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Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
Figure 5-2
____ 7. Refer to Figure 5-2. The price elasticity of demand between point A and point B, using the midpoint method,
is
a. 1.
b. 1.5.
c. 2.
d. 2.5.
____ 8. When the local used bookstore prices economics books at $15.00 each, they generally sell 70 books per
month. If they lower the price to $7.00, sales increase to 90 books per month. Given this information, we
know that the price elasticity of demand for economics books is about
a. 2.91, and an increase in price from $7.00 to $15.00 results in an increase in total revenue.
b. 2.91, and an increase in price from $7.00 to $15.00 results in a decrease in total revenue.
c. 0.34, and an increase in price from $7.00 to $15.00 results in an increase in total revenue.
d. 0.34, and an increase in price from $7.00 to $15.00 results in a decrease in total revenue.
____ 9. If a 6 percent increase in income results in a 10 percent increase in the quantity demanded of pizza, then the
income elasticity of demand for pizza is
a. negative and therefore pizza is an normal good.
b. negative and therefore pizza is a inferior good.
c. positive and therefore pizza is an inferior good.
d. positive and therefore pizza is a normal good.
____ 10. The cross-price elasticity of demand can tell us whether goods are
a. normal or inferior.
b. elastic or inelastic.
c. luxuries or necessities.
d. complements or substitutes.
Elasticity Quiz
Answer Section
MULTIPLE CHOICE