Chapter 5

1. If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is

• 1. Price elastic

• Price inelastic

• Unit price elastic

• Income elastic

The price elasticity of demand is defined as

• 1. the percentage change in price of a good divided by the percentage change in the quantity demanded of that good. (% change P / % change Q)

• 1. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good. (% change Q / % change P)

1. In general, a flatter demand curve is more likely to be

• Price elastic

• Price inelastic

• Unit price elastic

 In general, a steeper demand curve is more likely to be

• Price elastic

• Price inelastic

• Unit price elastic

The demand for which of the following is likely to be the most price inelastic?

• Ruffles

• Lay's

• Potato Chips

• Pringles

If the cross-price elasticity between iPhones and iPads is negative, iPhones and iPads are likely to be

• Substitutes

• Complements

• Necessities

• Luxuries

If consumers always spend 50 percent of their income on dog food, then the income elasticity of demand for dog food is

• 0

• 1.00

• 1.50

• 2.00

 If a supply curve for bowling alleys is price elastic, then

• The quantity supplied is sensitive to changes in the price of bowling alleys.

• 1. The quantity supplied is insensitive to changes in the price of bowling alleys.

• 1. The quantity demanded is sensitive to changes in the price of bowling alleys.

• 1. The quantity demanded is insensitive to changes in the price of bowling alleys.

Which of the following is a determinant of the price elasticity of demand?

• The availability of close substitutes

• Whether a good is a luxury or necessity

• 1. How broadly the market is defined

• The time horizon under consideration

• All of the above

Suppose the demand for diamonds is elastic. When the price of diamonds increases along the demand curve, total revenue:

• Increases

• Decreases

• Stays the same