Week 5 — Quiz · Elasticity

Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Objective 3 · 10 questions · 10 points · closed to AI · one attempt
Auto-graded (Classic QTI): see F-quiz-week-05-qti.xml for the Canvas import. Every numeric answer is pre-computed; every claim verified.

The questions (human-readable; answer key below)

Q1. Using the midpoint formula, what is the price elasticity of demand when price falls from $4 to $2 and quantity demanded rises from 80 to 100?

A) +1/3 (positive — demand slopes upward) B) −1 (unit elastic) C) −1/3 ≈ −0.33 (inelastic) D) −3 (elastic)

Q2. A good's price falls from $4 to $2 and quantity demanded rises from 80 to 100. Total revenue moves from $320 to $200. This result —

A) Contradicts the PED calculation, which showed elastic demand B) Confirms the PED calculation: P and TR move in the same direction (both fall), consistent with inelastic demand C) Shows unit-elastic demand, since both price and quantity changed D) Proves demand shifted to the left when price fell

Q3. A market research firm calculates PED = −2.5 for a luxury handbag. This means demand is —

A) Inelastic: buyers barely react to price changes
B) Elastic: a 10% price increase leads to a 25% drop in quantity demanded
C) Unit-elastic: total revenue does not change when price changes
D) Perfectly inelastic: quantity demanded does not change at all

Q4. (True/False) On a straight-line (linear) demand curve, price elasticity of demand is the same at every point along the curve. → False

Q5. Which of the following statements correctly distinguishes elasticity from slope?

A) Slope measures percentage changes; elasticity measures absolute changes
B) Both slope and elasticity change at every point along a linear demand curve
C) Slope measures absolute changes and is constant along a linear curve; elasticity measures percentage changes and varies at every point
D) Elasticity and slope are equal at the midpoint of a linear demand curve

Q6. (Select all that apply.) Which of the following would make the demand for a good MORE elastic?

☑ A) There are many close substitutes available
☐ B) The good is a necessity with no alternatives
☑ C) Buyers have a long time to adjust to the price change
☐ D) The good accounts for a tiny share of the average buyer's budget
☑ E) The good is considered a luxury item

Q7. Income rises from $50,000 to $70,000 per year and a household's annual demand for restaurant meals rises from 60 to 90 meals. Using the midpoint formula, the income elasticity (YED) is —

A) +0.5 (normal good, necessity range)
B) +1.0 (unit elastic)
C) +1.2 (normal good, luxury range)
D) −1.2 (inferior good)

Q8. When the price of coffee rises, consumers buy more tea. The cross-price elasticity (XED) of tea with respect to coffee price is —

A) Negative — coffee and tea are complements
B) Zero — the goods are unrelated
C) Positive — coffee and tea are substitutes
D) Equal to the PED for coffee

Q9. (Matching) Match each XED value to the correct economic relationship:
- XED = +0.8 → Substitutes (goods that buyers switch between)
- XED = −0.6 → Complements (goods used together)
- XED ≈ 0 → Unrelated goods
- YED = −0.4 → Inferior good (quantity falls when income rises)

Q10. A seller of concert tickets knows demand is elastic on the current price segment. To maximize total revenue, the seller should —

A) Raise the ticket price, since higher prices always bring more revenue
B) Keep the price fixed, since any change reduces revenue
C) Lower the ticket price — when demand is elastic, a price cut raises TR (P and TR move opposite directions)
D) Raise the ticket price — when demand is elastic, buyers barely reduce their ticket purchases

Answer key & feedback (instructor)

Q1 arithmetic re-check (midpoint): P: $4→$2, Q: 80→100. %ΔQ = (100−80)/((80+100)/2) = 20/90 = 2/9. %ΔP = (2−4)/((4+2)/2) = −2/3. PED = (2/9)÷(−2/3) = (2/9)×(−3/2) = −6/18 = −1/3 ≈ −0.333. |PED|<1 → inelastic ✓. TR: $4×80=$320; $2×100=$200. TR falls; P falls → same direction → inelastic ✓.

Q7 arithmetic re-check: %ΔQ=(90−60)/75=30/75=2/5; %ΔY=(70k−50k)/60k=20k/60k=1/3; YED=(2/5)÷(1/3)=6/5=1.2 ✓.