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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 52
8.
Refer to Figure 52. 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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 Spring '07
 Zirkle
 Economics, Price Elasticity

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