21)The price of season tickets to a performing arts theater decreases
by 3 percent. As a result, the quantity demanded increases by 6
percent.  The price elasticity of demand for season tickets is:
a)0
b)1
c)2
d)3


22) There are very few, if any, good substitutes for motor oil. 
Therefore,
a)the supply of motor oil would tend to be price elastic
b)the demand for motor oil would tend to be price elastic
c)the demand for motor oil would tend to be price inelastic
d)the demand for motor oil would tend to be income elastic

23)Which pair of products lists the more elastic product first?
a)corn oil and motor oil
b)eggs and butter
c)erasers and snickers candy bars
d)car tires and diet coke

24)Which products are most likely to be the most price elastic?
a)sugar and eggs
b)clothing and auto repair
c)china and glassware
d)elactricity and housing

25)You are newlt appojnted sales manager of the Rock Record Company
and have been charged with the task of increasing revenues.  Your
economics consultants have informed you that at present price and
output levels, price elasticity of demand for your product is less
than one.  You should:
a)decrease prices
b)increase prices
c)hold prices constant and increase supply
d)cut advertising expenditures to decrease the demand for these
records

21. c) 2.  "The elasticity coefficient is percentage change in
quantity demanded divided by percentage change in price."  (page 744)

22. c) the demand for motor oil would tend to be price inelastic. 
"For necessities like food, fuel, and shoes, demand tends to be
inelastic."  (page 70)

23. a) corn oil and motor oil.  Corn oil is a product with lots of
potential substitutes (other vegetable oils, lard, etc.) whereas motor
oil has very few substitutes, making it more inelastic.  "In addition,
those goods that have ready substitutes tend to have higher price
elasticities than those that have no substitutes."  (page 70)

24. c) china and glassware.  China and glassware are luxuries, and
have many substitutes (plastic or paper goods, for example).  The
other items are greater necessities.  See question 23.

25. b) increase prices.  When the price elasticity of demand is less
than one, demand is price inelastic.  "In this case, when price
declines, total revenue declines, and when price is increased, total
revenue goes up."  (page 744)

Sincerely,

Wonko

Source: "Economics" 14th edition by Samuelsson & Nordhaus, McGraw-Hill
Inc., 1992