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 for Red Bull is:

Accepted Answer

$$-1.25$$

Question 11

Which of the following goods is probably the most highly income elastic?

Accepted Answer

Luxury cars

Question 12

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

Accepted Answer

A luxury good

Question 13

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

Accepted Answer

complements

Question 14

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

Accepted Answer

increase; $$8$$

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

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 19

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

Accepted Answer

Inferior good

Question 20

A perfectly inelastic supply curve is:

Accepted Answer

vertical

Elasticity in Macroeconomics: Concepts, Applications, and Calculations

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