Multiple Choice Questions

If the elasticity of supply of a product is 2.5, we know that supply is inelastic.
  • True
  • False
e = 1
  • (Vertical line) e = 0
  • Elastic
  • Unit Elasticity
  • Buyers
The greater the price elasticity of demand the more likely the product is a necessity
  • True
  • False
Goods with close substitutes tend to have more elastic demands than do goods without close substitutes
  • True
  • False
Longer time horizons are more _______
  • Inelastic
  • Elastic
  • False
  • Sellers
Flatter supply curve = supply is more ____
  • Inelastic
  • False
  • Sellers
  • Elastic
For a horizontal demand curve, slope is undefined and elasticity equals 0.
  • True
  • False
Price Elasticity of Supply Formula
  • (Horizontal line) elasticity is infinite
  • % change in quantity demanded/ % change in price
  • True
  • % change in quantity supplied/ % change in price
Demand is unit elastic if elasticity is less than 1
  • True
  • False
Demand for a good would tend to be more inelastic the fewer the available substitutes
  • True
  • False
Demand Perfectly Inelastic
  • Measures response of quantity supplied to change in the price
  • (Horizontal line) e = infinite
  • (Horizontal line) elasticity is infinite
  • (Vertical line) elasticity = 0
If sellers do not respond at all to a change in price, technological advancement must be great
  • True
  • False
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the demand curve will be steeper
  • True
  • False
When a supply curve is relatively flat, the supply is relatively elastic.
  • True
  • False
Demand is inelastic if elasticity is less than 1
  • True
  • False
Elasticity
  • Measures response of quantity supplied to change in the price
  • Sellers
  • % change in quantity demanded/ % change in price
  • a measure of the responsiveness of quantity demanded (or quantity supplied) to one of its determinants (price, income, etc)
The price elasticity of supply measures how much the quantity supplied responds to changes in input prices.
  • True
  • False
If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is 1/2 and supply is elastic.
  • True
  • False
As elasticity rises, the supply curve gets flatter.
  • True
  • False
Supply Perfectly Inelastic
  • Measures response of quantity supplied to change in the price
  • (Vertical line) e = 0
  • Inelastic
  • (Horizontal line) e = infinite
e < 1
  • Elastic
  • Sellers
  • Inelastic
  • Buyers
The demand for Rice Krispies is more elastic than the demand for cereal
  • True
  • False
e > 1
  • True
  • False
  • Inelastic
  • Elastic
More fixed supply (beach property, artwork) = more ______
  • Unit Elasticity
  • Elastic
  • Inelastic
  • False
The elasticity of a perfectly elastic supply curve equals 0.
  • True
  • False
Price Elasticity of Supply
  • % change in quantity supplied/ % change in price
  • False
  • True
  • Measures response of quantity supplied to change in the price
Price Elasticity of Demand Formula
  • (Vertical line) elasticity = 0
  • Measures how much the quantity demanded responds to a change in price
  • False
  • % change in quantity demanded/ % change in price
If the quantity supplied is the same regardless of price, then the supply curve would be elastic.
  • True
  • False
Supply is Perfectly Elastic
  • The flatter the demand curve that passes through a given point, the more elastic the demand
  • (Vertical line) elasticity = 0
  • (Horizontal line) elasticity is infinite
  • (Horizontal line) e = infinite
If demand is perfectly inelastic, the demand curve is vertical, and elasticity is equal to 0
  • True
  • False
Price elasticity of supply measures how much the quantity supplied responds to changes in the price
  • True
  • False
When quantity demanded responds only slightly to changes in price, demand is said to be unit elastic
  • True
  • False
As the elasticity of supply approaches infinity, very small changes in price will lead to very large changes in quantity supplied.
  • True
  • False
In general, elasticity is the friction that develops between buyers and sellers in a market.
  • True
  • False
If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price would result in a 4.0 percent decrease in the quantity demanded
  • True
  • False
Demand Perfectly Elastic
  • (Vertical line) e = 0
  • (Horizontal line) elasticity is infinite
  • Measures response of quantity supplied to change in the price
  • % change in quantity supplied/ % change in price
Concerning a vertical supply curve, suppliers will not respond to a change in price.
  • True
  • False
If two supply curves pass through the same point and one is steep and the other is flat, the steeper supply curve is more inelastic.
  • True
  • False
Supply in short run is more _____
  • Elastic
  • Inelastic
  • (Vertical line) e = 0
  • False
If a 15 percent increase in price causes a 30 percent decrease in quantity demanded, this product might have no close substitute
  • True
  • False
Price Elasticity of Demand
  • True
  • Measures response of quantity supplied to change in the price
  • % change in quantity demanded/ % change in price
  • Measures how much the quantity demanded responds to a change in price
The price elasticity of demand measures a buyer's responsiveness to a change in the price of a good.
  • True
  • False
Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because it must be eaten quickly.
  • True
  • False
The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price
  • True
  • False
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Multiple Choice Questions
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