# ECON301: Chapter 3

question
The price elasticity of demand coefficient measures:
answer
buyer responsiveness to price changes.
question
The basic formula for the price elasticity of demand coefficient is:
answer
percentage change in quantity demanded/percentage change in price.
question
The demand for a product is inelastic with respect to price if:
answer
consumers are largely unresponsive to a per unit price change.
question
If the price elasticity of demand for a product is 2.5, then a price cut from \$2.00 to \$1.80 will:
answer
increase the quantity demanded by about 25 percent.
question
Suppose that as the price of Y falls from \$2.00 to \$1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand using the average formula is:
answer
1.37.
question
If the demand for product X is inelastic, a 4 percent increase in the price of X will:
answer
decrease the quantity of X demanded by less than 4 percent.
question
A perfectly inelastic demand schedule:
answer
can be represented by a line parallel to the vertical axis.
question
The larger the coefficient of price elasticity of demand for a product, the:
answer
smaller the resulting price change for an increase in supply.
question
The price elasticity of demand is generally:
answer
negative, but the minus sign is ignored.
question
For a linear demand curve:
answer
demand is elastic at high prices.
question
Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded:
answer
decreased by 7 percent.
question
If a demand for a product is elastic, the value of the price elasticity coefficient is:
answer
greater than one.
question
A perfectly inelastic demand curve:
answer
graphs as a line parallel to the vertical axis.
question
If quantity demanded is completely unresponsive to price changes, demand is:
answer
perfectly inelastic.
question
When the percentage change in price is greater than the resulting percentage change in quantity demanded:
answer
an increase in price will increase total revenue.
question
Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of:
answer
W and Y.
question
If a firm's demand for labor is elastic, a union-negotiated wage increase will:
answer
cause the firm's total payroll to decline.
question
Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:
answer
relatively inelastic.
question
If the price elasticity of demand for a product is unity, a decrease in price will:
answer
increase the quantity demanded, but total revenue will be unchanged.
question
The elasticity of demand for a product is likely to be greater:
answer
the greater the amount of time over which buyers adjust to a price change.
question
The price elasticity of supply measures how:
answer
responsive the quantity supplied of X is to changes in the price of X.
question
Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:
answer
will increase but equilibrium quantity will be unchanged.
question
If the supply of product X is perfectly elastic, an increase in the demand for it will increase:
answer
equilibrium quantity but equilibrium price will be unchanged.
question
A supply curve that is a vertical straight line indicates that:
answer
a change in price will have no effect on the quantity supplied.
question
The supply curve of a one-of-a-kind original painting is:
answer
perfectly inelastic.
question
We would expect the cross elasticity of demand between Pepsi and Coke to be:
answer
positive, indicating substitute goods.
question
The larger the positive cross elasticity coefficient of demand between products X and Y, the:
answer
greater their substitutability.
question
Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
answer
positive and therefore these goods are substitutes.
question
Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
answer
negative and therefore these goods are complements.
1 of 29
question
The price elasticity of demand coefficient measures:
answer
buyer responsiveness to price changes.
question
The basic formula for the price elasticity of demand coefficient is:
answer
percentage change in quantity demanded/percentage change in price.
question
The demand for a product is inelastic with respect to price if:
answer
consumers are largely unresponsive to a per unit price change.
question
If the price elasticity of demand for a product is 2.5, then a price cut from \$2.00 to \$1.80 will:
answer
increase the quantity demanded by about 25 percent.
question
Suppose that as the price of Y falls from \$2.00 to \$1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand using the average formula is:
answer
1.37.
question
If the demand for product X is inelastic, a 4 percent increase in the price of X will:
answer
decrease the quantity of X demanded by less than 4 percent.
question
A perfectly inelastic demand schedule:
answer
can be represented by a line parallel to the vertical axis.
question
The larger the coefficient of price elasticity of demand for a product, the:
answer
smaller the resulting price change for an increase in supply.
question
The price elasticity of demand is generally:
answer
negative, but the minus sign is ignored.
question
For a linear demand curve:
answer
demand is elastic at high prices.
question
Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded:
answer
decreased by 7 percent.
question
If a demand for a product is elastic, the value of the price elasticity coefficient is:
answer
greater than one.
question
A perfectly inelastic demand curve:
answer
graphs as a line parallel to the vertical axis.
question
If quantity demanded is completely unresponsive to price changes, demand is:
answer
perfectly inelastic.
question
When the percentage change in price is greater than the resulting percentage change in quantity demanded:
answer
an increase in price will increase total revenue.
question
Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of:
answer
W and Y.
question
If a firm's demand for labor is elastic, a union-negotiated wage increase will:
answer
cause the firm's total payroll to decline.
question
Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:
answer
relatively inelastic.
question
If the price elasticity of demand for a product is unity, a decrease in price will:
answer
increase the quantity demanded, but total revenue will be unchanged.
question
The elasticity of demand for a product is likely to be greater:
answer
the greater the amount of time over which buyers adjust to a price change.
question
The price elasticity of supply measures how:
answer
responsive the quantity supplied of X is to changes in the price of X.
question
Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:
answer
will increase but equilibrium quantity will be unchanged.
question
If the supply of product X is perfectly elastic, an increase in the demand for it will increase:
answer
equilibrium quantity but equilibrium price will be unchanged.
question
A supply curve that is a vertical straight line indicates that:
answer
a change in price will have no effect on the quantity supplied.
question
The supply curve of a one-of-a-kind original painting is:
answer
perfectly inelastic.
question
We would expect the cross elasticity of demand between Pepsi and Coke to be:
answer
positive, indicating substitute goods.
question
The larger the positive cross elasticity coefficient of demand between products X and Y, the:
answer
greater their substitutability.
question
Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
answer
positive and therefore these goods are substitutes.
question
Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
answer
negative and therefore these goods are complements.