CLEP Microeconomics chapter practice4 questions

10 Elasticity

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

The price elasticity of demand for a good is 1.8. A 5 percent increase in price will cause quantity demanded to

Elasticity of 1.8 means quantity changes by about 1.8 times the percentage price change: 1.8(5%)=9% in the opposite direction.
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A. fall by approximately 9 percent

Elasticity of 1.8 means quantity changes by about 1.8 times the percentage price change: 1.8(5%)=9% in the opposite direction.

Question 2

Question 2 of 4

Demand is inelastic over the relevant range. If a seller raises price, total revenue will generally

With inelastic demand, quantity falls proportionally less than price rises, so price times quantity increases.
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D. rise

With inelastic demand, quantity falls proportionally less than price rises, so price times quantity increases.

Question 3

Question 3 of 4

For which purchase would a 10 percent price increase most likely cause the largest percentage reduction in quantity demanded?

A narrowly defined brand with many close substitutes gives buyers easy alternatives, increasing responsiveness to its price.
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C. A particular cereal brand with many substitutes

A narrowly defined brand with many close substitutes gives buyers easy alternatives, increasing responsiveness to its price.

Question 4

Question 4 of 4

The cross-price elasticity between goods X and Y is negative. The goods are most likely

A higher price of one good reduces demand for the other when the goods are consumed together, producing negative cross-price elasticity.
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E. complements

A higher price of one good reduces demand for the other when the goods are consumed together, producing negative cross-price elasticity.

Quiz complete