1.Determining the price elasticity of demand of a product involves all of the following factors, but NOT

• whether the product is a luxury or a necessity.
• the total number of firms in a market.
• the availability of substitutes to the product.

2.What happens to total revenue (TR) if the price rises on a product with demand that is price elastic?

• Total revenue will fall.
• Total revenue will remain the same.
• Total revenue will rise.

3.If a product is considered ________, then higher costs can be passed on to the consumer.

• inelastic
• elastic
• perfectly elastic

4.What is the name of the method for calculating elasticity that makes the math easier but is less accurate?

• The point elasticity approach
• The percent change approach
• The midpoint (arc) elasticity approach

5.In a market with relatively elastic demand, if the supply curve shifts due to a fall in production costs, the equilibrium price will ________ by ________ than equilibrium quantity.

• decrease; more
• increase; less
• increase; less
• decrease; less

6.What is the price elasticity of demand for shoes if for every 20% price increase clothing demand decreases by 5%? ________. The price elasticity of demand would be ________.

• -.5; inelastic
• -.25; inelastic
• -4; elastic

7.Price elasticity of demand is closely related, but not the same as the slope of the demand curve. The more sensitive buyers are to changes in price the

• the flatter the demand curve.
• demand curve becomes more curved and less linear.
• the more the demand curve will shift

8.Using the midpoint method, the price elasticity of demand is determined to be about 0.85. What change in the price would cause a 10% decrease in the quantity demanded?

• A 11.8% increase in the price of the product
• A decrease in the price of the product from $8.50 to $10
• An increase in the price of the product from $8.50 to $10

9.Elasticity refers to

• how responsive one variable is to changes in another variable.
• how frequently a demand curve or supply curve changes slope.
• how long it takes a market to reach equilibrium.

10.Kel loves orange soda. Unfortunately, the price has increased from $2 to $4. The percentage change in price is (use the point approach)

• 67%
• 33%
• 100%

11.The price elasticity of supply is defined as the ________ change in quantity supplied divided by the ________ change in price.

• total; percentage
• percentage; percentage
• marginal; percentage

12.Epson's office printer price increased from $97 to $150. At the same time the quantity demanded for printer ink decreased from 260 to 160. Calculate the cross price elasticity of demand using the midpoint method. Are these products complements or substitutes?

• The cross-price elasticity of demand is -1.11 and they are complements.
• The cross-price elasticity of demand is .90 and they are complements.
• The cross-price elasticity of demand is 1.11 and they are substitutes.

13.What is the calculation to solve for the wage elasticity of labor demanded??

• The % change in quantity of labor supplied divided by the % change in wage.
• The % change in wage divided by the % change in quantity of labor demanded.
• The % change in quantity of labor demanded divided by the % change in wage.

15.Sebastian received a raise this year so his income climbed from $45,000 to $52,000. Last year Sebastian purchased 2 sunglasses. This year he has purchased 7 sunglasses. Assuming that all of the other things remain constant, what type of a good are sunglasses and what type of income elasticity of demand does Sebastian have?

• The sunglasses are an inferior good and the income elasticity of demand is 7.7.
• The sunglasses are a normal good and the income elasticity of demand is 7.7.
• The sunglasses are a normal good and the income elasticity of demand is .13.

16.The demand for cigarettes is highly inelastic. This suggests that the incidence of a higher tax on cigarettes will fall primarily on

• government.
• cigarette consumers.
• cigarette sellers.