# Eco 102 H Review (Chapter 5: Elasticity And Its Application)

34 Questions | Total Attempts: 265  Settings  Related Topics
• 1.
Elasticity measured the magnitude of how much buyers and sellers respond to changes in market conditions.
• A.

True

• B.

False

• 2.
The price elasticity of demand measures how willing consumers are to buy less of the good as its price decreases.
• A.

True

• B.

False

• 3.
Goods with close substitutes tend to have more elastic demand.
• A.

True

• B.

False

• 4.
Neccesities tend to have elastic demands, whereas luxuries have inelastic demands.
• A.

True

• B.

False

• 5.
Whether a good is a necessity depends not on the intrinsic properties of the good.
• A.

True

• B.

False

• 6.
Narrowly defined markets tend to have more elastic demand than broadly defined markets.
• A.

True

• B.

False

• 7.
Goods tend to have a more inelastic demand over longer time horizon.
• A.

True

• B.

False

• 8.
In Mankiw's book, a larger price elasticity implies a lesser responsiveness of quantity demanded to price.
• A.

True

• B.

False

• 9.
Using the midpoint method, what is the demand elasticity of a product if its price rose from \$4 to \$6 and its quantity decreased from 120 to 80?
• A.

0.25

• B.

2.5

• C.

-1

• D.

1

• 10.
In Mankiw's book, what elasticity represents is more important than how it is calculated.
• A.

True

• B.

False

• 11.
Demand is considered elastic when the elasticity is less than 1, and inelastic if the elasticity is greater than 1.
• A.

True

• B.

False

• 12.
If the elasticity is exactly 1, the quantity moves the same amount proportionately as the price, and demand is said to have unit elasticity.
• A.

True

• B.

False

• 13.
The price elasticity is closely related to the demand slope.
• A.

True

• B.

False

• 14.
The flatter the demand curve that passes through a given point, the greater the price elasticity of the demand and vice versa.
• A.

True

• B.

False

• 15.
Profit is the amount paid by buyers and received by sellers of the good.
• A.

True

• B.

False

• 16.
How total revenue changes as one moves along the demand curve does not depend on the price elasticity of demand.
• A.

True

• B.

False

• 17.
An increase in price in a good with an elastic demand decreases total revenue, while it increase if the good has an inelastic demand.
• A.

True

• B.

False

• 18.
Which is not part of the general rules for demand elasticity?
• A.

When demand is inelastic, price and total revenue moves in the same direction.

• B.

When demand is elastic, price and total revenue moves in opposite directions.

• C.

If demand is unit elastic, total revenue remains constant when the price changes.

• D.

If demand is unit elastic, total revenue changes from one point to another in the demand curve.

• 19.
Even though the slope of a linear demand curve is constant, the elasticity is not.
• A.

True

• B.

False

• 20.
In a linear demand curve, the demand curve is elastic at points with low price and high quantity; and the demand curve is inelastic at points with a high price and low quantity.
• A.

True

• B.

False

• 21.
Normal goods have positive income elasticities, while inferior goods have negative income elasticties.
• A.

True

• B.

False

• 22.
Necessities tend to have small income elasticities.
• A.

True

• B.

False

• 23.
Luxuries tend to have small income elasticities.
• A.

True

• B.

False

• 24.
The cross-price elasticity of substitutes is negative while the cross-price elasticity of complements is positive.
• A.

True

• B.

False

• 25.
The law of supply states that higher prices decrease the quantity supplied.
• A.

True

• B.

False