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When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent,and the sale of dips (like salsa and bean dip) fell 8 per cent.This set of facts indicates that


A) the cross-price elasticity between tortilla chips and dips is 0.8,so the two are substitutes.
B) the cross-price elasticity between tortilla chips and dips is -0.4,so the two are complements.
C) the cross-price elasticity between tortilla chips and dips is -0.8,so the two are complements.
D) the cross-price elasticity between tortilla chips and dips is 0.4,so the two are substitutes.

E) A) and B)
F) A) and C)

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The price elasticity of demand for Kellogg Corn Flakes is larger in absolute value than the price elasticity for all breakfast cereals.

A) True
B) False

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Which of the following products comes closest to having a perfectly inelastic demand?


A) petrol
B) cholesterol medication in general
C) iPhones
D) bus rides

E) B) and D)
F) B) and C)

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The price elasticity of supply measures


A) the responsiveness of quantity supplied to changes in input prices.
B) the responsiveness of quantity supplied to changes in technology.
C) the responsiveness of quantity supplied to changes in price.
D) a supplier's ability to produce a good in the face of scarcity.

E) B) and C)
F) A) and D)

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Price elasticity of demand measures


A) how responsive suppliers are to price changes.
B) how responsive sales are to changes in the price of a related good.
C) how responsive quantity demanded is to a change in price.
D) how responsive sales are to a change in buyers' incomes.

E) A) and B)
F) A) and D)

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List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

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1.Availability of close substitutes: If ...

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If a 5 per cent increase in income leads to a 10 per cent decrease in quantity demanded for a product this product is


A) an income elastic good.
B) an inferior good.
C) a necessity.
D) a luxury good.

E) None of the above
F) A) and D)

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If the demand for iPods is price elastic,then


A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value) .
B) the percentage change in quantity demanded is less than the percentage change in price (in absolute value) .
C) the percentage change in quantity demanded is equal to the percentage change in price.
D) quantity demanded is not responsive to changes in price.

E) None of the above
F) C) and D)

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If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.

A) True
B) False

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Seth is a competitive body builder.He says he has to have his 12-oz package of protein powder to 'feed his muscles' every day.On the basis of this information,what can you conclude about his price elasticity of demand for protein powder?


A) It is elastic.
B) It is perfectly elastic.
C) It is perfectly inelastic.
D) The price elasticity coefficient is 0.

E) A) and B)
F) All of the above

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The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

A) True
B) False

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Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities ?

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Cross-price elasticity of demand measure...

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If,for a given percentage increase in price,quantity demanded falls by a proportionately smaller percentage,then demand is


A) unit-elastic.
B) perfectly elastic.
C) relatively inelastic.
D) relatively elastic.

E) A) and C)
F) A) and D)

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The demand for heating oil in the short run is more elastic than the long run demand for heating oil.

A) True
B) False

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If the demand for a product is elastic,the quantity demanded changes by a smaller percentage than the percentage change in price.

A) True
B) False

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When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

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Demand is perfectly elastic when quantit...

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You are the manager of a theatre.At present the theatre charges the same admission price of $8 to all customers,regardless of age.You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults.You tell your supervisor that your proposal is likely to increase revenues.What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.

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You believe that the price elasticity of...

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Which of the following statements about the price elasticity of demand is correct?


A) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good.
B) The absolute value of the elasticity of demand ranges from zero to one.
C) Demand is more elastic in the long run than it is in the short run.
D) Demand is more elastic the smaller the percentage of the consumer's budget the item takes up.

E) None of the above
F) All of the above

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Figure 4-7 Figure 4-7 -Refer to Figure 4-7.A perfectly elastic supply curve is shown in A) Panel A. B) Panel B. C) Panel C. D) Panel D. -Refer to Figure 4-7.A perfectly elastic supply curve is shown in


A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

E) A) and D)
F) A) and C)

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Bringing oil to the market is a relatively long and costly process.The whole process from exploration to pumping significant amounts of oil can take years.What does this indicate about the price elasticity of supply for oil?


A) The elasticity coefficient is likely to be very high,and supply is inelastic.
B) The elasticity coefficient is likely to be close to zero,and supply is perfectly elastic.
C) The elasticity coefficient is likely to be low,and supply is highly inelastic.
D) The elasticity coefficient is likely to be low,and supply is highly elastic.

E) B) and D)
F) C) and D)

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