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1
The formula for calculating price elasticity of demand is:
A)
the change in quantity demanded divided by the change in price.
B)
the percentage change in quantity demanded divided by percentage change in price.
C)
the change in price divided by the change in quantity.
D)
the percentage change in price divided by the percentage change in quantity.
2
A price elasticity of demand for a good or service of 2.5 tells us that:
A)
the price changes by $2.50 when quantity changes by one unit.
B)
quantity demanded decreases by 2.5% when price rises by 1%.
C)
the price rises by 2.5% when quantity demanded falls by 1%.
D)
quantity demanded falls by 2.5 units when price changes by $1.
3
An elasticity of supply of 4.5 means that:
A)
supply is inelastic.
B)
quantity supplied changes 4.5 units for each 1% change in price.
C)
quantity supplied changes 4.5% for each 1% change in price.
D)
price changes by 4.5% for each 1% change in quantity supplied.
4
If quantity demanded remains the same when the price changes, the demand:
A)
is elastic.
B)
is inelastic.
C)
has unit elasticity.
D)
is perfectly inelastic.
5
Price elasticity of demand for restaurant meals is 2.27. If the price of restaurant meals rises, expenditure on restaurant meals will:
A)
fall.
B)
rise.
C)
not change.
D)
either rise or fall, depending on how much demand shifts.
6
The supply curve is likely to be most elastic over what time period?
A)
One month.
B)
One year.
C)
Ten years.
D)
One-hundred years.
7
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Refer to the graph above. When price increases from $5 to $10, total revenue:
A)
increases from $300 to $400.
B)
increases from $150 to $200.
C)
decreases from $400 to $300.
D)
decreases from $250 to $200.
8
Income elasticity is _______ for necessities.
A)
positive.
B)
greater than 1.
C)
negative.
D)
between 0 and 1.
9
Income elasticity is ________ for luxuries.
A)
positive but less than one
B)
greater than 1.
C)
negative.
D)
equal to 1.
10
It is estimated that a 6% drop in the price of Asian and European autos will decrease the demand for American cars by 1.68%. From this information one can conclude that:
A)
The income elasticity of demand for European cars is less than one.
B)
European and Asian cars are necessities.
C)
European and Asian and American cars are substitutes.
D)
European and Asian and American cars are complements.