ECONOMICS 202  EXAM 2A  FALL 2010
1. Last month a firm raised the price of its product from $8 to $12 and as a result the quantity sold fell from
100 to 60.
Between $8 and $12 E
D
 is estimated at (use the midpoints formula):
a. 0.8;
b. 1.25;
c. 1.33;
d. 2.0;
e. none above.
2. If you know that E
D
 = 3.0, and you know that the price rose by 8 percent, you know that the percentage
change in quantity was ____ and quantity must have ____.
a. 24, fallen;
b. 24, risen;
c. 0.33, fallen;
d. 0.33, risen;
e. none above
3. Price elasticity of demand:
a. is a measure of how sensitive consumers are to a change in price, c.p.
b. tells us how products are related to each other in terms of substitutes or complements.
c. tells us how goods are related in production
d. helps us to determine whether the good in question is a necessity or a luxury.
e. both a and b.
4. When the level of income in the market for Good K increased by 10 percent, the demand for Good K fell
by 20 percent.
Which of the following is consistent with this statement:
a.
E
D
 = 2
d. E
Y
(or Ei ) =  2.0;
b.
E
D
 = 0.5
e. Cross price elasticity of demand between Goods X and K = 2.0.
c.
E
Y
(or Ei ) = 0.5
5. Along a straight line demand function which is neither vertical nor horizontal, we know that E
D
 is smaller
at P = 2 than at P = 5.
a. True;
b. False;
c. not enough information to know if true or false.
6. Which of the following involves a shift of and not a movement along the demand function.
a. crossprice elasticity of demand
b. income elasticity of demand.
c. price elasticity of demand
d. all above
e. a and b.
7. If two goods are complements in consumption, the sign of the _______ will be ______.
a. price elasticity of demand, positive
d. crossprice elasticity of demand, negative
b. price elasticity of demand, negative
e. income elasticity of demand, positive.
c. crossprice elasticity of demand, positive
8. Last month the price of gasoline rose by 10 percent but the total revenue from the sales of gasoline fell.
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 Spring '08
 BRIGHTWELL
 Economics, Supply And Demand, A., C D B C C C

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