Elasticity and Inelasticity

1. If the quantity supplied of a product increases at every price (shifting the

supply curve rightward) and the demand curve for the product is relatively inelastic,
equilibrium quantity will ____, equilibrium price will ____, but equilibrium ____ will
change proportionately more.

a) decrease; increase; price

b) increase; increase; price
c). increase; decrease; price
d) increase; increase; quantity
e) increase; decrease; quantity

2. If the price of a product changes by 5 percent, and as a result quantity

demanded changes by 10 percent,

a) demand for the product is price-inelastic.

b) revenue will rise if the price change was an increase.
c) revenue will fall if the price change was a reduction.
d). revenue will rise if the price change was a reduction.
e) revenue will rise if price goes up or down

3. If even the smallest reduction in the price of a product results in the quantity
supplied falling to zero, the supply for this product

a) is perfectly price-inelastic.
b) is price-inelastic.
c). is perfectly price-elastic.
d) is price-elastic.
e) has a price elasticity of unity.

4. If the price elasticity of supply for a product is 2, a price increase from $1.00
to $1.02 will cause quantity supplied to

a). rise by 4 percent.

b) rise by 2 percent.
c) fall by 4 percent.
d) fall by 2 percent.
e) rise by $.04.

5. The formula for the price elasticity of supply is the

a). percentage change in quantity supplied divided by the

percentage change in price.
b) change in quantity supplied divided by the change in price.
c) percentage change in price divided by the percentage change
in quantity supplied.
d) change in price divided by the change in quantity supplied.
e) percentage change in quantity supplied divided by the change
in price.

6. A tax has been levied on a product. The more price-elastic the demand for
that product is,

a) the more likely it is that the tax is borne equally by consumers

and sellers.
b). the greater is the proportion of the tax borne by
producers.
c) the greater is the revenue that is raised by the tax.
d) the greater is the proportion of the tax borne by consumers.
e) the more likely it is that the tax will be reflected in a change in
price rather than a change in quantity.

7. If a firm lowers the price of its product and finds that total revenue has fallen,
this indicates that

a). demand for the product is price-inelastic.

b) demand for the product is price-elastic.
c) demand for the product has unit price elasticity.
d) the demand curve for the product is downward sloping.
e) the price elasticity is greater than 1.

8. If the price elasticity of demand for a product is .5, a price ____ will result in
____ in revenue.

a) reduction; an increase
b) increase; a reduction
c) increase; no change
d). increase; an increase
e) reduction; no change

9. If the supply curve of a product is relatively elastic and the price of a

compliment to the product rises, equilibrium quantity will ____ and equilibrium price
will ____, but equilibrium ____ will change proportionately more.

a) decrease; decrease; price

b) increase; decrease; price
c). decrease; decrease; quantity
d) increase; decrease; quantity
e) increase; increase; price

10. If the supply of a product is upward sloping and the price of a substitute
product rises, equilibrium quantity will ____ and equilibrium price will ____.

a). increase; increase

b) decrease; increase
c) increase; decrease
d) decrease; decrease
e) increase; remain unchanged