Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

46 THE MEASUREMENT OF ELASTICITIES [CHAP. 3
2. If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of price elasticity
of demand is (a) greater than 1, (b) equal to 1, (c) smaller than 1, or (d) zero.
Ans. (d) See Section 3.1.
3. Arc elasticity gives a better estimate of point elasticity of a curvilinear demand curve as (a) the size of the
arc becomes smaller, (b) the curvature of the demand curve over the arc becomes less, (c) both of the above, or
(d) neither of the above.
Ans. (c) See Fig. 3-4 in Example 4.
4. If a straight-line demand curve is tangent to a curvilinear demand curve, the elasticity of the two demand curves at
the point of tangency is (a) the same, (b) different, (c) can be the same or different, or (d) it depends on the location
of the point of tangency.
Ans. (a) See point D in Fig. 3-4 of Example 4.
5. An increase in the price of a commodity when demand is inelastic causes the total expenditures of consumers of the
commodity to (a) increase, (b) decrease, (c) remain unchanged, or (d) any of the above.
Ans. (a) See Section 3.3.
6. A fall in the price of a commodity whose demand curve is a rectangular hyperbola causes total expenditures on the
commodity to (a) increase, (b) decrease, (c) remain unchanged, or (d) any of the above.
Ans. (c) See Section 3.3.
7. A negative income elasticity of demand for a commodity indicates that as income falls, the amount of the commodity
purchased (a) rises, (b) falls, (c) remains unchanged, or (d) any of the above.
Ans. (a) See Section 3.4.
8. If the income elasticity of demand is greater than 1, the commodity is (a) a necessity, (b) a luxury, (c) an inferior
good, or (d) a nonrelated good.
Ans. (b) See Section 3.4.
9. If the amounts of two commodities purchased both increase or decrease when the price of one changes, the cross
elasticity of demand between them is (a) negative, (b) positive, (c) zero, or (d) 1.
Ans. (a) See Section 3.5.
10. If the amount of a commodity purchased remains unchanged when the price of another commodity changes, the
cross elasticity of demand between them is (a) negative, (b) positive (c) zero, or (d) 1.
Ans. (c) See Section 3.5.
11. e s for a positively sloped straight-line supply curve that intersects the price axis is (a) equal to zero, (b) equal to 1,
(c) greater than 1, or (d) constant.
Ans. (c) See Example 9.
12. Which of the following elasticities measure a movement along a curve rather than a shift in the curve?
(a) The price elasticity of demand. (c) The cross elasticity of demand.
(b) The income elasticity of demand. (d) The price elasticity of supply.
Ans. (a) and (d). The price elasticity of demand and supply measures the relative responsiveness in quantity to the
corresponding relative changes in the commodity price, keeping everything else constant. These are movements
along a curve. The income elasticity and cross elasticity of demand measure shifts in demand.