Assume that for the average consumer, the quantity demanded for gasoline increases from 15 gallons per week to 20 gallons per week response to a price decrease from $2.90 per gallon to $2.46 per gallon. Which of the following is closest to the price elasticity of demand for gasoline?

A) -1.74.

B) -1.65.

C) -1.86

Assume that Rajesh Singh’s income increased from $20,000 per year to $30,000 per year, and his demand for “store-brand” bread decreased from 80 loaves to 40 loaves per year. Which of the following most accurately describes Singh’s income elasticity for store-brand bread?

A) Income elasticity is -1.67 and store-brand bread is an inferior good.

B) Income elasticity is -0.60 and store-brand bread is an inferior good.

C) Income elasticity is +1.00 and store-brand bread is a complimentary good.

The percent change in demand for a good divided by the percent change in the price of another good is known as the:

A) income elasticity of demand.

B) price elasticity of demand.

C) cross elasticity of demand.

If a 10% income increase caused a group of consumers to increase their purchases of television sets from 95 to 105, the group's income elasticity of demand for television sets would be closest to:

A) 1.00.

B) 0.10.

C) 2.00.

Price elasticity of demand is most accurately defined as the change in:

A) market price in response to a change in the quantity demanded.

B) quantity demanded in response to a change in income.

C) quantity demanded in response to a change in market price.

George’s Appliance Center sells big screen televisions. On a representative model, when the price was reduced from $2,450 to $2,275, monthly demand increased from 175 to 211 units. What is the price elasticity of demand?

A) -1.69.

B) -2.53.

C) -2.14.

If the admission price for a rock concert is raised from $25 to $30 causing sales to drop from 60,000 to 40,000, the price elasticity of demand for tickets to the concert is:

A) 2.20.

B) -2.20.

C) -1.67.

Suppose the price of computers increases from $1,000 to $1,200. Assuming the original quantity demanded for computers was 50 million units, and the new quantity demanded is 45 million computers, what is the price elasticity of demand, and is the demand for computers elastic or inelastic?

A) 0.58, inelastic.

B) -1.73, elastic.

C) -0.58, inelastic.

Antonio Conti consumes 2 pounds of beef per week when beef is $4.50 per pound and 3 pounds of chicken when chicken sells for $3.50 per pound. If the price of chicken increases to $4.00 per pound, Conti’s consumption of beef increases to 2.5 pounds per week. Which of the following most accurately describes Conti’s cross elasticity of demand for beef versus chicken? The cross elasticity of demand for:

A) beef relative to chicken is +1.67 and beef and chicken are substitutes.

B) beef relative to chicken is +1.67 and beef and chicken are complimentary goods.

C) chicken relative to beef is +1.75 and beef and chicken are substitutes.

Assume that for the average consumer, the quantity demanded for jeans increases from 5 to 7 pairs per year in response to a price decrease from $29 to $24 per pair. The respective price elasticity and relative elasticity of demand for jeans is best described by which of the following?

A) ?1.77; relatively inelastic.

B) ?2.32; relatively elastic.

C) ?1.77; relatively elastic.

Marko Tskitishvili, an economist, has been studying the drop in the price of the average household computer in the U.S. and wonders if computers should still be considered a luxury good or if it has now become a normal good. He conducts a survey of 500 people and finds the following:

*Assume that 1998 is the base rate.

Based on the above data, Tskitishvili would conclude that a computer is a:

A) luxury good with income elasticity of 1.18.

B) luxury good with income elasticity of 1.01.

C) normal good with income elasticity of 0.84.

If quantity demanded declines 20% when incomes fall 3%, this good is:

A) a necessity.

B) an inferior good.

C) a luxury good.

Income elasticity is defined as the:

A) change in quantity demanded divided by the change in income.

B) percentage change in the quantity demanded divided by the percentage change in income.

C) percentage change in income divided by the percentage change in the quantity demanded.

When household incomes go down and the quantity of a product demanded goes up, the product is:

A) an inferior good.

B) a necessity.

C) a normal good.

If the price elasticity of demand is -1.5 and you increase the price of the product 2%, the quantity demanded will (closest to):

A) decrease 3%.

B) decrease 1.5%.

C) decrease 0.75%.

If the price of a candy bar increases from $0.50 to $0.55 and the quantity demanded decreases from 267 to 235, the price elasticity of demand is:

A) -1.34.

B) 1.34.

C) -1.23.

If the price elasticity of demand is 1.5 and a change in the price of the product increases the quantity demanded by 4%, then what is the percent change in price?

A) +2.667%.

B) ?2.667%.

C) –0.375%.

If the price elasticity of demand for a good is 4.0, then a 10% increase in price would result in a:

A) 4% decrease in the quantity demanded.

B) 40% decrease in the quantity demanded.

C) 10% decrease in the quantity demanded.

The price of product Z decreased from $2.50 per unit to $2.00 per unit.  Since the price decreased, demand has gone up from 3 million units to 4 million units.  Calculate the respective price elasticity of demand and determine the elasticity of demand.

A) ?1.29; elastic.

B) ?1.29; inelastic.

C) ?2.00; elastic.

If the number of widgets demanded changes from 51 to 49 when the price changes from $4 to $6, the price elasticity of demand is:

A) Elastic.

B) -2.00.

C) -0.10.

Suppose that the demand curve for soybeans shifts such that the equilibrium price of soybeans decreases 58%. At the new equilibrium price, the quantity that soybean suppliers are willing to provide decreases by 3%. Which of the following most accurately describes the respective elasticity of supply and relative elasticity for soybeans?

A) +19.33; inelastic.

B) +0.05; inelastic.

C) ?0.05; elastic.

Which of the following most accurately describes elasticity of supply? Elasticity of supply is the percentage change in the quantity supplied divided by the percentage change in:

A) price and it equals zero when supply is perfectly elastic.

B) quantity demanded and it equals infinity when supply is perfectly inelastic.

C) price and it equals zero when supply is perfectly inelastic.

Suppose that the demand curve for honey shifts such that the equilibrium price for a pound of honey increases from $7 to $9 per pound. At the new equilibrium, the quantity supplied increases from 500 pounds per month to 600 pounds per month, although the supply curve has not shifted. The elasticity of supply for honey is closest to:

A) +0.91.

B) +0.73.

C) +1.12.

Gene Bawerk, an economics professor, is lecturing on the factors that influence the price elasticity of demand. He makes the following assertions:

Statement 1: For most goods, demand is more elastic in the long run than the short run.

Statement 2: Demand for a good becomes more elastic when a close substitute for it becomes available on the market.

With respect to Bawerk’s statements:

A) only statement 1 is correct.

B) both are correct.

C) only statement 2 is correct.

The demand for a product tends to be price inelastic if:

A) few good complements for the product are available.

B) few good substitutes for the product are available.

C) people spend a large share of their income on the product.

Which of the following is least likely to affect the elasticity of supply for a good?

A) The uniqueness of production inputs.

B) The time frame for making the supply decision.

C) The relative amount of income spent on the good.

Economics commentator Gail Brythe is discussing the different factors that influence the elasticity of supply. She states the following:

Statement 1: Elasticity of supply is greater when a good or service can only be produced with unique or rare inputs.

Statement 2: Typically, a good’s momentary supply elasticity is higher than its short-run supply elasticity, which in turn is higher than its long-run supply elasticity.

With respect to Brythe’s statements:

A) only statement 1 is incorrect.

B) only statement 2 is incorrect.

C) both are incorrect.