econ ch 6
If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is a relatively large positive number, then it indicates that A) the two brands are probably made by the same company. B) the two brands of detergent are close substitutes. C) consumers have a distinct preference for one brand versus the other. D) detergents are necessities.
b
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are A) substitutes. B) complements. C) inferior. D) normal.
b
If the market for a product is broadly defined, then A) the good has many complements. B) there are few substitutes for the product and the demand for the product is relatively inelastic. C) there are many substitutes for the product and the demand for the product is relatively elastic. D) the expenditure on the good is likely to make up a large share of one's budget.
b
According to a study of the U.S. demand for alcoholic beverages, the price elasticity of demand for beer is -0.30. Which of the following could explain why the price elasticity of demand for beer is low? A) Beer is an inferior alcoholic beverage. B) More and more people are switching to wine and cocktails rather than beer. C) The price of beer is relatively low and for many people it is a habit forming product. D) There are only a few major suppliers of beer.
c
Bringing oil to the market is a relatively long and costly process. The whole process from exploration to pumping significant amounts of oil can take years. What does this indicate about the price elasticity of supply for oil? A) The elasticity coefficient is likely to be very high and supply is inelastic. B) The elasticity coefficient is likely to be close to zero and supply is perfectly elastic. C) The elasticity coefficient is likely to be low and supply is highly inelastic. D) The elasticity coefficient is likely to be low and supply is highly elastic.
c
why do suppliers like to know the elasticity of the GoS?
it would allow them to change price to maxims total revenue (tr)
if income elasticity of demand is negative
the good is inferior
The income elasticity of demand measures A) the responsiveness of quantity demanded to changes in income. B) how a consumer's purchasing power is affected by a change in the price of a product. C) the percentage change in the price of a product divided by the percentage change in consumer income. D) the income effect of a change in price.
a
The price elasticity of an upward-sloping supply curve is always A) positive. B) negative. C) greater than one. D) impossible to determine.
a
If the income elasticity for canned food is 0.8, then canned food is an inferior good.
false
midpoint formula for price elasticity of demand
(Q2-Q1)/((Q1+Q2)/2) / (P2-P1)/((P1+P2)/2)
The relationship between E and TR
- every demand curve has an elastic and inelastic range
Explain the concepts of cross-price elasticity of demand and income elasticity of demand. What do positive and negative values indicate for each of these demand elasticities?
Cross-price elasticity of demand measures the percentage change in quantity demanded of one good based on the percentage change in the price of another good. If cross-price elasticity is positive, the two goods are substitutes. If cross-price elasticity is negative, the two goods are complements. Income elasticity of demand measures the responsiveness of quantity demanded to changes in income. If income elasticity is positive but less than one, the product is a normal good and a necessity. If income elasticity is positive and greater than one, the product is a normal good and a luxury. If income elasticity is negative, the product is an inferior good.
Total Revenue=
Price x Quantity
If firms do not increase their quantity supplied when price changes, then supply is A) perfectly elastic. B) perfectly inelastic. C) inelastic. D) elastic.
b
Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product decreases. Which of the following statements accurately predicts the resulting decrease in price? A) The more elastic the supply curve, the greater the price increase. B) The more elastic the supply curve, the smaller the price decrease. C) The increase in price is not affected by the elasticity of the supply curve. D) The decrease in price will always be proportional to the magnitude of the demand shift.
b
The price elasticity of supply is usually a positive number because A) quantity supplied increases in response to income increases. B) quantity supplied increases in response to price increases. C) the quantity demanded usually rises when price falls and therefore suppliers would want to capitalize on this increase in demand. D) price rises when supply increases.
b
The process involved in bringing oil to world markets can take years. Substitutes for oil-based products such as gasoline are limited. As a result A) the supply of oil is very elastic and the demand for oil is very elastic over short periods of time. B) the supply of oil is very inelastic and the demand for gasoline is inelastic over short periods of time. C) the supply of oil and the demand for oil shift to the right over short periods of time. D) the supply of oil and the demand for oil are both perfectly elastic over short periods of time.
b
Which of the following statements is true? A) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic. B) The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. C) The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly. D) Over short periods of time increases in the demand for oil are greater than increases in the supply of oil. Over the long run increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.
b
uppose at the going wage rate of $20 per hour, firms can hire as many hours of janitorial services as they desire. If any firm tries to lower the wage rate to $19, it will not be able to hire any janitor. What does this indicate about the supply curve for janitorial services? A) Supply is unit-elastic. B) Supply is perfectly elastic. C) Supply is perfectly inelastic. D) Supply is relatively inelastic.
b
Shifts in the supply of oil have caused large changes in price since the 1970s because A) the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time. B) the supply of oil is very elastic while the demand for oil is inelastic over short periods of time. C) both the supply of oil and the demand for oil are inelastic over short periods of time. D) the supply of oil and the demand for oil are perfectly elastic over short periods of time.
c
Suppose the value of the price elasticity of supply is 4. What does this mean? A) A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent. B) A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent. C) A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. D) For every $1 increase in price, quantity supplied increases by 4 units.
c
Inelastic supply occurs whenever the elasticity of supply value is A) negative and < -1. B) any positive number. C) positive and > 1. D) positive and < 1.
d
Suppose the demand curve for hybrid cars shifts to the right. This will cause a relatively small increase in the price of hybrid cars if A) demand is elastic and supply is inelastic. B) demand is inelastic and supply is perfectly inelastic. C) both demand and supply are inelastic. D) both demand and supply are elastic.
d
Supply is elastic whenever the value of the elasticity of supply is positive and greater than 1.
true
Suppose the supply curve for digital cameras shifts to the right. This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.
true
What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?
Price elasticity of demand measures the responsiveness of the quantity of a product demanded to a change in the price of the product. Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price. Demand is inelastic when the percentage change in quantity demanded is less than the percentage change in price. Demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price
You are the manager of a theater. At present the theater charges the same admission price of $8 to all customers, regardless of age. You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults. You tell your supervisor that your proposal is likely to increase revenue. What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.
You believe that the price elasticity of demand for theater tickets for children is elastic. Hence, a decrease in price will increase revenue. The demand for tickets for adults is inelastic; therefore, increasing price for this group will increase revenue.
Between 1950 and 2017, the number of acres devoted to wheat production in the United States ________ and the price of wheat ________. A) declined; decreased B) more than doubled; increased by about 50 percent C) declined; more than doubled D) increased; more than doubled
a
If demand is perfectly elastic, the absolute value of the price elasticity coefficient is A) infinity. B) zero. C) one. D) equal to the absolute value of the slope of the demand curve.
a
If raising the price of sweetened beverages would cause the owner to receive less total revenue from the sale of sweetened beverages, the demand for sweetened beverages is A) elastic. B) inelastic. C) unit elastic. D) perfectly inelastic.
a
If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then A) the price elasticity of demand for teapots is greater than 1 in absolute value. B) the demand for teapots is unit elastic. C) the price elasticity of demand for teapots is equal to zero. D) the price elasticity of demand for teapots is less than 1 in absolute value.
a
If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, demand for using the toll road must be A) inelastic. B) elastic. C) unit elastic. D) perfectly elastic.
a
In order to prove that Motrin and Ibuprofen are substitutes, one should measure the ________ and get a ________. A) cross-price elasticity; positive number B) cross-price elasticity; negative number C) price elasticity of demand; number greater than 1 (in absolute value) D) price elasticity of demand; number less than 1 (in absolute value)
a
Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21. This indicates that A) wine and spirits are luxury goods. B) wine is a luxury good and spirits are inferior goods. C) wine and spirits are highly price elastic. D) wine is a luxury good and spirits are necessities.
a
If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded A) will increase by 45 percent. B) will increase by 5 percent. C) will decrease by 45 percent. D) will decrease by 5 percent.
c
If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is A) unit elastic. B) perfectly elastic. C) relatively inelastic. D) relatively elastic.
c
Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand? A) 0.11 B) 0.37 C) 2.69 D) 9.33
c
Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is ∞. What happens to sales revenue if the restaurant increases its price by 5 percent? A) Sales revenue falls by less than 5 percent. B) Sales revenue remains unchanged. C) Sales revenue falls by 100 percent. D) It cannot be determined without information on prices.
c
If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.
false
If the price elasticity of demand is unit elastic, a 10 percent increase in price will result in a 10 percent increase in revenue.
false
The absolute value of the price elasticity of demand for telescopes is 1.5. Therefore, telescopes can be classified as a luxury.
false
The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.
false
The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm products will also cause farm revenues to fall.
false
The market demand for The Federalist Papers is likely to be more elastic than the market demand for a best-selling mystery novel.
false
if cross price elasticity is positive
goods are substitutes
is a flatter demand save more or less responsive/elastic than a steeper D curve
more elastic
perfectly inelastic demand
the case where the quantity demanded is completely unresponsive to price and the price elasticity of demand equals zero -vertical demand curve (D does not change)
perfectly elastic demand
the case where the quantity demanded is infinitely responsive to price and the price elasticity of demand equals infinity -flat demand curve
total revenue
the total amount of funds a seller receives from selling a good or service, calculated by multiplying price per unit by the number of units sold
the determinant of price elasticity of supply
time (short term- less elastic, long term- more elastic) -flatter=more elastic -vertical s curve = perfectly inelastic -flat s curve = perfectly elastic
If demand is unit elastic, a change in price (either up or down) does not affect total revenue.
true
If the cross-price elasticity of demand for goods A and B is zero, this means the two goods are unrelated.
true
If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.
true
If the market for a product is narrowly defined, then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.
true
Most food products have low income and price elasticities of demand.
true
The price elasticity of demand for Kellogg's Raisin Bran is larger in absolute value than the price elasticity of demand for all breakfast cereals.
true
inelastic
when Qd changes by a little when price changes, demand is considered this (0>E>-1)
elastic
when Qd changes by a lot when price changes, demand is considered this (E<-1)
unit elastic
when Qd changes by the same amount as the change in price, demand is considered this (E=-1)
income elasticity of demand
-a measure of the responsiveness of the quantity demanded to changes in income, measured by the percentage change in the quantity demanded divided by the percentage change in income -Ei= ((change in Q)/(Q))/((change in income)/(income)) -when 0<Ei<1, then GoS is normal and a necessity -when Ei>1, then GoS is normal and a luxury -when Ei<0, then GoS is inferior
if the price elasticity of demand is elastic... inelastic... unit elastic...
-cut the price -raise the price -you've maximized profits
cross-price elasticity of demand
-the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good -Ex,y= (change in Q for product x/Q product x)/(change in P product y)/(P product y) -if positive, they're substitute goods -if negative, they're complements
price elasticity of supply
-the responsiveness of the quantity supplied to a change in price, measured by dividing the percentage change in the quantity supplied of a product by the percentage change in the product's price -n= ((change in Qs) / (Qs)) / ((change in P) / (P)) -when n>1, elastic -when n is btwn 0 and 1, inelastic
List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.
1. Availability of close substitutes: If a product has more substitutes available, it will have more elastic demand. If a product has fewer substitutes available, it will have less elastic demand. 2. Passage of time: The more time that passes, the more elastic the demand for a product becomes. 3. Luxuries versus necessities: The demand curve for a luxury is more elastic than the demand curve for a necessity. 4. Definition of the market: The more narrowly a market is defined, the more elastic demand will be. 5. Share of a good in a consumer's budget: The demand for a good will tend to be more elastic the larger the share of the good in the average consumer's budget.
5 key determinants of E
1. the availability of close substitutes for the good (no substitutes= less elastic, substitutes= elastic) 2. the passage of time (short term=less elastic, long term=more elastic) 3. whether the good is a luxury or a necessity (necessity= less elastic, luxury=more elastic) 4. the definition of the market (gasoline as a product = less elastic, gasoline at local station = more elastic) 5. the share of the good in the consumer's budget (small (salt) = less elastic , large (spa day, trip to Europe) = more elastic)
Explain why a local bottler of PepsiCo products would likely prefer a national soda tax to a local soda tax in its region.
A local bottler would likely prefer a national soda tax because a local tax would probably reduce sales in its region as some consumers in that region would switch to buying products outside the region where there is no tax. A national tax would affect all consumers no matter where they made their purchases, so there would be no reason for consumers to shop outside the region.
elasticity
A measure of how much one economic variable responds to changes in another economic variable.
When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like
Demand is perfectly elastic when quantity demanded is infinitely responsive to price. If demand is perfectly elastic, price elasticity of demand equals infinity, and the demand curve is a horizontal line. Demand is perfectly inelastic when quantity demanded is completely unresponsive to price. If demand is perfectly inelastic, price elasticity of demand equals zero, and the demand curve is a vertical line.
price elasticity of demand
The responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price. E=(change in Q/Q)/(change in P/P)
The price of wheat has fallen since 1950. Which of the following explains this price decline? A) The price elasticity of demand is less than 1 (in absolute value) and the income elasticity of demand for wheat is low. B) The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is low. C) The price elasticity of demand is less than 1 (in absolute value) and wheat is an inferior good. D) The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is greater than 1.
a
When demand is unit elastic, a change in price causes total revenue to stay the same because A) the percentage change in quantity demanded exactly offsets the percentage change in price. B) buyers are buying the same quantity. C) total revenue never changes with price changes. D) the change in profit is offset by the change in production cost.
a
Which of the following would result in a higher absolute value of the price elasticity of demand for a product? A) A wide variety of substitutes are available for the good. B) The time period under consideration is short. C) The good is a necessity. D) The expenditure on the good is small relative to one's budget.
a
If a firm lowered the price of the product it sells and found that total revenue did not change, then the demand for its product is A) perfectly inelastic. B) perfectly elastic. C) unit elastic. D) relatively elastic.
c
Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic, and that the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes? A) The demand for cantaloupes at $2.00 must be inelastic. B) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. C) The demand for cantaloupes at $2.00 must be elastic. D) The demand for cantaloupes at $2.00 must be unit elastic.
aa
Assume that the market for barley is in equilibrium and the demand for barley is inelastic. Predict what happens to the revenue of barley farmers if a prolonged drought reduces the supply of barley. The drought will cause farm revenue to A) rise because there will be a shortage of barley. B) rise because the percentage decrease in quantity sold is less than the percentage increase in price. C) rise because the percentage increase in quantity sold is greater than the percentage increase in price. D) fall because of the decrease in the quantity of barley sold.
b
Demand for a luxury item, such as a yacht, is likely to be A) both income inelastic and price inelastic. B) both income elastic and price elastic. C) income elastic and price inelastic. D) income inelastic and price elastic.
b
Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03. This means that A) beer and wine are substitutes and wine is an inferior good. B) beer and wine are complements and wine is a luxury good. C) beer and wine are substitutes and wine is a luxury good. D) beer and wine are complements and wine is an inferior good.
b
Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that A) an increase in the price of beer will increase the quantity demanded of beer and beer is a normal good. B) an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good. C) a decrease in the price of beer will lead to an increase in revenue for beer sellers and beer is an inferior good. D) an increase in the price of beer will lead to a decrease in the quantity demanded of beer and beer is a luxury.
b
From 1950 to 2017 the number of people who lived on farms fell from 23 million to fewer than 3 million. Which of the following factors have contributed to this trend? A) increases in the cost of farming and a desire for young adults to move to urban areas B) rapid growth in farm production and low income and price elasticities for food products C) slow growth in agricultural productivity and low income elasticities for food products D) government policies that have increased the cost of living and working on farms
b
Studies show that the income elasticity of demand for wine is approximately five. What does this mean? A) A 1 percent decrease in the price of wine leads to a 5 percent increase in wine consumption. B) A 1 percent increase in income leads to a 5 percent increase in wine consumption. C) A 5 percent increase in income leads to a 1 percent increase in wine consumption. D) Wine is a relatively elastic good.
b
Suppose a decrease in the supply of bottled water results in a decrease in revenue. This indicates that A) the demand for bottled water is inelastic in the price range considered. B) the demand for bottled water is elastic in the price range considered. C) the supply of bottled water is inelastic in the price range considered. D) the supply of bottled water is elastic in the price range considered.
b
Suppose the demand for milk is relatively inelastic. What happens to sales revenue if the government imposes a price floor above the free-market equilibrium price in the market for milk? A) Sales revenue falls. B) Sales revenue rises. C) Sales revenue remains unchanged. D) It cannot be determined without information on prices.
b
Suppose the value of the price elasticity of demand is -3. What does this mean? A) A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. B) A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. C) A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. D) A $1 increase in price causes quantity demanded to fall by 3 units.
b
If a good has a negative income elasticity of demand, this indicates that the good is A) a substitute with another good. B) a complement with another good. C) inferior. D) normal.
c
The demand for most farm products is relatively inelastic. All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity? A) Farm revenues increase. B) Farm revenues decrease. C) Farm revenues remain constant because consumers will not increase their consumption of farm products by much. D) Farm revenues could increase or decrease depending on the cost of this new equipment.
b
The most important determinant of the price elasticity of demand for a good is A) the definition of the market for a good. B) the availability of substitutes for the good. C) the share of the good in the consumer's budget. D) whether the good is a necessity or a luxury.
b
When demand is elastic, a fall in price causes total revenue to rise because A) when price falls, quantity sold increases so total revenue automatically rises. B) the increase in quantity sold is large enough to offset the lower price. C) the percentage increase in quantity demanded is less than the percentage fall in price. D) the demand curve shifts.
b
Which of the following is one reason why the income of small family farms has decreased over time? A) Technology has increased farm productivity and market supply. B) The demand for farm products is inelastic. C) The demand for farm products is income inelastic. D) The U.S. population has increased greatly since 1950.
b
With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services? A) It has become more price inelastic. B) It has become more price elastic. C) It has become more income elastic. D) The absolute value of the price elasticity coefficient has probably gone down.
b
jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers? A) It is elastic. B) It is perfectly elastic. C) It is perfectly inelastic. D) The price elasticity coefficient is 0.
b
Consider the following pairs of items: a. shampoo and conditioner b. iPhones and earbuds c. a laptop computer and a desktop computer d. beef and pork e. air-travel and weed killer Which of the pairs listed will have cross-price elasticity of zero? A) a and b only B) c only since most people cannot do without computers C) e only D) none of the pairs listed
c
He tells the staff, "Our costs are currently $150,000 more than our revenues each month. I propose to eliminate this problem by raising the price of the magazine to $3.00 per issue. This will result in our revenue being exactly equal to our cost." 15) Refer to Table 6-4. Which of the following statements is correct? A) The publisher's analysis is correct only if the demand is perfectly elastic. B) The publisher's analysis is correct only if the demand is elastic. C) The publisher's analysis is correct only if the demand is perfectly inelastic. D) The publisher's analysis is correct only if the demand is unit elastic.
c
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula. A) 0.17 B) 0.62 C) 1.62 D) 5
c
If a 5 percent increase in income leads to a 10 percent increase in quantity demanded for airline travel, then airline travel is A) a necessity. B) a substitute for another good. C) a luxury. D) an inferior good.
c
Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products. If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with A) a high positive income elasticity coefficient such as 5. B) a low positive income elasticity coefficient such as 0.8. C) a "high" negative income elasticity coefficient such as -4. D) a "low" negative income elasticity coefficient such as -0.2.
c
The cross-price elasticity between Gillette razors and a related good is -3.4. What happens to the demand for the related good if the price of Gillette razors falls by 10 percent? A) The quantity demanded of the related good rises by 3.4 percent. B) The quantity demanded of the related good falls by 34 percent. C) The quantity demanded of the related good rises by 34 percent. D) The quantity demanded of the related good falls by 3.4 percent.
c
The demand for all carbonated beverages as a whole is likely to be ________ the demand for Dr. Pepper. A) more elastic than B) perfectly elastic compared to C) less elastic than D) perfectly inelastic compared to
c
The paradox of American farming is A) the demand for imported luxury food products has risen as the demand for domestic food products has fallen. B) the demand for food has risen as the number of people who pursue farming as a career has fallen. C) food has become cheaper and more abundant as the number of farms has decreased. D) the amount of food produced has increased as the average farm size has fallen.
c
The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded? A) 40 percent B) 25 percent C) 2.5 percent D) 0.4 percent
c
The slope of a demand curve is not used to measure the price elasticity of demand because A) the slope of a linear demand curve is not constant. B) the slope of a line cannot have a negative value. C) the measurement of slope is sensitive to the units chosen for price and quantity. D) the slope of the demand curve does not tell us how much quantity changes as price changes.
c
We should never assume that an inelastic demand curve is a perfectly inelastic demand curve because A) there has never been evidence of a perfectly inelastic demand curve. B) an inelastic demand curve may be perfectly inelastic at some times but not others. C) perfectly inelastic demand curves are rare. D) an inelastic demand curve may be elastic at low prices.
c
Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true? A) It is inelastic at high prices and elastic at low prices. B) It is unit elastic throughout the demand curve. C) It is elastic at the highest prices and inelastic at the lowest prices. D) It is perfectly elastic at very high prices and perfectly inelastic at very low prices.
c
22) Holding everything else constant, the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes in general. A) less than B) equal to C) twice as great as D) greater than
d
An article in the Wall Street Journal noted the following: Instead of relying on a full-coach, round-trip unrestricted fare of about $2,000 between Cleveland and Los Angeles ...Continental [Airlines] since June has offered a $716 unrestricted fare in that market .... Through October, the test resulted in about the same revenue that Continental thinks it would have collected with its higher fare. Source: Scott McCartney, "Airlines Try Cutting Business Fares, Find They Don't Lose Revenue," Wall Street Journal, November 22, 2002. What is the absolute value of the price elasticity of demand on this airline route? A) 0 B) less than 1 C) greater than 1 D) approximately 1
d
Assume that a 2 cent per ounce percent soda tax led to a large increase in its price and only a small decrease in the quantity of soda demanded. Economic analysis would lead one to conclude that A) soda should be taxed because the benefits of the tax would exceed the costs. B) soda should not be taxed because the benefits are uncertain. C) soda should not be taxed on ethical grounds since ethical benefits and costs can't be measured. D) the benefits of taxing soda is a normative issue. Economic analysis can be used to contribute to discussion of this issue but cannot decide it.
d
Between 1950 and 2017 the productivity of wheat farmers in the United States more than doubled. This means that A) the amount of land and other resources devoted to wheat production more than doubled. B) the incomes of wheat farmers more than doubled. C) the total amount of wheat produced more than doubled. D) the amount of wheat produced by the average farmer more than doubled.
d
If the demand for cell phone service is inelastic, then A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). B) the percentage change in quantity demanded is equal to the percentage change in price. C) the quantity demanded does not change in response to changes in price. D) the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
d
If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good. A) greater; an inferior B) less; a normal C) less; an inferior D) greater; a normal
d
Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Rakuten.com is 3.5. Based on this information, predict what happens when Amazon.com lowers its DVD prices by 10 percent. A) The quantity of DVDs demanded on Amazon.com will increase by 35 percent. B) The quantity of DVDs demanded on Rakuten.com will increase by 35 percent. C) The quantity of DVDs demanded on Amazon.com will decrease by 35 percent. D) The quantity of DVDs demanded on Rakuten.com will decrease by 35 percent.
d
The midpoint formula is used to measure the elasticity of demand between two points on a demand curve A) when demand is elastic. B) in special cases when the percentage change in the quantity demanded is equal to the percentage change in price. C) to ensure that the elasticity has a negative value. D) to ensure that we have only one value of the price elasticity of demand between two points on a demand curve.
d
The price elasticity of supply is equal to A) the value of the slope of the supply curve. B) the change in quantity supplied divided by the change in price. C) the percentage change in price divided by the percentage change in quantity supplied. D) the percentage change in quantity supplied divided by the percentage change in price.
d
Which of the following statements is true? A) In general, if a product has few substitutes it will have an elastic demand. B) The more time that passes the more inelastic the demand for a product becomes. C) The demand curve for a necessity is more elastic than the demand curve for a luxury. D) The more narrowly we define a market, the more elastic the demand for a product will be.
d