Penn ECON102 Quiz 4

Question 1

A demand curve can be described as elastic when

the percent change in quantity demanded is equal to the percent change in price

the percent change in quantity demanded is smaller than the percent change in price

the percent change in quantity demanded is larger than the percent change in price

the percent change in income is larger than the percent change in price

Question 2

A good that is a luxury is likely to have a relatively _______ demand.

inelastic

elastic

unit elastic

perfectly inelastic

Question 3

Consider the figure above. What is the absolute value of the price elasticity of demand when price increases from $1.50 to $2.00?

0.2

0.714

1.4

0.1428

Question 4

Consider the linear demand curve above. As price falls, the slope along this demand curve is ________, and the price elasticity is _________ in absolute value.

falling, constant

constant, falling

falling, falling

constant, constant

Question 5

Consider the figure above. Which curve is the least elastic?

a

b

c

all are equally elastic

Question 6

Consider the figure above. Lowering price from $2.00 to $1.50 would

increase total revenue by $1

decrease total revenue by $1

leave total revenue unchanged

increase total revenue by $4

Question 7

Consider the figure above. If the price increases from $2.00 to $2.50, then total revenue

increases by $3 and demand is considered to be elastic

decreases by $3 and demand is considered to be elastic

decreases by $3 and demand is considered to be inelastic

increases by $3 and demand is considered to be inelastic

Question 8

When the cross price elasticity of demand is positive, the goods are

complements

unrelated goods

substitutes

inferior

Question 9

Supply for a good tends to be more elastic

in the long run

when there are many available substitutes for the good

when the market is more broadly defined

when the good is a necessity

Question 10

You are hired as an economic consultant for an online store that sells music downloads. Currently each download costs $.98. Your assignment is to increase the firm’s total revenue. Your research indicates that the industry wide price elasticity of demand for music downloads is equal to 2.6 in absolute value. You recommend that the firm change the price per download to

$.95 since demand is inelastic

$1.05 since demand is elastic

$.95 since demand is elastic

$1.05 since demand is inelastic