Q: Which formula correctly calculates the price elasticity of demand?

$E_d = \frac{\%\ \text{change in quantity demanded}}{\%\ \text{change in price}}$

Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone when making a decision.

Question 2

Suppose a country can produce either 100 units of wheat or 200 units of corn. If the country decides to produce 50 units of wheat, what is the opportunity cost in terms of corn?

Accepted Answer

100 units of corn

Question 3

Which of the following statements is a positive economic statement?

Accepted Answer

Increasing the minimum wage will lead to higher unemployment among teenagers.

Question 4

If the production possibilities frontier (PPF) is bowed outward, what does this indicate about opportunity costs?

Accepted Answer

Opportunity costs are increasing.

Question 5

A country can produce 10 cars or 20 trucks. Another country can produce 5 cars or 15 trucks. Which country has the absolute advantage in producing cars?

Accepted Answer

The first country

Question 6

Which formula correctly calculates the price elasticity of demand?

Accepted Answer

$E_d = \frac{\%\ 	ext{change in quantity demanded}}{\%\ 	ext{change in price}}$

Question 7

If the price of a normal good increases, what is the expected effect on quantity demanded, according to the law of demand?

Accepted Answer

Quantity demanded will decrease.

Question 8

Which of the following is NOT a determinant of demand?

Accepted Answer

Technology

Question 9

Suppose the price of coffee increases and the demand for tea increases. What does this indicate about the relationship between coffee and tea?

Accepted Answer

They are substitutes.

Question 10

If a decrease in the price of a good leads to a proportionally larger increase in quantity demanded, the demand for the good is:

Accepted Answer

Elastic

Question 11

A shift in the supply curve to the right could be caused by:

Accepted Answer

An improvement in technology

Question 12

Which of the following best describes marginalism in economics?

Accepted Answer

Making decisions based on additional costs and benefits from a small change.

Question 13

If the cross-price elasticity of demand between two goods is negative, what does this imply?

Accepted Answer

The goods are complements.

Question 14

Suppose the price elasticity of supply for a product is $E_s = 0.5$. What does this indicate about the supply?

Accepted Answer

Supply is inelastic.

Question 15

Which of the following would cause a movement along the demand curve, rather than a shift of the curve?

Accepted Answer

A change in the price of the good itself

Question 16

If a good is classified as inferior, what happens to its demand when consumer income increases?

Accepted Answer

Demand decreases.

Question 17

Which of the following is an example of a shortage in a market?

Accepted Answer

Quantity demanded exceeds quantity supplied at the current price.

Question 18

If both demand and supply increase simultaneously, what happens to equilibrium quantity and price?

Accepted Answer

Equilibrium quantity increases, but the effect on price is indeterminate.

Question 19

A bakery finds that when it raises the price of its bread from $\$2$ to $\$2.20$, the quantity demanded falls from 100 loaves to 80 loaves. Calculate the price elasticity of demand using the midpoint formula.

Accepted Answer

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

Question 20

Which of the following is NOT considered a factor of production?

Accepted Answer

Money

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