5 Ch - Revision Questions
DL-S 06/11/09
1. If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is: a. price inelastic b. price elastic c. unit price elastic d. income elastic e. income inelastic 2. The price elasticity of demand is defined as: a. the percentage change in the price of a good divided by the percentage change in the quantity demanded of the good. b. the percentage change in income divided by the percentage change in the quantity demanded. c. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good. d. the percentage change in the quantity demanded divided by the percentage change in income. 3. In general, a flatter demand curve is more likely to be: a. price inelastic b. price elastic c. unit price elastic d. none of the above 4. In general, a steeper supply curve is more likely to be: a. price inelastic b. price elastic c. unit price elastic d. none of the above 5. Which of the following would cause a demand curve for a good to be price inelastic? a. there are a great number of substitutes for the good. b. the good is inferior. c. the good is a luxury. d. the good is a necessity.
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6. The demand for which of the following is likely to be the most price inelastic? a. airline tickets b. bus tickets c. taxi rides d. transportation 7. If consumers think that there are very few substitutes for a good, then: a. supply would tend to be price elastic. b. supply would tend to be price inelastic. c. demand would tend to be price elastic. d. would demand tend to be price inelastic. 8. If a supply curve for a good is price elastic, then: a. the quantity supplied is sensitive to changes in the price of that good. b. the quantity supplied is insensitive to changes in the price of that good. c. the quantity demanded is sensitive to changes in the price of that good. d. the quantity demanded is insensitive to changes in the price of that good. 9. If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught the fisherman's price elasticity of supply for fresh fish is: a. zero b. one c. infinity d. none of the above 10. If supply is price inelastic, the value of the price elasticity of supply must be: a. zero b. less than 1 c. greater than 1 d. infinity 11. If demand is linear (a straight line), then price elasticity of demand is: a. constant along the demand curve. b. inelastic in the upper portion and elastic in the lower portion. c. elastic in the upper portion and inelastic in the lower portion. d. elastic throughout. 12. If the income elasticity of demand for a good is negative, it must be: a. a luxury good. b. a normal good. c. an inferior good. d. an elastic good.
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Use the following information to answer the question below. Suppose that at a price of Dhs 30 per month, there are 30,000 subscribers to E-Vision (cable TV) in Fujairah. If the price was to rise to Dhs 40 per month, the number of subscribers will fall to 20,000. 13. What is the price elasticity of demand for E-Vision in Fujairah? a. 0.66 b. 0.75 c. 1.0 d. 1.4 e. 2.0 .......................
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