Elasticity of demand and supply
University of Belize FMSS Belize City ECON 222- Microeconomics Quiz #7
1. Suppose the price elasticity of demand is 0.5. By how much should you reduce price if you want to increase sales by 20%?
a. price should be reduced by 20 percent b. price should be reduced by $40 c. price should be reduced by 40percent d. cannot be determined since we do not have the old price
2. If the cross-price elasticity of demand between fish and chicken is 2, then a 2% increase in the price of fish will result in
a. a 1% increase in the quantity of chicken demanded b. a 4% increase in the quantity of chicken demanded c. a 10% increase in the quantity of chicken demanded d. a 20% decrease in the quantity of chicken demanded
3. A supply curve that is a vertical straight line has an elasticity that is:
a. zero b. more than zero but less than one c. greater than one d. one
4. Inferior goods have:
a. zero income elasticities of demand b. negative cross elasticities of demand c. negative cross elasticities of demand d. negative income elasticities of demand
5. Which of the following elasticity signs are positive?
a. complements b. substitutes c. inferior goods d. none of the above
6. Normal commodities have:
a. negative income elasticities b. zero income elasticities c. positive income elasticities d. none of the above
7. suppose that as national income rises from $6, 400 billion to $6, 600 billion a year, the quantity demanded of good Z rises from 18, 000, 000 to 18, 472, 000 units a year. Using the mid-point formula, the coefficient of income elasticity of demand for good Z is _________.
a. 0.093 b. 1.189 c. 0.841 d. 10,872.2
8. The most important determinant of the price elasticity of supply is
a. the number of substitutes b. the availability of the good c. the strength of consumer’s willingness to buy the good d. the number of buyers wanting the good e. time
9. The producer of good X is contemplating a price change and has asked for your advice. After some empirical investigation, you conclude that the price elasticity of demand for X is 0.75. Your advice to the producer is to
a. increase price to raise total revenue b. decrease price to raise total revenue c. leave the price unchanged since it will not influence total revenue d. none of the above
10. For a straight-line, downward-sloping demand curve, price elasticity of demand
a. increases as we move down and along the curve from higher to lower prices b. decreases as we move down and along the curve from higher to lower prices c. remains constant along the entire demand curve d. (a) or (b) depending on the actual slope of the demand curve.
END OF QUIZ. GOOD LUCK!!!!!!!!