Economics 12
Demand and Supply – Quiz #2
Name: _________________________
Date: _________________________
Multiple Choice Section – Choose the best answer. [5]
1. If the demand for a product is inelastic, the coefficient of elasticity is:
a) less than one *
b) equal to one
c) zero
d) greater than one
2. If the price of a product increases by 6 percent and the quantity demanded falls by 10 percent, the demand for
this product is:
a) inelastic
b) unitary elastic
c) elastic *
d) perfectly inelastic
3. A perfectly inelastic demand curve is:
a) downward sloping to the right
b) vertical *
c) horizontal
d) upward sloping to the right
4. If the demand for a product is inelastic and the price of the product increases, the total amount of money
brought in from the sale of the product:
a) stays the same
b) decreases
c) increases *
d) is impossible to tell without further information
5. If an increase in the price of a product leads to a decrease in total revenue, the demand for this product is:
a) elastic *
b) inelastic
c) unitary elastic
d) perfectly elastic
6. If a 20 percent increase in the price led to a 15 percent increase in quantity demanded, the elasticity of
demand is:
a) Inelastic *
b) perfectly elastic
c) unitary elastic
d) elastic
7. Which of the following products is likely to have the most inelastic demand?
a) medical care *
b) blue jeans
c) chocolate bars
d) magazines
8. Which of the following products are likely to have the most elastic demand?
a) medical care *
b) blue jeans
c) chocolate bars
d) magazines *
Demand and Supply Quiz #2
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9. The coefficient of price elasticity of demand is calculated by:
a) dividing the change in quantity demanded by the change in price
b) dividing the change in price by the change in quantity demanded
c) dividing the percentage change in quantity demanded by the percentage change in price *
d) dividing the percentage change in price by the percentage change in quantity demanded
10. Which of the following characteristics does not lead to an elastic demand?
a) many substitutes
b) luxury product
c) quantity demanded decreases when price increases *
d) composes a large percentage of one's budget
11. The demand for a product will be more elastic:
a) the greater the number of substitutes for it *
b) the smaller the percentage of one's budget spent on it
c) if it is a necessity
d) the shorter the time period under consideration
12. If consumers spend a fixed amount of money on a product regardless of the price, the demand can be said to
be:
a) elastic
b) inelastic
c) unitary elastic *
d) perfectly elastic
13. When we say that the demand for a product is elastic we mean:
a) that the demand curve slopes to the right
b) that the coefficient of price elasticity of demand is less than one
c) that the percentage change in quantity demanded is greater than the percentage change in price *
d) that an increase in price will increase total revenue
14. The demand for a product tends to be less elastic:
a) the more substitutes there are available for it
b) the greater the percentage of our income allocated to it
c) the lower the price
d) the closer the product is to being a necessity *
15. If the price of a product increased from $28 to $32 and quantity demanded decreased from 102 to 98 units, the
demand is said to be:
a) perfectly elastic
b) inelastic *
c) elastic
d) unitary elastic
16. Which of the following statements is correct?
a) the imposition of a price ceiling on a product results in quantity demanded exceeding quantity supplied *
b) when the quantity supplied of a product exceeds the quantity demanded, the price increases
c) the imposition of an excise tax on a product causes the supply curves to shift to the right
d) the minimum wage is an example of a price ceiling in the labour market
17. A price ceiling:
a) describes the legal minimum price imposed on a product by the government
b) results in a shortage of the product *
c) results in quantity supplied exceeding quantity demanded
Demand and Supply Quiz #2
-3d) is imposed by government in order to support farm incomes
18. A price floor:
a) results in quantity supplied exceeding quantity demanded *
b) results in a shortage of the product
c) is imposed by government in order to stop price increases
d) is a legal maximum price
19. Both price ceilings and price floors:
a) result in rationing by government of the available product
b) force the government to impose quotas on producers
c) result in less of the product being exchanged in the marketplace *
d) involve government subsidies to producers
20. The following program is an example of price ceiling:
a) agricultural price support
b) rent control *
c) pollution-control legislation
d) guaranteed annual income
21. Which diagram below represents an inelastic demand curve, and why?
a) Figure 1, because a flatter curve shows that price changes cause smaller changes in quantity demanded.
b) Figure 2, because a steep curve shows that price changes cause larger changes in quantity demanded.
c) Figure 1, because a flatter curve shows that price changes cause larger changes in quantity demanded. *
d) Figure 2, because a steep curve shows that price changes cause smaller changes in the quantity demanded.
Demand and Supply Quiz #2
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Short Answers Section [5]
Cheese
Price
$3.00
$3.40
Quantity
116 250
123 750
Original Price/Quantity
New Price/Quantity
Bread
Price
$1.50
$3.00
Quantity
153 950
114 250
Original Price/Quantity
New Price/Quantity
1. Using the information above, calculate the price elasticity of : (remember to use % change)
a) bread [2]
b) cheese [2]
c) What do you think would happen to the demand of cheese if price of bread went from $3 to $6 each. [1]