Economics Micro & Macro (CliffsAP)

7. What does price cross-elasticity of demand represent?
   A. The relationship of substitutes and complements
   B. The relationship between prices and quantity demanded
   C. The relationship between prices and quantity supplied
   D. The level of income an individual spends on goods and services
   E. The level of income an individual saves on goods and services


8. How many elasticity ranges are on a demand curve?
   A. 1
   B. 4
   C. 2
   D. 5
   E. 3


9. Which of the following is not a range of elasticity?
   A. Elastic
   B. Inelastic
   C. Unitary elastic
   D. Secondary elastic
   E. None of the above

10. What does a total revenue curve represent?

A. The relationship between prices and quantity supplied

B. The relationship between prices and units made

C. The relationship between revenue and quantity sold

D. An illustration of quantity demanded

E. An illustration of quantity supplied

Answers to Review Questions

1. D. Price elasticity of demand determines the responsiveness of consumers’ demand to a price change.


2. B.A one-percent change in quantity demanded because of a three-percent change in price does not yield an elastic
   demand. The answer to the equation (change in quantity demanded divided by the change in price) is .33 (inelastic).


3. D. Price elasticity of demand measures the change in quantity demanded due to a price change.


4. D. Prescription medication is typically an inelastic product. People need their medication; therefore, in a
   particular price range, quantity demanded will be inelastic.


5. D. Price elasticity of supply measures the responsiveness quantity supplied has to a price change.


6. B.The time period taken into account is a determinant of price elasticity of demand because time allows
   consumers to change and shift their behaviors, thereby creating a more accurate reaction to a change in price.


7. A.Cross-elasticity of demand represents the relationship between substitutes and complements.


8. E.There are three ranges of elasticities on the demand curve: unitary elastic, inelastic, and elastic.


9. D. Secondary elastic is not a range of elasticity.


10. C.Total revenue curves represent the relationship between revenue (prices) and quantity sold. Total revenue is
    equal to the number of products sold times the price.

Part III: Microeconomics