Ch.6 Elasticity

An increase in the price of a substitute for Ipads will lead to ___ in the quantity demanded of Ipads so the the cross-price elasticity of demand will be____

an increase, positive

Economists avoid confusion over units in the computation of elasticity by using:

percantage changes

The price elasticity of supply always has a:

positive value

If the supply of Good B is perfectly elastic and price falls the quantity supplied will:

fall to zero

The more substitutes that exist for a particular product, the ___ the price elasticity of demand

greater

Prior to the 1997 federal tobacco settlement a pack of cigarettes sold for $2.48. The terms of the settlement required a decrease in teenage smoking of 60 percent. If the elasticity of cigarette demand for teenagers is about 1.3 then the price of cigarettes should rise to __________ in order to achieve the target reduction of 60 percent.

$3.62 -sold for $2.48 0.60/1.3=.4615 or 46.15% so $2.48(1+.4615)=$3.62

The current price of wheat is $1.00 per bushel, and the price elasticity of demand for wheat is known to be 0.50. A bad harvest causes the supply of wheat to decrease and as a result the price of wheat rises by 20%. What will be the percentage change in quantity demanded for wheat and will farm revenues rise or fall?

10%, rise

Using the initial value formula, the value of price elasticity of supply between points S and T equals:

2.0 - goes from $2 to $2.20 -calculate the change in price and then the percentage change in qsup, there is your answer

If the income elasticity of SUVs is greater than 1, what is the good considered?

A luxury

If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in quantity demanded of 25 percent, we say the demand for Red Bull is __________ in this range.

Elastic --25/20=-1.25

When you compute a price elasticity of demand the answer is always

Negative

The ___ is a measure of responsiveness of the change in qdem of a good to the change in its price

Price elasticity of demand

What is the cross-price elasticity of demand for two goods that are unrelated?

Zero

Personal computers and computer display monitors are:

complements - are consumed together

If the price of elasticity of supply is 0.4, then a 20% increase in price will ___ the quantity supplied by ___%

increase, 8.0

Along a linear demand curve, the slope ___ while the price elasticity of demand___

is constant, changes from one point to another

If prices rise the quantity supplied will be greater:

the longer the time that elapses

If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25 percent, the price elasticity of demand is:

-1.25

The income elasticity for peanut butter is -3. This defines peanut butter as what type of good?

An inferior good

If the cross-price elasticity of demand between two products is -3.0, then the two products are:

Complements

Which of these demand curves shows a perfectly inelastic demand?

The demand curve on the left

A perfectly inelastic suppply curve:

indicates the quantity supplied does not respond to a change in price

At current prices of a highly addictive drug the demand for the drug is highly price:

inelastic - because it is addictive the consumer will pay any price for the drug

The disappearance of the family farm can be partially attributed to the fact that the elasticity of demand for wheat is ____ while at the same time, the income elasticity for wheat is___

inelastic, low

Which of the following goods is probably the most highly income elastic?

Private Education -luxury good that people will consume if their income increases