SUPPLY & DEMAND AND PRICE ELASTICITY

Week Two Quiz

Supply DEMAND and Price Elasticity

Student Name : ____________________________

Date : ____________________________________

Section One : Multiple Choice

A 1 . If a 20 decrease in the price of long distance phone calls leads to a 35 increase in the quantity of calls demanded , we can conclude that the demand for phone calls is

a . elastic

b . inelastic

c . unit elastic

d . stretchy elastic

B 2 . Which of the following pairs are examples of substitutes

Popcorn Pepsi

Automobiles Bicycles

Boats Fishing Tackle

Wine Cheese

B

3 . When we say that a price in a competitive market is too high to clear the market ' we usually mean that (given upward-sloping supply curves

no producer can cover the costs of production at that price

quantity supplied exceeds quantity demanded at that price

producers are leaving the industry

consumers are willing to buy all the units produced at that price

B 4 . Which of the following statements is incorrect ? Assume upward-sloping supply curves

If the supply curve shifts left and the demand remains constant equilibrium price will rise

If the demand curve shifts left and the supply increase , equilibrium price will rise

If the supply curve shifts right and the demand curve shifts left equilibrium price will fall

If the demand curve shifts right and the supply curve shifts left , price will rise

Section Two : Short Answer (250 words or less

1 . Define Elasticity of Demand . Give an example

Elasticity of Demand is the responsiveness of a good to a change in its price . It...