Chapters 5 (test2) study questions
Elasticity is just about one big idea, which is:
measuring how responsive people are to changing conditions.
Easy entry into and exit from a market makes the supply _____.
more elastic
_____ occurs when the percent change in quantity supplied is infinite for any change in price.
Perfectly elastic supply
A supercenter provides more variety of goods than a small store does. You will find that you are _____ when shopping in a supercenter because _____.
more price sensitive; there are close substitutes to something you want
The quantity of parking permits demanded drops from 12,774 down to 7,265; use the midpoint formula to calculate the percentage change in quantity.
-55%
If the price of windmills rises by 20%, and the quantity supplied rises by 2%, what is the price elasticity of supply of windmills?
0.1
If cutting the price of frozen pizza by 30% leads to an increase in the quantity demanded by 6%, what is the absolute value of the price elasticity of demand for frozen pizza?
0.2
If cutting the price of shoes by 5% leads to an increase in the quantity demanded by 10%, what is the absolute value of the price elasticity of demand for shoes?
2.0
If increasing the price of watches by 6% leads to a decrease in the quantity demanded by 15%, what is the absolute value of the price elasticity of demand for watches?
2.5
A _____ absolute value of the price elasticity of supply means that the quantity is more responsive to _____ changes.
bigger; price
When the demand curve is completely horizontal it means that the price elasticity of demand is infinite. Economists call this _____ demand.
perfectly elastic
After the price rises, which of the following graphs yields less revenue?
graph 1
After the price rises, which of the following graphs yields more revenue?
graph 2
The price elasticity of supply is a _____ number, because changes in price lead to changes in quantity in _____ along a supply curve.
positive; the same direction
The _____ measures how responsive buyers are to price changes.
price elasticity of demand
The price elasticity of demand measures by what percent the _____ will change following a 1% _____ increase.
quantity demanded; price
The price elasticity of supply may be _____ in the short run, but it is typically _____ over the long run.
quite small; much larger
When prices _____, new businesses may enter the market. When prices _____ some businesses may exit.
rise; fall
Supply is inelastic whenever the percent change in quantity supplied is:
smaller than the percent change in price.
When the percent change in price is _____ than the percent change in quantity demanded, demand is _____.
smaller; elastic
The availability of _____ determines the price elasticity of _____.
substitutes; demand
What does the shaded area in the graph below represent?
total revenue
What is the total revenue of the indicated price and quantity in the demand graph below?
$300
If cutting the price of automobiles by 20% leads to an increase in the quantity demanded by 5%, what is the absolute value of the price elasticity of demand for automobiles?
0.25
If cutting the price of milk by 20% leads to an increase in the quantity demanded by 10%, what is the absolute value of the price elasticity of demand for milk?
0.5
If increasing the price of solar panels by 20% leads to a decrease in the quantity demanded by 10%, what is the absolute value of the price elasticity of demand for solar panels?
0.5
If the average income in the United States rises by 5%, then housing expenditures by homeowners increase by 3%. Based on this information, what is the income elasticity of demand for housing?
0.6
Calculate the absolute value of the price elasticity of demand if the percentage change in price is 67% and the percentage change in quantity is −55%.
0.8
If increasing the price of eggs by 10% leads to a decrease in the quantity demanded by 10%, what is the absolute value of the price elasticity of demand for eggs?
1.0
When the government increased the minimum wage by 50%, it led to a 75% increase in workers providing labor. Based on the information given, what is the price elasticity of supply for labor?
1.5
On weeknights an Uber driver can expect to earn $110 driving a six-hour shift. Surge pricing on Saturday nights mean that Uber drivers can expect to earn $140 driving a six-hour shift. On weeknights, there are 200 drivers on the road, which rises to 300 on Saturdays. Calculate the price elasticity of supply of Uber drivers using the midpoint formula.
1.67
If the price of eggs were to rise by 15%, and if the price elasticity of demand for eggs is around −0.2, will the quantity demanded for eggs increase or decrease, and by what percent?
Decrease by 3%
When the percent change in price is _____ than the percent change in quantity demanded, demand is _____.
Larger; inelastic
Describe the price elasticity of demand for each graph.
Graph 1 is elastic, and graph 2 is inelastic.
Which of the following is NOT a correct demand elasticity factor?
Necessities have more elastic demand
E-books are highly price-elastic. For every 1 copy of an e-book sold at $16.00, 1.75 copies would have been purchased if the price had been $10.00. If customers would buy 10,000 copies of a particular e-book when priced at $16.00, which price point produces lower revenue?
The $16.00 price point yields $15,000 less in revenue than at $10.00.
E-books are highly price-elastic. For every copy of an e-book sold at $14.99, it would sell 74% more if priced at $9.99. If customers buy 100,000 copies of a particular e-book when priced at $14.99, which price gives higher revenue?
The $9.99 price point yields $239,260 more in revenue than at $14.99.
The price elasticity of supply measures:
how responsive sellers are to price changes.
When the sign of the cross-price elasticity of demand is positive, it means that you buy _____ of a good when the price of another good goes up.`
more
The price elasticity of supply measures by what percent _____ will increase following a 1% _____.
the quantity supplied; price rise
