Additional Exercises
3rd edition
Chapter 6:
1) The price elasticity of demand is a measure of the:
a) Effect of changes in demand on the price
b) Relationship between price and profitability
c) Responsiveness of buyers of a good to changes in its price
d) Sensitivity of a good's price to changes in demand
2) The price-elasticity of demand is always negative because of:
a) The law of demand
b) Percent-changes being used in the formula
c) The midpoint formula
d) Scarcity
3) The elasticity of supply for a product will be 2 if:
a) 1 percent decrease in the price causes a 0.2 percent decrease in quantity supplied
b) 2 percent decrease in price causes a 1 percent decrease in quantity supplied
c) 1 percent decrease in price causes a 2 percent decrease in quantity supplied
d) 2 percent decrease in price causes a 2 percent decrease in quantity supplied
4) In the graph above, what happen to price and to total revenue points if the equilibrium
moves from point B to point A?
a) Price falls and total revenue increases
b) Price falls and total revenue also decreases
c) Price rises and total revenue also increases
d) Price rises and total revenue decreases
5) The cross elasticity of demand for product X with respect to the price of product Y is -
1.2. It can be inferred that X and Y are:
a) Substitute products
b) Complementary products
c) Luxury products
d) Unrelated products
6) The total revenue received by sellers of a good is the same amount as the:
a) Total income earned by the buyers
b) Total amount spent on the good by the buyers
c) Price paid by the buyers for each unit of the good
d) Profits earned by the sellers of the good
7) A 4 percent reduction in the price of a product has zero effect on the rand amount of
consumer expenditure on the product. The price elasticity of demand is:
a) Zero
b) Greater than zero
c) Greater than zero but less than 1
d) Equal to 1
8) Blossom, Inc. sells 500 bottles of perfume a month when the price is R7. A huge
increase in resource costs forces Blossom to raise price to R9, and the firm only manages
to sell 460 bottles of perfume. The price elasticity of demand is:
a) 0.28 and elastic
b) 28.0 and elastic
c) 0.28 and inelastic
d) 28.0 and inelastic
9) If an increase in the supply of a product in the market results in a decrease in price, but
no change in the quantity traded, then:
a) The price elasticity of supply is zero
b) The price elasticity of supply is infinite
c) The price elasticity of demand is unitary
d) The price elasticity of demand is zero
10) Use the following to answer the questions:
a) Over the R15-R16 range,
price elasticity of demand is:
b) Over the R15-R16 range, the elasticity of supply is:
c) Total revenue on the change fro R15 – R16 has:
11) Use the following to answer the questions:
11.1 Refer to the above diagram. Between prices of R6.00 and R8.00:
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 elasticity’s
d) D2 is more elastic than D1
11.2 Refer to the above diagram and assume a single good. If the price of the
good decreases from R8.00 to R6.00, consumer spending 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 were either D1 or D2.
