2.3

Assume that demand for bottled water is relatively price elastic. An increase in supply of bottled water will result in which of the following?

• A decrease in price, leading to an increase in total revenue

• A decrease in price, leading to a decrease in total revenue

• An excess supply of bottled water

• An excess demand for bottled water

• A relatively small decrease in price and no change in equilibrium quantity

If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of the good, demand is

• relatively inelastic

• relatively elastic

• unit elastic

• perfectly elastic

• perfectly inelastic

The demand curves X and Y are shown in the graph above. Which of the following offers the most accurate comparison of the price elasticities of demand curves X and Y at a price of $4?

• Demand is more elastic along curve X than along curve Y

• Demand is more elastic along curve Y than along curve X

• Demand is unit elastic along both curves

• Demand is perfectly elastic along both curves

• Demand is perfectly inelastic along both curves

Which of the following statements about the price elasticity of demand is true?

• When demand is price inelastic, total revenue will decrease as price increases.

• When demand is price elastic, an increase in price will increase total revenue.

• Demand tends to be more elastic in the short run compared to the long run.

• As more close substitutes become available, demand tends to be more price elastic.

• As a good becomes viewed as a necessity, demand becomes more price elastic.

Assume that the price of orange juice increases by 40 percent following a crop failure. If the quantity demanded falls by 10 percent, which of the following is true?

• The demand for orange juice is elastic.

• The price of grapefruit juice, a substitute good, will fall.

• The absolute value of the price elasticity of demand for orange juice is 4.

• The absolute value of the price elasticity of demand for orange juice is 0.25.

• The absolute value of the price elasticity of demand for orange juice is 10.

In the figure above, at which of the given points is demand most elastic?

• X

• Y

• Z

• The elasticity is the same for all points.

• The relative elasticity cannot be determined with the given information.

Which of the following will cause the demand for a normal good to increase?

• A decrease in consumers’ income

• A decrease in the price of a complementary good

• A decrease in the price of a substitute good

• A decrease in the price of the good

• A decrease in the number of consumers

Which of the following will increase the demand for pizza, a normal good?

• An increase in the cost of producing pizza

• A decrease in the price of pizza

• An increase in the price of a complementary product

• An increase in consumers’ income

• An increase in the number of restaurants selling pizza

If bologna is an inferior good, which of the following must be true?

• The demand curve for bologna is vertical.

• The demand curve for bologna is horizontal.

• An increase in the price of bologna will decrease the supply of bologna.

• An increase in consumer income will decrease the demand of bologna.

• A decrease in consumer income will decrease the supply of bologna.