ECN100 Chp.

4 Quiz 4
1) The list below refers to the price elasticity of demand.
1) perfectly inelastic
2) perfectly elastic
3) unitary elasticity
4) elastic
5) inelastic
Refer to the information above to answer this question. What is a demand curve that is parallel to the
vertical axis?
A) 1.
B) 2.
C) 3.
D) 4.
E) 5.
2) If people spend a large percentage of their income on a particular product, which of the following
statements is true?
A) The price elasticity of demand for the product is high.
B) The product has a large number of substitutes.
C) The elasticity of supply for the product is low.
D) The income elasticity of demand for the product is low.

3) On what type of products do governments impose "sin" taxes?

A) On consumer goods but not capital goods.
B) On products with elastic demand such as candy.
C) On illegal products.
D) On products with inelastic demand such as alcohol.

4) Suppose that the price of a product increased from $18 to $22, and the quantity demanded decreased
from 63 to 57. What is the value of the price elasticity of demand?
A) 2.3.
B) 1.5.
C) 2.0.
D) 0.5.
E) 0.43.

5) What will happen to the quantity demanded if the price elasticity of demand is 2 and price increases
by 10%?
A) It increases by 10%.
B) It decreases by 5%.
C) It increases by 20%.
D) It decreases by 20%.
6) When is the percentage change in quantity exactly equal to the percentage change in price?
A) When demand is elastic.
B) When demand is inelastic.
C) When there is unitary elasticity.
D) When demand does not change.

7) What is price elasticity of demand?

A) Price multiplied by quantity demanded.
B) The responsiveness of quantity demanded to a change in price.
C) Price divided by quantity demanded.
D) The responsiveness of price to a change in the quantity demanded.

8) What is a normal good?

A) It is a good whose income elasticity of demand is < 1.
B) It is a good whose quantity demanded will rise as income rises.
C) It is a good which has many substitutes.
D) It is a good whose income elasticity is > 1.

9) Suppose that a 10% increase in the price of product A results in a 12% decrease in the quantity
demanded of product B. Which of the following statements is correct?
A) The cross elasticity of demand coefficient between the two products is positive and the products are
complements.
B) The cross elasticity of demand coefficient between the two products is negative and the products
are complements.
C) The cross elasticity of demand coefficient between the two products is positive and the products are
substitutes.
D) The cross elasticity of demand coefficient between the two products is negative and the products are
substitutes.

10) Suppose that the value of the price of a product decreased from $2.10 to $1.90, and the quantity
supplied decreased from 24 to 16. What is the value of supply elasticity?
A) + 3.47.
B) + 4.0.
C) - 0.25.
D) - 4.0.
E) + 0.25.