Multiple Choice Questions:
1. Price elasticity of demand is defined as the _____________ change in quantity demanded divided by the _____________ change in price.
a. Total; percentage
b. Percentage; marginal
c. Marginal; percentage
d. Percentage; percentage
e. Total; total
2. Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.
a. Independent
b. Inelastic
c. Unit elastic
d. Elastic
3. For a given decrease in price, the greater the elasticity of demand, the greater the resulting
a. Increase in quantity demanded.
b. Increase in demand.
c. Decrease in quantity demanded.
d. Decrease in demand.
4. When demand is inelastic,
a. Price elasticity of demand is less than 1.
b. Consumers are not very responsive to changes in price.
c. The percentage change in quantity demanded resulting from a price change is less than the percentage change in price.
d. All of the above are correct.
5. Using the midpoint formula for the elasticity of demand, if a price increase from $57 to $63 reduces quantity demanded from 66 units to 54 units, the elasticity of demand
a. Equals 0.5.
b. Equals 1.
c. Equals 2.
d. Cannot be determined from the information given.
6. Which of the following will not tend to increase the elasticity of demand for a good?
a. An increase in the availability of close substitutes
b. An increase in the amount of time people have to adjust to a change in the price
c. An increase in the proportion of income spent on the good
d. All of the above will increase the elasticity of demand for a good
7. Which of the following would tend to have the most elastic demand curve?
a. Automobiles
b. Chevrolet automobiles
c. A and b would be the same
d. None of the above
8. Iron Mike’s steel mill finds that a 10 percent increase in its price leads to a 14 percent decrease in the quantity it is able to sell. The demand curve for the mill’s output is
a. Elastic.
b. Inelastic.
c. Unit elastic.
d. Perfectly elastic.