SOLVED

7.5  The Price Elasticity of Demand and Its Measurement 1) 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. 2) Suppose the value of the price elasticity of demand is -3. What does this mean? A) A $1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. B) A $1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. C) A $3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. D) A $1 increase in price causes quantity demanded to fall by 3 units. 3) If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded A) will increase by 45 percent. B) will increase by 5 percent. C) will decrease by 45 percent. D) will decrease by 5 percent. 4) The price elasticity of demand for Stork ice cream is -4. Suppose you’re told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded? A) 40 percent B) 25 percent C) 2.5 percent D) 0.4 percent 5) If demand is inelastic, the absolute value of the price elasticity of demand is A) one. B) less than one. C) greater than one. D) greater than the absolute value of the slope of the demand curve. 6) A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand. A) downward sloping; vertical B) horizontal; downward sloping C) vertical; downward sloping D) upward sloping; horizontal 7) If demand is perfectly inelastic, the absolute value of the price elasticity of demand is A) zero. B) less than one. C) more than one. D) equal to the absolute value of the slope of the demand curve. 8) Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers? A) It is elastic. B) It is perfectly elastic. C) It is perfectly inelastic. D) The price elasticity coefficient is 0. 9) 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. 10) Refer to Figure 7-2. The demand curve on which elasticity changes at every point is given in A) Panel A. B) Panel B. C) Panel C. D) none of the above graphs.