Chapter 4: Market Demand and Elasticity

At any price, the market demand curve
1. is flatter than the flattest individual demand curve.
2. has a slope that is the average of the individual demand curve slopes.
3. is steeper than the steepest individual demand curve.
4. has a horizontal intercept equal to the average of the individual demand curve horizontal intercepts.
Suppose there are two people who demand apples. Suppose one considers apples and oranges complements and another considers them substitutes. An increase in the price of oranges will
1. increase the market demand for oranges.
2. decrease the market demand for apples.
3. increase the market demand for apples.
4. have an uncertain impact on the market demand for apples.
The inelasticity of demand for petroleum
1. makes no theoretical sense.
2. makes sense because there are very few substitutes.
3. makes little sense because there are very few substitutes.
4. is more pronounced in the long run.
If the income elasticity of demand is 2, the good is
1. a luxury.
2. a normal good (but not a luxury).
3. an inferior good.
4. a Giffen good.
If the income elasticity of demand is 1/2, the good is
1. a luxury.
2. a normal good (but not a luxury).
3. an inferior good.
4. a Giffen good.
If the cross price elasticity of demand equals -1, then the two goods are
1. both normal.
2. both inferior.
3. complements to one another.
4. substitutes to one another.
The market demand curve for any good is
1. independent of individuals’ demand curves for the good.
2. the vertical summation of individuals’ demand curves.
3. the horizontal summation of individuals’ demand curves.
4. derived from the firm’s marginal cost of production.
If the demand for a product is elastic, then a rise in price will
1. cause total spending on the good to increase.
2. cause total spending on the good to decrease.
3. keep total spending the same, but reduce the quantity demanded.
4. keep total spending the same, but increase the quantity demanded.
If a consumer purchases only two goods (X and Y ) and the demand for X is elastic, then a rise in the price of X
1. will cause total spending on good Y to rise.
2. will cause total spending on good Y to fall.
3. will cause total spending on good Y to remain unchanged.
4. will have an indeterminate effect on total spending on good Y.
The price elasticity of demand for any good must be less than or equal to zero unless
1. the good is a necessity.
2. the good is a luxury.
3. the good is a Giffen good.

Chapter 4: Market Demand and Elasticity

Multiple Choice Questions