Assessment One - Practice Quiz 1. Suppose the value of the price elasticity of demand is -2. What does this mean? A) A 1 per cent increase in the price of the good causes quantity demanded to increase...

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Assessment One - Practice Quiz 1. Suppose the value of the price elasticity of demand is -2. What does this mean? A) A 1 per cent increase in the price of the good causes quantity demanded to increase by 2 per cent. B) A 1 per cent increase in the price of the good causes quantity demanded to decrease by 2 per cent. C) A 2 per cent increase in the price of the good causes quantity demanded to decrease by 1 per cent. D) A $1 increase in price causes quantity demanded to fall by 2 units. 2. If the percentage increase in price is 10 per cent and the value of the price elasticity of demand is -2, then quantity demanded A) will increase by 20 per cent. B) will increase by 10 per cent. C) will decrease by 20 per cent. D) will decrease by 10 per cent. 3. If 100 units are sold at a price of $20 and 80 units are sold at a price of $30, what is the absolute value of the price elasticity of demand? Use the arc method. A) 0.60 B) 0.62 C) 1.62 D) 0.56 4. At a price of $5 per unit, Jane sells 20 units of marmalade per week. When she raised her price to $7 per unit, she still sold 20 units per week. Based on this information, the demand for her marmalade is A) perfectly elastic. B) inelastic. C) unit-elastic. D) perfectly inelastic. 5. If the demand for a steak is inelastic, then A) the percentage change in quantity demanded is 1 per cent greater than the percentage change in price. B) the percentage change in quantity demanded is less than the percentage change in price. C) the percentage change in quantity demanded is 100 per cent greater than the percentage change in price (in absolute value). D) quantity demanded does not respond to changes in price. 6. Consider the following pairs of items: a.shampoo and conditioner b.iPhones and earbuds c.a laptop computer and a desktop computer d.beef and pork e.air-travel and weed killer Which of the pairs listed will have a positive cross-price elasticity? A) a and b only B) c and d only C) e only D) a, b, and d only 7) A change in which of the following variables will NOT change the market demand for a product? A) the price of the product. B) population and demographics. C) income. D) tastes. 8) If the price of music downloads was to increase, then A) the demand for iPods would decrease. B) the demand for iPods would increase. C) the supply of iPods would increase. D) the quantity demanded of iPods would increase. 9) If the quantity of textbooks supplied is 5,000 per year and the quantity of textbooks demanded is 8,000 per year, there is a ________ in the market and the price will ________. A) surplus; fall B) shortage; rise C) shortage; fall D) surplus; rise 10) Consider the products of coffee and tea. If there is a significant increase in the cost of producing of tea, there will also be A) an increase in the price of coffee and an increase in the supply of coffee. B) a leftward shift in the demand curve for coffee. C) a leftward shift of the supply curve of tea; a rightward shift of the demand for coffee; an increase in the equilibrium price of both tea and coffee; a reduction in the equilibrium quantity of tea and an increase in the equilibrium quantity of coffee. D) a decrease in the price of coffee and a shift of the demand for coffee to the left. 11) Consider the impact of the following economic events on the market for cars. The price of public transport trips decrease and at the same time indirect taxes on cars decrease. A) equilibrium price remains ambiguous and equilibrium quantity increases. B) both equilibrium price and equilibrium quantity decrease. C) both equilibrium price and equilibrium quantity increase. D) equilibrium price decreases and equilibrium quantity remains ambiguous. 12) Which of the following factors may cause both the demand and supply curves to shift to the left: A) An increase in the cost of production and a decrease in income tax. B) A decrease in the population and a decrease in the price of alternative products. C) A natural disaster and an increase in income tax D) A decrease in the price of a substitute good and an increase in business confidence. 13) If iPods and earbuds are considered to be complementary, then other things equal, an increase in the price of iPods will: A) decrease the demand for the earbuds. B) increase the demand for the earbuds. C) increase the quantity demanded for iPods. D) increase the quantity demanded for the earbuds. 14. Consider the market for coats. The demand function of coats is Qd = 800 – 4P while the supply function is Qs = -300 + 2P. From the above, it can be determined that the slopes of the demand and supply curves are: a. -0.27 and + 0.25 respectively b. -0.25 and + 0.30 respectively c. -0.30 and + 0.40 respectively d. -0.25 and + 0.50 respectively 15. Consider the market for smart phones. The demand function of smart phones is Qd = 1600 – 4P while the supply function is Qs = -800 + 4P. From the above, it can be ascertained that the equilibrium price and equilibrium quantity of smart phones are: a. $300 and 400 b. $400 and 500 c. $250 and 300 d. $500 and 630