Problem%20Set%20Chp.5

# Problem%20Set%20Chp.5 - Problem Set Chp.5 Elasticity...

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Problem Set Chp.5: Elasticity MULTIPLE CHOICE: Choose the one alternative that best completes the statement or answers the question. 1. The price elasticity of demand measures A. a buyer’s responsiveness to a change in the price of a good. B. the increase in demand as additional buyers enter the market. C. how much more of a good consumers will demand when incomes rise. D. the increase in demand that will occur from a change in the price of related goods. 2. Economists compute the price elasticity of demand as the A. percentage change in the price divided by the percentage change in quantity demanded. B. change in quantity demanded divided by the change in the price. C. percentage change in the quantity demanded divided by the percentage change in price. D. percentage change in the quantity demanded divided by the percentage change in income. 3. The price elasticity of demand for a good measures how willing A. consumers are to move away from the good as price rises. B. firms are to produce more of a good as price rises. C. consumers are to buy more of a good as price rises. D. firms are to produce more of a good as price falls. 4. The midpoint method is used to compute elasticity because it A. automatically computes a positive number instead of a negative number. B. uses the same equation that is used to compute slope. C. gives the same answer regardless of the direction of price change. D. automatically rounds quantities to the nearest whole unit. 5. The difference between slope and elasticity is that A. slope measures actual changes and elasticity measures percentage changes. B. slope measures percentage changes and elasticity measures actual changes. C. slope measures changes in quantity demanded more accurately than elasticity. D. there is no difference between slope and elasticity calculations. 1

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When the price of bubble gum is \$0.50, the quantity demanded is 400 packs per day. When the price falls to \$0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, you know that the demand for bubble gum is A. inelastic. B. elastic. C. unit elastic. D. perfectly inelastic. 7. If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price would result in a A. 4.0 percent decrease in the quantity demanded. B. 10 percent decrease in the quantity demanded. C. 40 percent decrease in the quantity demanded. D. 400 percent decrease in the quantity demanded. Figure 5-2 8. Refer to Figure 5-2. The value of price elasticity of demand from point A to point B, using the midpoint method would be A. 1. B. 1.5. C. 2. D. 2.5. 9. The government wants to reduce the consumption of electricity by 5%. The price elasticity of demand for electricity is 4. The government should _______ the price of electricity by ______. A.
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## This homework help was uploaded on 04/06/2008 for the course ECON 2005 taught by Professor Zirkle during the Spring '07 term at Virginia Tech.

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Problem%20Set%20Chp.5 - Problem Set Chp.5 Elasticity...

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