Chapter 19
The quantity of raspberries sold at a local store increases from 100 pints to 1,500 pints when the price is reduced from $4.00 to $1.00. In this situation, the absolute price elasticity of demand for raspberries is approximately
1.46.
When price is $5 per unit, quantity demanded is 12 units. When price is $6 per unit, quantity demanded is 8 units. The value of the absolute price elasticity of demand is approximately
2.20.
Consider the following data: Price of A Quantity Demanded of A $5 6 $4 10 The absolute value of the price elasticity of demand for product A is
2.25.
At a price of $10, quantity demanded is 30 units. When the price rises to $11, quantity demanded is 24 units. What is the absolute price elasticity of demand?
2.33
Refer to the above table. What is the absolute price elasticity of demand when a price rises from $9 to $9.50?
2.85
Absolute price elasticities are calculated for four commodities, and the values are: 0.009; 1.0; 3.3; and 4.1. Which indicates the most price-responsive situation?
4.1
Price elasticities are calculated for four goods, and the values are: 4.1; 3.7; 1.0; 0.002. Which price elasticity is most elastic?
4.1
Relative percentage changes are used in measuring price elasticity of demand, so that
it does not matter what units are used to measure prices or quantities.
If the demand curve for a product is vertical, then
its price elasticity of demand is equal to zero.
The price elasticity of demand along a linear demand curve is
more elastic at higher prices than at low prices.
The formal definition of price elasticity of demand is
percentage change in quantity demanded divided by percentage change in price.
The price elasticity of demand can be computed as
percentage change in quantity demanded/percentage change in price
A perfectly horizontal demand curve has
perfect elasticity
A demand relationship that is a vertical line up from the quantity axis is
perfectly inelastic.
If a good has an absolute price elasticity of 0, the demand for the good is
perfectly inelastic.
If the quantity demanded of a product is the same for each possible price, demand is
perfectly inelastic.
If there is no response in quantity demanded to a change in price, demand is
perfectly inelastic.
The responsiveness of quantity demanded of a good to changes in its price is the
price elasticity of demand
When economists want to obtain a measure of the responsiveness of quantity demanded to changes in price, they use
price elasticity of demand
When demand is inelastic,
quantity demanded is not very responsive to a change in price.
When demand is elastic,
quantity demanded is very responsive to a change in price.
Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to increase the total revenues from subscriptions, the publishers should
reduce the price of the newsletters.
Given a price elasticity of demand of -0.33, a decrease in price will
reduce total revenue.
The word best associated with price elasticity of demand is
relative
A perfectly elastic demand curve
shows that a slight increase in price will reduce quantity demanded to zero.
The less sensitive quantity demanded is to a change in price, the
smaller the absolute price elasticity of demand.
If the absolute price elasticity of demand for a product is greater than 1, then
the absolute price elasticity of demand is elastic and consumers are relatively sensitive to price changes.
If the absolute price elasticity of demand for a product is less than 1, then
the absolute price elasticity of demand is inelastic and consumers are relatively insensitive to price changes.
If demand is elastic and the price of a product decreases by 10 percent, then
the change in quantity demanded is greater than 10 percent.
The value of the absolute price elasticity of demand for good X is 3. The absolute price elasticity for good Y is 2. Which good's quantity demanded is less responsive to a change in price?
Good Y.
Suppose that the demand for pizza is inelastic. If a pizzeria decided to lower the price of pizza, total revenue would
decrease
If the absolute price elasticity of demand of a good is 1.46, then the total revenues will increase if its market price
decreases
Moving down a straight-line demand curve, the absolute price elasticity of demand
decreases
If the absolute value of the price elasticity of demand for a product is greater than 1, then
demand is elastic
An increase in total revenue will result if
demand is elastic and price decreases
A decrease in total revenue will result if
demand is inelastic and price decreases.
An increase in total revenue will result if
demand is inelastic and price increases
A demand relationship in which a given percentage change in price will result in a larger percentage change in quantity demanded is
elastic
If a good has an absolute price elasticity of 2, the demand for the good is
elastic
If the calculated price elasticity of demand between two points is -4, demand is
elastic
The range to the left of the midpoint on a linear demand curve is
elastic
When the price of a textbook is $100, 60 copies are demanded; and when the price of that textbook goes up to $120, 30 copies are demanded. In the price range between $100 and $120, the demand for the textbook is
elastic
When total revenue and price are inversely related, demand is
elastic
A perfectly elastic demand curve is
horizontal
The price elasticity of demand is a measure of
the responsiveness of the quantity demanded to a change in price
The slope of the perfectly inelastic demand curve is ________, the slope of the perfectly elastic demand curve is ________.
undefined, zero
A vertical demand curve has
zero elasticity.
Refer to the above table. Demand is least price elastic at a price of
$5.00.
The price elasticity of demand measures
how responsive consumers are to a change in price.
Suppose that the absolute price elasticity for cookies equals 0.9. We could then say that the demand for cookies is
inelastic
When the absolute price elasticity of demand equals 0.67, demand is
inelastic
When the calculated price elasticity of demand is -0.45, demand is
inelastic
When total revenue and price are directly related, demand is
inelastic
The absolute price elasticity of demand for a vertical demand curve
is 0.
The actual value of price elasticity of demand
is always negative.
The greater is the absolute price elasticity of demand, the
larger is the responsiveness of quantity demanded to the price change
If the price elasticity of demand for apples is greater than 1, an increase in apple prices will
lower total revenue
The actual value of the price elasticity of demand is always
negative because of the law of demand
Even though price elasticity of demand is always ________, by convention its absolute value is always discussed as a ________.
negative; positive number
To say that demand is inelastic means that
quantity demanded not very responsive to price changes.
An inelastic demand indicates that
relatively large changes in price are required to obtain a relatively small change in quantity demanded
Price elasticity of demand is the responsiveness of
the quantity demanded to a change in price.
If the absolute price elasticity of demand is 0.2, a 10 percent increase in the price will cause
the quantity demanded to decrease by 2 percent.
If the absolute price elasticity of demand is 2, a 10 percent increase in the price will cause
the quantity demanded to decrease by 20 percent.
Price elasticity of demand basically measures
the responsiveness of consumers to price changes.
The price elasticity of demand measures
the responsiveness of the quantity demanded to changes in price
If a good has an absolute price elasticity of 1, the demand for the good is
unit elastic.
If a 5 percent change in the price of a good elicited a 5 percent change in the quantity demanded of the good, we would say that over this range of prices the good has a(n)
unit elasticity of demand.
A demand relationship in which the quantity demanded changes exactly in proportion to the change in price is
unit-elastic
If a one percent increase in the price of bananas leads to a one percent decrease in the quantity of bananas demanded, then the demand for bananas is
unit-elastic
When the absolute percentage change in quantity demanded is just equal to the percentage change in price, demand is
unit-elastic
When the absolute price elasticity of demand equals 1, demand is
unit-elastic
When total revenue remain unchanged when there is a change in price, demand is
unit-elastic
When demand is perfectly inelastic, the demand curve is
vertical
When demand is unit elastic, a 10 percent change in the price of the good
will cause a change in quantity demanded equal to 10 percent.
Suppose that when the price of good X changes, the quantity of good Y demanded remains the same. The cross price elasticity of demand is
zero
The price elasticity of demand along a vertical demand curve is
zero
A perfectly inelastic demand curve exhibits
zero responsiveness to changes in price
If an item has an absolute price elasticity of demand that is greater than 1, we say the demand for the item is
elastic
Refer to the above table. Demand is unit elastic between the prices of
$6.00 & $6.50.
If the price of gasoline increased by 5 % and consumers responded by purchasing 1 % less gasoline, the absolute value of price elasticity of demand for gasoline would equal
0.2.
When the absolute price elasticity of demand equals 2.5, demand is
elastic
Six months ago, the price of gasoline was $2.20 per gallon. Now, the price is $2.40 per gallon. In response to this price increase, the number of gallons of gasoline purchased has declined by 2 percent. Based on this information, what is the absolute price elasticity of demand for gasoline?
0.23
If the price of gasoline increases from $2.50 per gallon to $3.00 per gallon and the quantity demanded goes down from 120 million gallons per week to 115 million gallons per week, the absolute value of price elasticity of demand in that price range is approximately
0.23.
Suppose the quantity demanded of ice cream cones increases from 400 to 425 cones a day when the price is reduced from $1.50 to $1.25. In this situation, the elasticity of demand, calculated using the average method, is
0.33
Suppose that when the price of milk rises 20%, the quantity demanded of milk falls 10%. Based on this information, what is the approximate absolute price elasticity of demand for milk?
0.5
A 10 percent increase in the price of neckties leads to a 5 percent decrease in the quantity demanded of neckties. The absolute price elasticity of demand is
0.5.
If the price of oil goes up by 50 % and the quantity demanded goes down by 25%, the absolute value of the price elasticity of demand is
0.50.
The local baseball stadium's concession stands previously sold hot dogs for 80 cents apiece. At that price, when a baseball fan went to watch a baseball game, he bought 2 hotdogs. But now that the stadium has a "dime-a-dog night," he has purchased 6 hot dogs. What is the approximate value of this individual's absolute price elasticity of demand for hot dogs?
0.64
Owners of a coffee shop finds that they can sell 150 donuts a day when the price of a donut is $1.20. When they price donuts at $1, they sell 170 donuts. The absolute value of the price elasticity of demand for donuts is
0.69.
Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?
0.72
When the price of a soft drink from the campus vending machine was $0.60 per can, 100 cans were sold each day. After the price increased to $0.75 per can, sales dropped to 85 cans per day. Over this range, the absolute price elasticity of demand for soft drinks was approximately equal to
0.73
A 2 percent rise in the price of a good leads to a 2 percent decrease in quantity demanded. The absolute price elasticity of demand is
1.0
A 10 percent increase in the price of smartphones leads to a 10 percent decrease in the quantity demanded of smartphones. The absolute price elasticity of demand is
1.0.
Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7 to $6.50?
1.17
The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars. If price were measured in cents, the price elasticity elasticity of demand would equal
1.2
According to the above table, what is the absolute price elasticity of demand when price rises from $5.50 to $6?
1.21
Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to $7?
1.38
If the price of good A increases from $15 to $20 per unit and quantity demanded falls from 1500 to 1000 units, then by using the method of average values, we can calculate the absolute price elasticity of demand to be
1.4.
Suppose that the price of eggs increases from 75 cents to $1.00 per dozen and as a result a typical farmer experiences a decrease in egg sales from 300 to 200 dozen per week. Using the method of average values, the absolute price elasticity of demand is
1.4.
If the price of a cola increased by 12 % and consumers responded by purchasing 20 % less cola, the absolute value of price elasticity of demand for cola would be
1.67.
If the price of corn chips increases from $2.00 per bag to $3.00 per bag and the quantity demanded goes down from 100 million bags per week to 50 million bags per week, the absolute value of price elasticity of demand in that price range is
1.67.
Refer to the above table. What is the absolute price elasticity of demand when a price rises from $8 to $8.50?
1.94
If the absolute price elasticity of demand is 2.0, a 5 percent decrease in price will increase quantity demanded by
10 percent
An absolute price elasticity of demand equal to 0.4 indicates that a
10 percent decrease in price leads to a 4 percent increase in quantity demanded.
A 3 percent increase in the price of cotton leads to a 6 percent decrease in the quantity demanded of cotton. The absolute price elasticity of demand is
2
A 2 percent increase in the price of neckties leads to a 5 percent decrease in the quantity demanded of neckties. The absolute price elasticity of demand is
2.5.
According to the above table, what is the absolute price elasticity of demand if price falls from $8.00 to
2.82
If price decreases by 10 percent and quantity demanded increases by 30 percent, the price elasticity of demand will be
3
If the absolute value of the price elasticity of demand for a product is 1.5, and the price of a product increased 30 percent, then the quantity demanded will decline by
45 percent.
Which of the following is NOT characteristic of a good with elastic demand?
A) The absolute price elasticity of demand is less than 1. B) Total revenue decreases if price is increased. C) Buyers are relatively sensitive to price changes. D) The percentage change in quantity demanded is greater than the percentage change in price. Answer: A
Which of the following statements about demand and price elasticity of demand is TRUE?
As the demand curve has a negative slope, the price elasticity of demand is negative.
A decrease in total revenue will result if
Demand is elastic, and price increases.
A value of the absolute price elasticity of demand equal to 2.5 indicates that
a 1% decrease in price leads to a 2.5% increase in quantity demanded
A value of the absolute price elasticity of demand equal to 0.5 indicates that
a 1% increase in price leads to a 0.5% decrease in quantity demanded.
A value of the absolute price elasticity of demand equal to 0.6 indicates that
a 10 percent increase in price leads to a 6 percent decrease in quantity demanded.
Demand is said to be inelastic when
a given percentage change in price will result in a less than proportionate percentage change in the quantity demanded.
We say that a good has elastic demand whenever the absolute value of the price elasticity of demand is greater than 1. A 1 percent change in price therefore causes
a greater than 1 percent change in quantity demanded.
Over the inelastic range of a demand curve, there is
a positive relationship between a given percentage change in price and a change in total revenues.
If demand for a good is perfectly inelastic, then
a price increase would cause no change in quantity demanded.
When demand is elastic,
a proportionately small change in price leads to a proportionately large change in quantity demanded.
If demand is unit elastic, then
a two percent increase in price leads to a two percent decrease in quantity demanded.
Wheat is sold in world markets, usually priced in terms of bushels. In the market for wheat, the price elasticity of demand for wheat would be expressed as
a unitless number.
The price elasticity of demand is
always negative, but by convention, economists typically express the price elasticity of demand as an absolute value.
The result of the calculation of the price elasticity of demand is
always negative.
If the absolute price elasticity of demand for a product is less than 1, then
consumers are relatively insensitive to price changes.
If the absolute price elasticity of demand for a product is greater than 1, then
consumers are relatively sensitive to price changes
A firm could lower prices and still increase revenue if
demand is elastic
If total revenues decline when the market clearing price increases, then we know that
demand is elastic.
If the market price of a product falls and as a result total revenue of firms falls, we can conclude that
demand is inelastic in this price range.
If the demand curve for a product is horizontal, then
demand is perfectly elastic
When discussing the price elasticity of demand we generally refer to the absolute price elasticity of demand by consumers. This means that we will
disregard the minus sign.
No matter what the price of coffee is in the cafeteria, Jack spends $20 a week on coffee. We can conclude that the absolute value of the price elasticity of demand for coffee for Jack is
equal to 1.
If a seller lowers the price of a product when demand is price inelastic, the seller can expect revenues to
fall
The value of the absolute price elasticity of demand for good X is 4. The absolute price elasticity for good Y is 1. Which good's quantity demanded is more responsive to a change in price?
good x
The more sensitive people are to a change in price, the
greater is the price elasticity of demand.
If a price decrease of a product significantly raises its revenues, then the absolute price elasticity of demand for that product must be
greater than one.
If the absolute price elasticity of demand for good Y is 0.75, when there is a 30 percent increase in price, we can conclude that quantity demanded
has fallen by 22.5 percent.
A perfectly elastic demand would imply what kind of demand curve?
horizontal
A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent. The consumer's demand curve is
horizontal and is perfectly elastic.
If the absolute price elasticity of demand for concert tickets is 0.75, an increase in ticket prices will
increase total revenue
A demand relationship in which a given percentage change in price will result in a less than proportionate percentage change in quantity demanded is
inelastic
The price elasticity of demand is measured by the
percentage change in quantity demanded divided by the percentage change in price.
The price elasticity of demand is the
percentage change in quantity demanded divided by the percentage change in price.
In an extreme hypothetical instance in which the price change of a good elicited no change in quantity demanded, we would say that the item is
perfectly inelastic.
Elastic demand implies
that a one percent increase in price results in a larger than one percent decrease in quantity demanded.
Inelastic demand implies
that a one percent increase in price results in a smaller than one percent decrease in quantity demanded
If the absolute price elasticity of demand for automobiles is equal to 0.75, we say
that demand is inelastic.
A perfectly elastic demand curve exhibits
that quantity demanded will decrease to zero when there is a slight increase in the price level.
The price elasticity of demand measures
the consumers' sensitivity to a price change.
If the price elasticity of demand for good A is -1, then a 1% increase in
the market price of good A will result in a 1% decrease in the quantity demanded of good A .
A good's price elasticity of demand can be calculated by using the formula of
the percentage change in quantity demanded divided by the percentage change in price