Lesson test: Elasticity

3.[2p]
Why is the slope of a demand curve a poor measure of responsiveness?

It changes whenever the units of price or quantity change, so it cannot be compared across goods

Correct

It is always negative, which makes comparison awkward

The answer is: It changes whenever the units of price or quantity change, so it cannot be compared across goods

It is constant along a straight line, unlike elasticity

The answer is: It changes whenever the units of price or quantity change, so it cannot be compared across goods

It cannot be computed without knowing income

The answer is: It changes whenever the units of price or quantity change, so it cannot be compared across goods

4.[1p]
A flat demand curve is elastic everywhere and a steep one is inelastic everywhere.

True

The answer is: False

False

Correct

5.[3p]
A tobacco tax raises the price of cigarettes by 10 per cent, and demand has elasticity $- 0.4$ . What happens to total spending on cigarettes?

It rises, because demand is inelastic and $1 + ε > 0$

Correct

It falls, because quantity falls

The answer is: It rises, because demand is inelastic and $1 + \varepsilon > 0$

It is unchanged, because the elasticity is less than one in magnitude

The answer is: It rises, because demand is inelastic and $1 + \varepsilon > 0$

It rises by exactly 10 per cent

The answer is: It rises, because demand is inelastic and $1 + \varepsilon > 0$

6.[2p]
The price of coffee rises 8 per cent and tea sales rise 3.2 per cent. What is the cross-price elasticity of tea with respect to the price of coffee?

CorrectNot quite: 0.4

7.[2p]
A household's income rises 12 per cent and its bus journeys fall 9 per cent. What is the income elasticity of bus travel?

CorrectNot quite: -0.75

8.[3p]
Which of these make the demand for a good more elastic?

Select all that apply

Close substitutes are available

Correct

The good takes a large share of the budget

Correct

A longer time horizon is allowed for adjustment

Correct

The good is a necessity with no alternative

The answer is: Close substitutes are available, The good takes a large share of the budget, A longer time horizon is allowed for adjustment

9.[3p]
Why can a scatter of historical prices and quantities not be used directly as a demand curve?

The observed points are intersections of supply and demand, so they trace neither curve

Correct

Historical prices are recorded in nominal terms

The answer is: The observed points are intersections of supply and demand, so they trace neither curve

Demand curves must be estimated in logs, not levels

The answer is: The observed points are intersections of supply and demand, so they trace neither curve

Quantities are measured with error while prices are not

The answer is: The observed points are intersections of supply and demand, so they trace neither curve

Sign in

Elasticity

1.[2p]
Demand is $q = 120 - 4 p$ . What is the price elasticity of demand at $p = 20$ ?

2.[2p]
For the same demand curve, at what price is demand unit elastic?

3.[2p]
Why is the slope of a demand curve a poor measure of responsiveness?

4.[1p]
A flat demand curve is elastic everywhere and a steep one is inelastic everywhere.

5.[3p]
A tobacco tax raises the price of cigarettes by 10 per cent, and demand has elasticity $- 0.4$ . What happens to total spending on cigarettes?

6.[2p]
The price of coffee rises 8 per cent and tea sales rise 3.2 per cent. What is the cross-price elasticity of tea with respect to the price of coffee?

7.[2p]
A household's income rises 12 per cent and its bus journeys fall 9 per cent. What is the income elasticity of bus travel?

8.[3p]
Which of these make the demand for a good more elastic?

9.[3p]
Why can a scatter of historical prices and quantities not be used directly as a demand curve?

1.[2p] Demand is q=120-4p. What is the price elasticity of demand at p=20?

2.[2p] For the same demand curve, at what price is demand unit elastic?

3.[2p] Why is the slope of a demand curve a poor measure of responsiveness?

4.[1p] A flat demand curve is elastic everywhere and a steep one is inelastic everywhere.

5.[3p] A tobacco tax raises the price of cigarettes by 10 per cent, and demand has elasticity -0.4. What happens to total spending on cigarettes?

6.[2p] The price of coffee rises 8 per cent and tea sales rise 3.2 per cent. What is the cross-price elasticity of tea with respect to the price of coffee?

7.[2p] A household's income rises 12 per cent and its bus journeys fall 9 per cent. What is the income elasticity of bus travel?

8.[3p] Which of these make the demand for a good more elastic?

9.[3p] Why can a scatter of historical prices and quantities not be used directly as a demand curve?

1.[2p]
Demand is $q = 120 - 4 p$ . What is the price elasticity of demand at $p = 20$ ?

2.[2p]
For the same demand curve, at what price is demand unit elastic?

3.[2p]
Why is the slope of a demand curve a poor measure of responsiveness?

4.[1p]
A flat demand curve is elastic everywhere and a steep one is inelastic everywhere.

5.[3p]
A tobacco tax raises the price of cigarettes by 10 per cent, and demand has elasticity $- 0.4$ . What happens to total spending on cigarettes?

6.[2p]
The price of coffee rises 8 per cent and tea sales rise 3.2 per cent. What is the cross-price elasticity of tea with respect to the price of coffee?

7.[2p]
A household's income rises 12 per cent and its bus journeys fall 9 per cent. What is the income elasticity of bus travel?

8.[3p]
Which of these make the demand for a good more elastic?

9.[3p]
Why can a scatter of historical prices and quantities not be used directly as a demand curve?