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Chapter 4 - Tutorial Exercise

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11 views

Chapter 4 - Tutorial Exercise

ecc102

Uploaded by

thandoangelmaluleke
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter 4: Tutorial Questions

Multiple Choice Questions

1)The price elasticity of demand is defined as the magnitude of


A) the change in quantity demanded divided by the change in price.
B) the change in price divided by the change in quantity demanded.
C) the percentage change in quantity demanded divided by the percentage
change in price.
D) the percentage change in price divided by the percentage change in
quantity demanded.

2)If a 20 percent increase in the price of a used car results in a 10 percent decrease in the
quantity of used cars demanded, then the price elasticity of demand equals
A) 0.5.
B) 1.0.
C) 2.0.
D) 10.0.

3)If the cross elasticity of demand for good x with respect to the price of good y is positive,
then goods x and y are
A) normal goods.
B) inferior goods.
C) complements.
D) substitutes.

4)A good with a vertical demand curve has a demand with


A) unit elasticity.
B) infinite elasticity.
C) zero elasticity.
D) varying elasticity.

5)The price elasticity of demand for a good is greater


A) the smaller the number of substitute goods available.
B) for highly complementary goods.
C) for necessities like basic foodstuffs than for luxury goods and services.
D) the longer the time period under consideration.

6)If the income elasticity of demand for a good is -0.5, then this would imply that this good
must be a(n)
A) necessity.
B) luxury.
C) inferior good.
D) substitute.
7)The price of strawberries fell from R10 to R5 per box. This led to an increase in the
quantity demanded of strawberries from 15 to 20 boxes per month. The price elasticity of
demand is closest to ___.
A) 0.43
B) 2.33
C) 1
D) 0.25

8)You are told that when the price of beef fell by 50%, the quantity demanded rose by
100%. The elasticity of demand for beef would thus be
A) price elastic.
B) unitary price elastic.
C) price inelastic.
D) income elastic.
E) income inelastic.

Use this figure to answer the question below.

9)At price P1 and quantity Q1


A) demand curve D1 is the most price elastic.
B) demand curve D2 is the most price elastic.
C) demand curve D3 is the most price elastic.
D) the coefficient of the price elasticity of demand is the same on D1, D2 and D3.
E) the coefficient of the price elasticity of demand across the three demand curves
cannot be compared from the information given.
10)If the cross-price elasticity of demand between bread rolls and cheese is –3.0, it implies
that these goods are
A) luxuries.
B) complements.
C) necessities.
D) substitutes.
E) income inferior goods.

Long Question

Compare income elasticity of demand and the cross-price elasticity of demand. [2 Marks]

………………………………………………………………………….

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