Question 1

The price of wheat is $$1.00 per bushel, and the price elasticity of demand for wheat is -0.50$. If a bad harvest causes the price of wheat to rise by 20$$\%$, what is the percentage change in quantity demanded for wheat?

Accepted Answer

$$-10\%$$

Question 2

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

Accepted Answer

A luxury good

Question 3

If the cross-price elasticity of demand between two products is $$-3.0$$, what does this indicate about the relationship between the two products?

Accepted Answer

They are strong complements

Question 4

Suppose the price elasticity of supply for a product is $$0.4. If $$the price increases by $$20\%$$, by what percentage will the quantity supplied change?

Accepted Answer

$$8\%$$

Question 5

If the price elasticity of demand for a product is perfectly inelastic, what does the demand curve look like?

Accepted Answer

A vertical line

Question 6

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

Accepted Answer

An inferior good

Question 7

If the cross-price elasticity of demand for two goods is zero, what does this imply about the goods?

Accepted Answer

They are unrelated

Question 8

When the elasticity of demand for a product is greater than the elasticity of supply, who bears more of the tax burden?

Accepted Answer

Producers

Question 9

If a $$20\%$$ increase in the price of Red Bull energy drinks results in a decrease in quantity demanded of $$25\%$$, what is the price elasticity of demand for Red Bull?

Accepted Answer

$$-1.25$$

Question 10

Which of the following goods is most likely to be highly income elastic?

Accepted Answer

Luxury cars

Question 11

If the supply of Good B is perfectly elastic and price falls, what happens to the quantity supplied?

Accepted Answer

It falls to zero

Question 12

The price elasticity of supply always has which of the following characteristics?

Accepted Answer

It is positive

Question 13

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

Accepted Answer

The law of supply

Question 14

Consumers with what type of demand will be willing to pay more for a good or service?

Accepted Answer

Inelastic demand

Question 15

If the elasticity of cigarette demand for teenagers is about $$1.3$$, and the government wants to reduce smoking by $$60\%$$, by what percentage should the price of cigarettes increase?

Accepted Answer

$$46.15\%$$

Question 16

An increase in the price of a substitute for iPads will lead to what change in the quantity demanded of iPads, and what will the cross-price elasticity of demand be?

Accepted Answer

Increase; positive

Question 17

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

Accepted Answer

Greater

Question 18

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

Accepted Answer

Highly inelastic

Question 19

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

Accepted Answer

Percentage changes

Question 20

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

Elasticity in Macroeconomics: Concepts, Applications, and Calculations

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