288
Chapter 5
Elasticity and Its Application
TRUE/FALSE
1.
Elasticity measures how responsive quantity is to changes in price.
ANS:
T
DIF:
1
REF:
5-0
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Definitional
2.
Measures of elasticity enhance our ability to study the magnitudes of changes.
ANS:
T
DIF:
1
REF:
5-0
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Definitional
3.
The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.
ANS:
F
DIF:
2
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
4.
In general, demand curves for necessities tend to be price elastic.
ANS:
F
DIF:
1
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
5.
In general, demand curves for luxuries tend to be price elastic.
ANS:
T
DIF:
1
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
6.
Necessities tend to have inelastic demands, whereas luxuries have elastic demands.
ANS:
T
DIF:
2
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
7.
Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.
ANS:
T
DIF:
2
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
8.
The demand for Rice Krispies is more elastic than the demand for cereal in general.
ANS:
T
DIF:
2
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
9.
The demand for soap is more elastic than the demand for Dove soap.
ANS:
F
DIF:
2
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
10.
The demand for gasoline will respond more to a change in price over a period of five weeks than over a period
of five years.
ANS:
F
DIF:
2
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
11.
Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer
time horizon.
ANS:
T
DIF:
2
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Interpretive
12.
The price elasticity of demand is defined as the percentage change in quantity demanded divided by the
percentage change in price.
ANS:
T
DIF:
1
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Definitional
13.
The price elasticity of demand is defined as the percentage change in price divided by the percentage change
in quantity demanded.
ANS:
F
DIF:
1
REF:
5-1
NAT:
Analytic
LOC:
Elasticity
TOP:
Price elasticity of demand
MSC:
Definitional