Fall 2013
Chapter 4 Sample Questions
Solve the following questions please.
1. The price elasticity of demand coefficient measures:
A. buyer responsiveness to price changes.
B. the extent to which a demand curve shifts as incomes change.
C. the slope of the demand curve.
D. how far business executives can stretch their fixed costs. 2. The basic formula for the price elasticity of demand coefficient is:
A. absolute decline in quantity demanded/absolute increase in price.
B. percentage change in quantity demanded/percentage change in price.
C. absolute decline in price/absolute increase in quantity demanded.
D. percentage change in price/percentage change in quantity demanded.
3. If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
A. increase the quantity demanded by about 2.5 percent.
B. decrease the quantity demanded by about 2.5 percent.
C. increase the quantity demanded by about 25 percent.
D. increase the quantity demanded by about 250 percent.
4. Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand is:
A. 4.00.
B. 2.09.
C. 1.37.
D. 3.94.
5. The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore demand for X in this price range:
A. has declined.
B. is of unit elasticity.
C. is inelastic.
D. is elastic. 6. Refer to the above diagram. Between prices of $5.70 and $6.30:
A. D1 is more elastic than D2.
B. D2 is an inferior good and D1 is a normal good.
C. D1 and D2 have identical elasticities.
D. D2 is more elastic than D1.
7. Refer to the above diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer expenditure would:
A. decrease if demand were D1 only.
B. decrease if demand were D2 only.
C. decrease if demand were either D1 or D2.
D. increase if demand