AS Economics: Elasticity of Demand and Supply

The demand for a product will tend to be elastic when:
1. It has few close substitutes
2. It is quickly consumed
3. The purchase of the product takes up a high proportion of a consumers' budget
4. It is subject to habitual consumption
A mobile telephone company reduces its charges by 15% and finds that demand for calls rises by only 6%. Which of the following would describe the price elasticity of demand?
1. It is perfectly inelastic
2. It is elastic
3. It is inelastic
4. Elasticity of demand = unity (1)
Which of the following statements about price elasticity of supply is correct?
1. Elasticity of supply is normally negative rather than positive
2. Elasticity of supply is higher when a producers' stock levels are fairly high
3. Elasticity of supply is lower the longer the time period involved
4. Elasticity of supply will be higher when existing factor resources are being fully utilised
If the price elasticity of demand for butter is 2, a 1% decrease in the price of butter will
1. Double the quantity demanded
2. Reduce the quantity demanded by half
3. Increase the quantity demanded by 2%
4. Increase the quantity demanded by 0.5%
The demand for frozen orange juice is found to have a price elasticity of demand equal to 1.8. If there is a severe frost which destroys large quantities of oranges we expect to see
1. A fall in the market price and a rise in spending on orange juice
2. A rise in the market price and a fall in spending on orange juice
3. No change in the market price and no change in spending
4. An increase in the market price and no change in spending
The price elasticity of demand for British built computers in foreign markets is estimated to be 2. A fall in the exchange rate lowers the foreign prices of these computers by 10%. Assuming the British computer industry has unemployed resources, the lower exchange rate will result in the number of computers exported rising by
1. 5%
2. 8%
3. 10%
4. 20%
Ratko loves truffles. As the price of a truffle increases from 50p to 60p, Ratko continues to buy a dozen truffles every week. Ratko's demand for chocolate truffles is
1. Elastic
2. Unit elastic
3. Perfectly inelastic.
4. Illustrated by a horizontal demand curve.
When the price of a DVD version of a new film is £12 per unit, 180,000 DVDs are demanded each week. The manufacturer estimates that the price elasticity of demand is (-) 1.4. If the price of the DVD were cut by £3, how many DVDs would be demanded at the new price?
1. 200,000
2. 215,000
3. 220,000
4. 243,000
The price elasticity of demand is equal to the _in the __ divided by the ___ in the __
1. Change, quantity demanded, change, price.
2. Percentage change, quantity demanded, percentage change, price.
3. Change, price, change, quantity demanded.
4. Percentage change, price, percentage change, quantity demanded.
A firm sells 80000 packs of washing powder at a price of £3 per pack. The price is increased to £3.60 and the price elasticity of demand is (-) 0.7. The new quantity demanded will be
1. 67000
2. 68800
3. 70000
4. 75000
If the demand is perfectly elastic, the elasticity of demand is ___and the demand curve is ___
1. Infinite, horizontal
2. Zero, horizontal
3. Zero, vertical
4. Infinite, vertical
A normal good can be distinguished from an inferior good because a normal good has
1. A positive income elasticity of demand
2. A positive price elasticity of demand
3. A positive cross price elasticity of demand
4. A negative income elasticity of demand
An industry's supply curve is more likely to be elastic if
1. Producers have low levels of stocks
2. Firms are operating at below full capacity
3. New firms are unable to enter the market
4. There are shortages of skilled labour needed by the firm to increase production
If the price elasticity of supply of UK produced coal is 0.6, an increase in the price for £30 to £33 per tonne will increase the quantity produced each week from 400,000 tonnes to
1. 420000 tonnes
2. 422000 tonnes
3. 424000 tonnes
4. 430000 tonnes
A manufacturer reduces the price of his washing machines by 5% and, as a result, the volume of sales of washing machines rises by 4%. The price elasticity of demand for the good is
1. -1.25
2. -0.8
3. -1.0
4. Indeterminate from available information
Evidence suggests that the cross elasticity of demand between private and public transport, whilst positive, is very low. Therefore it follows that
1. A fall in the demand for private transport would cause a small rise in the demand for public transport
2. A rise in the price of private transport would cause a slight fall in the demand for public transport
3. A fall in the demand for private transport would cause a small rise in the price of public transport
4. A rise in the price of private transport would cause a small rise in the demand for public transport
A supermarket reduces the price of oranges from 20 pence each to 16 pence each. the weekly sales increase from 8,000 to 12,000. The price elasticity of demand is
1. -0.4
2. -0.6
3. -2.0
4. -2.5
"
In 2001, export prices of coffee in Ethiopia fell by half - from 79 cents per pound in 2000 to 39 cents" If the demand for Ethiopian coffee is assumed to be price inelastic, the fall in price will cause
1. A rise in the total revenue of coffee growers
2. A fall in the total revenue of coffee growers
3. No change in total revenue
4. An increase in the profitability of growing coffee in Ethiopia
Vodafone estimates the price elasticity of demand for text messages to be -2.0. If the business cuts the price of text messages by 20%, demand could be expected to
1. expand by 20%
2. expand by 30%
3. expand by 40%
4. expand by 10%

AS Economics: Elasticity of Demand and Supply

Economics Multiple-choice Quiz