Question : 6.2   The Determinants of the Price Elasticity of Demand 1) Which : 1387529

6.2   The Determinants of the Price Elasticity of Demand

1) Which of the following products comes closest to having a perfectly inelastic demand?

A) gasoline

B) cholesterol medication in general

C) iPhones

D) bus rides

2) Which of the following statements about the price elasticity of demand is correct?

A) The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good.

B) The absolute value of the elasticity of demand ranges from zero to one.

C) Demand is more elastic in the long run than it is in the short run.

D) Demand is more elastic the smaller the percentage of the consumer’s budget the item takes up.

3) When there are few close substitutes available for a good, demand tends to be

A) perfectly inelastic.

B) perfectly elastic.

C) relatively inelastic.

D) relatively elastic.

4) Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

A) Demand is likely to be perfectly inelastic.

B) Demand is likely to be perfectly elastic.

C) Demand is likely to be relatively elastic.

D) Demand is likely to be relatively inelastic.

5) A demand curve that is horizontal indicates that the commodity

A) has few substitutes.

B) must be very cheap.

C) is a necessity.

D) has a large number of substitutes.

6) Which of the following goods would have the most inelastic demand?

A) ski vacations

B) bread

C) luxury cars

D) big screen TVs

7) The demand for all carbonated beverages is likely to be ________ the demand for Dr. Pepper.

A) more elastic than

B) perfectly elastic compared to

C) less elastic than

D) perfectly inelastic compared to

8) The demand for gasoline in the short run is

A) elastic because people can easily switch to public transportation.

B) perfectly inelastic because people have no choice but to buy gasoline.

C) unit-elastic because people tend to consume a stable amount of gasoline per period.

D) inelastic because there are no good substitutes for gasoline.

9) According to an article in the Wall Street Journal, unlike airlines, even elite hotels don’t have sophisticated systems that can react quickly to changes in demand. Even if they could, many hoteliers say people don’t respond that much to lower rates. “We’ve tested this, cutting our rates by $50 [per night], and we didn’t see an appreciable response in occupancy,” says Jim Schultenover, a vice president for Ritz-Carlton.

Source: Jesse Drucker, “In Times of Belt-Tightening, We Seek Reasonable Rates,” Wall Street Journal, April 6, 2001.

Based on the information above, the demand for hotel rooms is

A) elastic.

B) unit-elastic.

C) inelastic.

D) perfectly elastic.

10) According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?

A) The toothpaste industry is highly competitive.

B) Toothpaste is relatively inexpensive.

C) Toothpaste is heavily endorsed by dentists.

D) There are few close substitutes for toothpaste.