Download CH 4 QUIZ (3-05-12)

NAME:_____________________________
Macroeconomics
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DATE: ____________
QUIZ: Chapter Four
NAME:_____________________________
Macroeconomics
DATE: ____________
QUIZ: Chapter Four
1.
T
F
Price ceilings keep prices from falling to equilibrium.
2.
T
F
The concept of elasticity has only limited applicability, since it refers only
to the responsiveness of quantity demanded to price.
3.
T
F
The price elasticity of demand is the same as the slope of the demand curve.
4.
T
F
Elasticity of demand is the change in quantity demanded divided by the
change in price.
5.
T
F
The steeper the demand curve, the less elastic the demand.
6.
T
F
Elasticity of demand is generally discussed as a negative number.
7.
T
F
It makes no sense to compare elasticities for different goods, because that
is like comparing apples and oranges.
8.
T
F
If the percentage change in quantity demanded is more than the percentage
change in price that caused it, demand is inelastic.
9.
T
F
If a 5 percent increase in the price of tea causes a 10 percent decrease in
the quantity of tea demanded in Indianapolis, we would say that the
demand for tea in Indianapolis is elastic.
10.
T
F
When the demand for a product is perfectly inelastic; its demand curve is a
horizontal line.
11.
T
F
A rise in the price of a good will always result in a decrease in the amount
spent on that good.
12.
T
F
If the income elasticity of demand for fast-food cheeseburgers is negative,
we know that cheeseburgers must have many close substitutes.
13.
T
F
The elasticity of demand will be lower if the change in price is only
temporary, since no one pays much attention to temporary things.
14.
T
F
If the income elasticity of demand for pizza is .75, pizza must be a normal good.
15.
T
F
The elasticity of supply is the ratio of the percentage change in quantity
supplied to the percentage change in price, all else being equal.
16.
T
F
Perfectly elastic supply is represented by a vertical supply curve.
QUIZ: Chapter Four ANSWER KEY (True-False Questions)
1.
False. Price ceilings keep prices from rising to equilibrium.
2.
False. Elasticity can be used to measure the responsiveness of the relationship between any
two economic variables.
3.
False. First, elasticity is unit-free, while slope is not. Second, the formula for calculating
elasticity and slope are different.
4.
False. The elasticity of demand is the percent change in quantity demanded divided by
percent change in price.
5.
False. Slope and elasticity are not the same thing.
6.
False. Although price elasticities of demand are technically negative numbers,
often ignore the minus sign and discuss them in positive terms.
7.
False. Since elasticities are unit-free, they can be compared across goods.
8.
False. If the percentage change in quantity demanded is more than the percentage
change in price, then the former divided by the latter is greater than 1, and demand is elastic.
9.
True. Demand is elastic if the percentage change in quantity demanded is greater than the
percentage change in price.
10.
False. When the demand for something is perfectly inelastic, its demand curve is a vertical line.
11.
False. Revenue, which is the amount spent on the good, will rise only when the price rises if
the demand is inelastic.
12.
False. The income elasticity of demand doesn’t tell us about substitutes; it tells us whether
goods are normal goods or inferior goods.
13.
False. When price changes are expected to be temporary, consumers will respond more quickly
in order to take advantage of the limited opportunity to save or to avoid the limited extra cost.
14.
True. When income rises 1 percent, demand for pizza rises .75 percent. Since demand
increases when income increases, this is a normal good.
15.
True. This is the definition of the price elasticity of supply.
16.
False. The vertical supply curve is inelastic; a higher price cannot bring about a higher quantity
supplied.
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