Question 1

You have found data that indicates that the income elasticity of demand for generic (unbranded)  shampoo is -0.7. You should conclude that generic shampoo:

Accepted Answer

A)  is a normal good.
B)  has inelastic demand.
C)  is below its equilibrium price.
D)  is an inferior good.E) A) and B)
F) All of the above

Question 2

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is

Accepted Answer

A)  elastic.
B)  perfectly inelastic.
C)  unit elastic.
D)  perfectly elastic.E) A) and C)
F) C) and D)

Question 3

If most consumer goods and services are ______, then most income elasticities are ______.

Accepted Answer

A)  normal; negative
B)  inferior; positive
C)  normal; greater than one
D)  normal; positiveE) All of the above
F) A) and B)

Question 4

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50:

Accepted Answer

A)  total expenditure would increase.
B)  total expenditure would stay the same.
C)  total expenditure would decrease.
D)  the change in total expenditure, if any, would depend on the supply curve.E) All of the above
F) B) and D)

Question 5

In 1985 a desert community stopped pumping water from a 1000 foot well because it had run dry. In 2005 the price of water doubled. The community then drilled the well deeper and started pumping again. In this community,

Accepted Answer

A)  the supply of water is perfectly inelastic because it is a finite resource.
B)  water production is characterized by increasing opportunity costs.
C)  markets cannot reach equilibrium because there is a persistent shortage of water.
D)  higher water prices can reduce quantity demanded but cannot increase quantity supplied.E) None of the above
F) B) and C)

Question 6

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

Accepted Answer

A)  the demand for Taylor's earrings at the original price was elastic.
B)  there are many other boutiques competing with Taylor.
C)  there was excess demand for earrings at the original price.
D)  the demand for Taylor's earrings at the original price was inelastic.E) B) and D)
F) A) and D)

Question 7

On a given linear demand curve, as price increases demand becomes ______

Accepted Answer

A)  more elastic.
B)  less elastic.
C)  more negative.
D)  more variable.E) A) and B)
F) A) and C)

Question 8

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

Accepted Answer

A)  elastic.
B)  inelastic.
C)  unit elastic.
D)  perfectly inelastic.E) None of the above
F) A) and B)

Exam 4: Elasticity

If most consumer goods and services are , then most income elasticities are .

Correct Answer
verified

On a given linear demand curve, as price increases demand becomes ______

Correct Answer
verified

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50:

Correct Answer
verified

You have found data that indicates that the income elasticity of demand for generic (unbranded) shampoo is -0.7. You should conclude that generic shampoo:

Correct Answer
verified

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

Correct Answer
verified

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is

Correct Answer
verified

In 1985 a desert community stopped pumping water from a 1000 foot well because it had run dry. In 2005 the price of water doubled. The community then drilled the well deeper and started pumping again. In this community,

Correct Answer
verified

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

Correct Answer
verified

Exam 4: Elasticity

If most consumer goods and services are ______, then most income elasticities are ______.

Correct AnswerverifiedShow Answer

On a given linear demand curve, as price increases demand becomes ______

Correct AnswerverifiedShow Answer

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50:

Correct AnswerverifiedShow Answer

You have found data that indicates that the income elasticity of demand for generic (unbranded) shampoo is -0.7. You should conclude that generic shampoo:

Correct AnswerverifiedShow Answer

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

Correct AnswerverifiedShow Answer

The price elasticity of supply for the Hope Diamond is zero because there is only one. Therefore, the supply curve for the Hope Diamond is

Correct AnswerverifiedShow Answer

In 1985 a desert community stopped pumping water from a 1000 foot well because it had run dry. In 2005 the price of water doubled. The community then drilled the well deeper and started pumping again. In this community,

Correct AnswerverifiedShow Answer

When Taylor raised the price of earrings at Taylor's Boutique, her total revenue from selling earrings increased. This suggests that:

Correct AnswerverifiedShow Answer

If most consumer goods and services are , then most income elasticities are .

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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