Question 1

Suppose the government imposes a price ceiling on apartment rents that is set below the equilibrium price. Which of the following is a likely consequence?

Accepted Answer

A shortage of apartments in the market.

Question 2

If the price elasticity of demand for a product is $-2$, what does this mean?

Accepted Answer

A 1 percent increase in price causes quantity demanded to decrease by 2 percent.

Question 3

A perfectly inelastic demand curve is represented by which of the following?

Accepted Answer

A vertical line.

Question 4

If the absolute value of the price elasticity of demand for beef is $0.5$, what will happen to the quantity demanded if the price of beef increases by $20\%$?

Accepted Answer

Quantity demanded will decrease by $10\%$.

Question 5

Which of the following best describes a price floor?

Accepted Answer

A legally determined minimum price that sellers may receive.

Question 6

If the demand for a lifesaving drug is perfectly inelastic and the price doubles, what happens to the quantity demanded?

Accepted Answer

It remains constant.

Question 7

The price elasticity of demand is calculated as:

Accepted Answer

The percentage change in quantity demanded divided by the percentage change in price.

Question 8

If the price elasticity of demand for aspirin is $0.8$ in absolute value, what does this indicate?

Accepted Answer

The demand for aspirin is inelastic.

Question 9

When the price of tortilla chips rises by $10\%$ and the quantity demanded falls by $4\%$, the demand for tortilla chips is:

Accepted Answer

Inelastic.

Question 10

If the percentage change in the quantity demanded of teapots is greater than the percentage change in the price of teapots, then:

Accepted Answer

The price elasticity of demand for teapots is greater than $1$ in absolute value.

Question 11

Which of the following is most likely to have the most elastic demand?

Accepted Answer

A brand of bottled water.

Question 12

If the price elasticity of demand for Stork ice cream is $-2.5$ and quantity demanded fell by $10\%$, what was the percentage change in price?

Accepted Answer

$2.5\%$

Question 13

Which factor is most likely to make the demand for a good more inelastic?

Accepted Answer

The good is considered a necessity with no close substitutes.

Question 14

If the percentage increase in price is $15\%$ and the value of the price elasticity of demand is $-0.3$, then quantity demanded:

Accepted Answer

Will decrease by $5\%$.

Question 15

Which of the following is the best example of a good with perfectly inelastic demand?

Accepted Answer

A diabetic's demand for insulin.

Question 16

If the demand for a product is elastic, which of the following is true?

Accepted Answer

The percentage change in quantity demanded is greater than the percentage change in price (in absolute value).

Question 17

Which of the following could explain why the demand for table salt is inelastic?

Accepted Answer

Households devote a very small portion of their income to salt purchases.

Question 18

If the absolute value of the price elasticity of demand is $1$, the demand is:

Accepted Answer

Unit elastic.

Question 19

Which of the following statements about price ceilings is correct?

Accepted Answer

A price ceiling is a legally determined maximum price that sellers may charge.

Question 20

If the demand for cell phone service is inelastic, then:

Accepted Answer

The percentage change in quantity demanded is less than the percentage change in price (in absolute value).

Price Controls and Elasticity in Microeconomics: Study Notes

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