Theme 1 - Markets - Price Elasticity (demand and supply)
Quiz by Mark Seccombe
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- Q1
Assume the PED for best quality French wine is zero. What would be the effect in New Zealand if the New Zealand government imposed a tariff on such wine?
The price of the wine would rise by an amount less than the tariff
Expenditure on the wine would rise
Sales of the wine would cease
Demand for the wine would fall
30s1.2.3a - Q2
The price elasticity of supply of cocoa beans over a given time period is found to be +0.4, the most likely explanation for this PES value is that
Cocoa beans are a necessity to consumers
Cocoa bean farmers have plenty of spare capacity
Stock levels of cocoa beans are below normal
Farmers are able to store cocoa beans at low cost
30s1.2.5 - Q3
The price elasticity of demand for late night taxi fares is found to be -0.7. This implies that
Taxi companies would see their revenues fall if they cut their fares
A small rise in fares would cause many more taxi drivers to supply vehicles late at night
Bus companies would see a large rise in passengers if taxi fares were raised
Taxi companies would see their revenues rise if they cut their fees
30s1.2.3a - Q4
A good has unitary PED and at a price of $25 it sells 100,000 units. If it lowers the price by 10%, what will happen to total revenue?
It will rise
It will fall
It will remain the same
Impossible to calculate without more data
30s1.2.3a - Q5
Which statement about income elasticity of demand is correct?
The income elasticity of demand for inferior goods is 0
The income elasticity of demand for normal necessities is >+1
The income elasticity of demand for normal luxuries is >+1
The income elasticity of demand for inferior goods is >0
30s1.2.3b - Q6
What would increase the price elasticity of supply of a firm's products?
A decrease in the period of time that stocks can be kept
A decrease in the time that it takes to produce the products
An increase in the level of employment in the area
An increase in the cost of capital goods employed by the firm
30s1.2.5 - Q7
Product R is an inferior good with no close substitutes. It is also a complement to Product S. Which describes product R?
YED is zero and XED with respect to good S is positive
YED is positive and XED with respect to good S is negative
YED is negative and XED with respect to good S is negative
YED is negative and XED with respect to good S is positive
30s1.2.3c - Q8
The price of good X rises by 10%. As a result, the demand for a substitute good Y rises by 20%. What is the cross elasticity of demand for good Y with respect to good X?
+2
-2
+0.5
-0.5
30s1.2.3c - Q9
What will make it more likely that road tolls will reduce traffic congestion?
Cross elasticity of demand between private and public transport is zero
Supply of public transport is price inelastic
Demand for car use is price elastic
Demand for car use is income elastic
30s1.2.3a - Q10
If the demand curve for a product has unitary price elasticity across all relevant price levels then
A fall in price will bring about an increase in expenditure on the product
A fall in price will bring about an increase in sales but a fall in expenditure on the product
As the price rises, expenditure on the product rises and than falls
As the price rises, expenditure on the product remains the same
30s1.2.3a