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Chapter 5

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Chapter 5
Elasticity and Its Applications
MULTIPLE CHOICE
1. In general, elasticity is
a. the friction that develops between buyers and sellers in a market.
b. a measure of how much government intervention is prevalent in a market.
c. a measure of how competitive a market is.
d. a measure of how much buyers and sellers respond to changes in market conditions.
ANSWER: d. a measure of how much buyers and sellers respond to changes in market conditions.
TYPE: M SECTION: 1 DIFFICULTY: 1
2. When studying how some event or policy affects a market, elasticity provides information on the
a. direction of the effect on the market.
b. magnitude of the effect on the market.
c. efficiency of the effect on the market.
d. equity of the effect on the market.
ANSWER: b. magnitude of the effect on the market.
TYPE: M SECTION: 1 DIFFICULTY: 2
3. The most basic tools of economics are
a. demand and supply.
b. price and quantity.
c. monetary and fiscal policy.
d. elasticity of demand and supply.
ANSWER: a. demand and supply.
TYPE: M SECTION: 1 DIFFICULTY: 1
4. The price elasticity of demand measures how responsive
a. buyers are to a change in income.
b. sellers are to a change in price.
c. buyers are to a change in price.
d. sellers are to a change in buyers’ incomes.
ANSWER: c. buyers are to a change in price.
TYPE: M SECTION: 1 DIFFICULTY: 1
5. The price elasticity of demand measures
a. a buyer’s responsiveness to a change in the price of a good.
b. the increase in demand as additional buyers enter the market.
c. how much more of a good consumers will demand when incomes rise.
d. the increase in demand that will occur from a change in one of the nonprice determinants of demand.
ANSWER: a. a buyer’s responsiveness to a change in the price of a good.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y
6. The concept of elasticity is used to
a. analyze how much the economy is capable of expanding.
b. determine the level of government invention in the economy.
c. analyze supply and demand with greater precision.
d. calculate consumer credit purchases.
ANSWER: c. analyze supply and demand with greater precision.
TYPE: M SECTION: 1 DIFFICULTY: 2

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Chapter 5/Elasticity and Its Applications 128
7. Demand is said to be elastic if
a. the price of the good responds substantially to changes in demand.
b. demand shifts substantially when the price of the good changes.
c. buyers do not respond much to changes in the price of the good.
d. the quantity demanded responds substantially to changes in the price of the good.
ANSWER: d. the quantity demanded responds substantially to changes in the price of the good.
TYPE: M SECTION: 1 DIFFICULTY: 1
8. Demand is said to be inelastic if
a. the quantity demanded changes only slightly when the price of the good changes.
b. demand shifts only slightly when the price of the good changes.
c. buyers respond substantially to changes in the price of the good.
d. the price of the good responds only slightly to changes in demand.
ANSWER: a. the quantity demanded changes only slightly when the price of the good changes.
TYPE: M SECTION: 1 DIFFICULTY: 2
9. An inelastic demand means that
a. consumers hardly respond to a change in price.
b. consumers respond substantially to a change in price.
c. consumers respond directly to a change in income.
d. the change in quantity demanded is equal to the change in price.
ANSWER: a. consumers hardly respond to a change in price.
TYPE: M SECTION: 1 DIFFICULTY: 1
10. When quantity demanded responds only slightly to changes in price, demand is said to be
a. unit elastic.
b. elastic.
c. inelastic.
d. perfectly inelastic.
ANSWER: c. inelastic.
TYPE: M SECTION: 1 DIFFICULTY: 1
11. If a good is a necessity, demand for the good would tend to be
a. elastic.
b. horizontal.
c. unit elastic.
d. inelastic.
ANSWER: d. inelastic.
TYPE: M SECTION: 1 DIFFICULTY: 2
12. When quantity demanded responds substantially to changes in price, demand is said to be
a. elastic.
b. inelastic.
c. unit elastic.
d. perfectly elastic.
ANSWER: a. elastic.
TYPE: M SECTION: 1 DIFFICULTY: 1
13. If a good is a luxury, demand for the good would tend to be
a. inelastic.
b. elastic.
c. unit elastic.
d. horizontal.
ANSWER: b. elastic.
TYPE: M SECTION: 1 DIFFICULTY: 2

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Chapter 5 Elasticity and Its Applications MULTIPLE CHOICE 1. In general, elasticity is a. the friction that develops between buyers and sellers in a market. b. a measure of how much government intervention is prevalent in a market. c. a measure of how competitive a market is. d. a measure of how much buyers and sellers respond to changes in market conditions. ANSWER: d. a measure of how much buyers and sellers respond to changes in market conditions. TYPE: M SECTION: 1 DIFFICULTY: 1 2. When studying how some event or policy affects a market, elasticity provides information on the a. direction of the effect on the market. b. magnitude of the effect on the market. c. efficiency of the effect on the market. d. equity of the effect on the market. ANSWER: b. magnitude of the effect on the market. TYPE: M SECTION: 1 DIFFICULTY: 2 3. The most basic tools of economics are a. demand and supply. b. price and quantity. c. monetary and fiscal policy. d. elasticity of demand and supply. ANSWER: a. demand and supply. TYPE: M SECTION: 1 DIFFICULTY: 1 4. The price elasticity of demand measures how responsive a. buyers are to a change in income. b. sellers are to a change in price. c. buyers are to a change in price. d. sellers are to a change in buyers’ incomes. ANSWER: c. buyers are to a change in price. TYPE: M SECTION: 1 DIFFICULTY: 1 5. The price elasticity of demand measures a. a buyer’s responsiveness to a change in the price of a good. b. the increase in demand as additional ...
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