Download Exhibit 1 Demand curves

1. Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It
can be concluded that the president thinks that demand to attend this college is:
a. elastic.
b. inelastic, but not perfectly inelastic.
c. unitary elastic.
d. perfectly elastic.
2. The president of Tucker Motors says, "Lowering the price won't sell a single additional Tucker car." The
president believes that the price elasticity of demand is:
a. perfectly elastic.
b. perfectly inelastic.
c. unitary elastic.
d. elastic.
e. inelastic.
Exhibit 1 Demand curves
10
Price
per unit
(dollars)
a
b
8
c
6
Demand
20
25
30
Quantity
3. In Exhibit 1, the demand curve between points a and b is:
a. price elastic.
b. price inelastic.
c. unit elastic.
d. perfectly elastic.
e. perfectly inelastic.
4. In Exhibit 1, the demand curve between points b and c is:
a. price elastic.
b. price inelastic.
c. unit elastic.
d. perfectly elastic.
e. perfectly inelastic.
5. In Exhibit 1, between points a and b, the price elasticity of demand measures:
a. .67.
b. 1.5.
c. 2.0.
d. 1.56.
e. 1.0.
6. In Exhibit 1, between points b and c, the price elasticity of demand measures
a. 4.27.
b. 1.5.
c. 1.56.
d. .636.
e. .425.
7.
8. If demand price elasticity measures 2, this implies that consumers would:
a. buy twice as much of the product if the price drops 10 percent.
b. require a 2 percent drop in price to increase their purchases by 1 percent.
c. buy 2 percent more of the product in response to a 1 percent drop in price.
d. require at least a $2 increase in price before showing any response to the price increase.
e. buy twice as much of the product if the price drops 1 percent.
9. A product would be more demand price elastic:
a. the shorter the time the consumer has to adjust to price changes.
b. the lower the price of the good.
c. the fewer the number of good substitutes.
d. the less the essential nature of the good.
e. if the supply is more price elastic.
10. A product would be more demand price inelastic:
a. the shorter the time the consumer has to adjust to price changes.
b. the higher the price of the good.
c. the more the number of good substitutes.
d. the less the essential nature of the good.
e. if the supply is more price elastic.
11. If goods X and Y are such that the cross price elasticity between them is negative, and if the income elasticity of
X is negative, then these goods are:
a. inferior complements.
b. luxury complements.
c. income elastic substitutes.
d. normal substitutes.
e. income elastic complements.
12. The cross price elasticities among substitute goods will be extremely high when:
a. b and d.
b. they are very similar to each other.
c. people are consuming them frequently.
d. people consume them in equal quantities.
e. they are imperfect substitutes.
13. If the government wants to raise tax revenue and shift most of the tax burden to the consumers, it would impose a
tax on a good with a:
a. flat (elastic) demand curve and a steep (inelastic) supply curve.
b. steep (inelastic) demand curve and a flat (elastic) supply curve.
c. steep (inelastic) demand curve and steep (inelastic) demand curve.
d. flat (elastic) demand curve and a flat (elastic) supply curve.
14. As shown in Exhibit 9, assuming goods X and Y are substitutes, an increase in the price of Y, other factors held
constant, could move the equilibrium from point E to point:
a. A.
b. B.
c. C.
d. D.