Elasticity
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1. The cross price elasticity of demand between complements is always
a. high.
b. low.
c. positive.
d. negative.

2. The income elasticity of inferior goods is always
a. less than one.
b. greater than one.
c. zero.
d. inelastic.
e. negative.

3. If the demand curve is for oranges is unit elastic, then
a. consumers do not react to a change in the price of oranges.
b. oranges can only be purchased one unit at a time.
c. oranges are a basic food staple.
d. the percentage change in the quantity of oranges demanded = the percent change in the price of oranges.

4. Engel's Law states that
a. the percentage increase in the consumption of food will be less than the percentage increase in income.
b. food is an inferior good.
c. the demand for food is income elastic.
d. the income elasticity for food is negative.
e. consumers will increase their purchases of food as the price of food increases.

5. Which of the following will have a high elasticity of demand?
a. the demand for chewing gum
b. the demand for corn grown by Farmer Brown
c. the demand for infant formula
d. the demand of wealthy families for clothing

6. Suppose the government of Freedonia wants to maximize total tax revenue. It will place unit taxes on goods with the
a. highest cross elasticity.
b. lowest price elasticity.
c. fewest complements.

7. Computers and software programs are
a. inferior goods.
b. complementary goods.
c. goods with a cross-price elasticity of demand of 0.
d. substitute goods.
e. perfectly elastic goods.

8. In the following Figure,
a. the demand curve in Panel A is more income elastic than that in Panel B.
b. the demand curve in Panel A is less income elastic than that in Panel B.
c. the demand curve in Panel A is more price elastic than that in Panel B.
d. the demand curve in Panel A is less price elastic than that in Panel B.

       

9. The short run supply curve is always less elastic than
a. the short run demand curve.
b. the long run demand curve.
c. the market day supply curve.
d. the long run supply curve.

10. A producer can increase her revenue by raising price if demand is
a. inelastic.
b. elastic.
c. unit elastic.
d. none of the above; there is no relationship between demand elasticity and revenue.

11. The cross price elasticity of demand between substitutes is always
a. greater than one.
b. less than one.
c. positive.
d. negative.

12. If the price of peanut butter increases one percent, which of the following could happen?
a. The demand for peanut butter increases by 1 percent.
b. The demand for peanut butter goes up by 5 percent.
c. The demand for jelly goes down by 5 percent.
d. The quantity demand of jelly goes down by 1 percent.

13. In the long run,
a. firms can adjust the quantity of all their inputs.
b. firms can easily adjust their production levels in response to price changes.
c. the supply curve is more elastic than in the short run.
d. all of the above.

14. If the elasticity of demand for orange juice is 5 and the price of orange juice goes up by 5 percent, the quantity demanded of orange juice will
a. increase by 1 percent.
b. decrease by 1 percent.
c. increase by 25 percent.
d. decrease by 25 percent.

15. A marketing study has just found that the demand for widgets is unit elastic. If I raise the price of the widgets I sell by 5 percent, my revenue will
a. increase by 5 percent.
b. decrease by 5 percent.
c. increase by 1 percent.
d. remain unchanged.



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