Choose the correct answer for each question.

1. The price elasticity of demand measures the responsiveness of quantity demanded for good X to ____________________

   1.   ?    quantity demanded
   2.   ?    quantity supplied
   3.   ?    a change in the price of good X
   4.   ?    a change in the output of good X

2. When the price elasticity of demand for a good is greater than 1, we say that the demand is ____________________.Demand is said to be ____________________ when the elasticity of demand is less than ____________________

   1.   ?    elastic, inelastic, -1
   2.   ?    elastic, inelastic, 1
   3.   ?    inelastic, elastic, 1
   4.   ?    inelastic, elastic, -1

3. True or False, the steeper the demand curve, the less elastic the demand curve

   1.   ?    True
   2.   ?    False

4. When the price of petrol rises 30%, the quantity of petrol purchased falls by 6%. The demand for petrol is _______________

   1.   ?    perfectly elastic
   2.   ?    perfectly inelastic
   3.   ?    price inelastic
   4.   ?    price elastic

5. The local multiplex cinema discovered that when it charged £5 for the afternoon matinee, it took in £450 per showing, but when it lowered the price to £3, it took in £500 per showing. This implied that the elasticity of demand for afternoon matinee movies is

   1.   ?    Price inelastic
   2.   ?    Price elastic
   3.   ?    Unit elastic
   4.   ?    Perfectly elastic

6. We know that the demand for a good or service is inelastic if ____________________

   1.   ?    when price rises, total revenue rises
   2.   ?    when price rises, total revenue falls
   3.   ?    when price rises, quantity demanded falls
   4.   ?    when price rises, quantity demanded rises

7. If you earn £50,000 a year and acquiring a cable TV service costs you £360 per year, your demand for cable television is likely to be

   1.   ?    perfectly inelastic
   2.   ?    perfectly elastic
   3.   ?    inelastic
   4.   ?    elastic

8. When consumers only have a limited time period to respond to price changes, demand becomes

   1.   ?    more price elastic
   2.   ?    less price elastic
   3.   ?    unit elastic
   4.   ?    the time frame does not influence price elasticity of demand

9. If the price elasticity of demand for beans is estimated to be -0.4, then a 20% increase in price will _______ the quantity demanded by ____ %

   1.   ?    increase, 8%
   2.   ?    decrease, 14%
   3.   ?    increase, 16%
   4.   ?    decrease, 8%

10. Given that the market demand for heroin is inelastic, how will a reduction in market supply affect total revenue of those selling this drug (other things equal)?

    1.   ?    Total revenue will rise
    2.   ?    Total revenue will fall
    3.   ?    Total revenue will remain unchanged
    4.   ?    The final effect on total revenue cannot be predicted - it depends on how much the supply has fallen