Econ Lesson 5

If income increases by 2 percent, and quantity demanded increases by 0.2 percent, the income elasticity is _____________. 0.22 0.10 0.002 1.00

0.10

A 10 percent decrease in income decreases the quantity demanded of compact discs by 3 percent. The income elasticity of demand for compact discs is __________. 3.3 −0.3 0.3 10.0

0.3

A shift of the supply curve of oil raises the price of oil from $9.50 a barrel to $10.50 a barrel and reduces the quantity demanded from 41 million to 39 million barrels a day. The price elasticity of demand for oil is __________. 2.0 0.5 2 million barrels a day per dollar $1 per 2 million barrels a day

0.5

Fred's income has just risen from $940 per week to $1,060 per week. As a result, he decides to purchase 9 percent more steak per week. The income elasticity of Fred's demand for steak is _________. 1.42 0.75 1.33 .70

0.75

REVIEW GRAPH IN QUESTION 3, PRE TEST 5....SERIOUS

REVIEW GRAPH IN QUESTION 3, PRE TEST 5....SERIOUS

A shift of the supply curve of oil raises the price from $10 a barrel to $15 a barrel and reduces the quantity demanded from 40 million to 15 million barrels a day. You can conclude that the ___________. demand for oil is inelastic demand for oil is elastic supply of oil is elastic supply of oil is inelastic

demand for oil is elastic

Deb's income has just risen from $950 per week to $1,050 per week. As a result, she decides to increase the number of movies she attends each month by 5 percent. Her demand for movies is ______________. Calculate the percentage change in income and compare to the percentage change in movies watched. If change in movies is greater, then demand is elastic. income elastic income inelastic represented by a vertical line represented by a horizontal line

income inelastic

Goods whose income elasticities are negative are called ___________. superior goods complements inferior goods normal goods

inferior goods

The demand curve in the figure illustrates a product whose demand has a price elasticity of demand equal to __________. (completely vertical curve) a different amount at different prices one at all prices zero at all prices infinity

infinity

The cross elasticity of demand between Coca-Cola and Pepsi-Cola is _________. positive; that is, Coke and Pepsi are complements negative; that is, Coke and Pepsi are complements positive; that is, Coke and Pepsi are substitutes negative; that is, Coke and Pepsi are substitutes

positive; that is, Coke and Pepsi are substitutes

The demand for Honda Accords is __________. probably inelastic and less elastic than the demand for automobiles probably elastic but less elastic than the demand for automobiles probably elastic and more elastic than the demand for automobiles probably inelastic but more elastic than the demand for automobiles

probably inelastic but more elastic than the demand for automobiles

The elasticity of supply measures the sensitivity of __________. quantity supplied to quantity demanded quantity supplied to a change in price price to changes in supply supply to changes in costs

quantity supplied to a change in price

If a 1 percent decrease in the price of a pound of squash results in a larger percentage decrease in the quantity supplied, __________. supply is inelastic demand is inelastic ! supply is elastic demand is elastic

supply is elastic

If a 1 percent decrease in the price of a pound of oranges results in a smaller percentage decrease in the quantity supplied, __________. supply is inelastic supply is elastic demand is inelastic demand is elastic

supply is inelastic

A leftward shift of the supply curve of cookies raises the price of a cookie from 10 cents to 20 cents and decreases the quantity demanded from 700,000 to 500,000. You can conclude that __________. the supply of cookies is elastic the supply of cookies is inelastic the demand for cookies is elastic the demand for cookies is inelastic

the demand for cookies is inelastic

If Pepsi decided to raise its price, you would expect the price of Coca Cola _________. Is Pepsi a substitute or a complement for Coke? to have no relationship because Pepsi and Coca Cola are not related to fall to rise None of the above answers are correct.

to rise

The demand curve in the figure illustrates the demand for a product with _______. zero price elasticity of demand at all prices a price elasticity of demand that is different at all prices infinite price elasticity of demand unit price elasticity of demand at all prices

zero price elasticity of demand at all prices

A local pizzeria raised its price from $9 to $11 for each pizza and the sales of its pizza decreased from 150 to 100 per day. What is the price elasticity of demand in this case? −1/2 1/2 2 −2

−2

When the price of oranges increases from $4 to $6 per bag, the quantity demanded of oranges decreases from 800 to 700. The price elasticity of demand over this price range is equal to ______. 3 3/7 or 0.4286 1/4 or 0.25 1/3 or 0.3333

1/3 or 0.3333

If the price of one good increases by 3 percent and the quantity demanded of another good increases by 2 percent, the cross elasticity is _______ and the two goods are ________. 3/2; complements 3/2; substitutes 2/3; substitutes 2/3; complements

2/3; substitutes

If the cross elasticity of demand between goods A and B is negative, __________. the demands for A and B are both price inelastic A and B are complements the demands for A and B are both price elastic A and B are substitutes

A and B are complements

The cross-elasticity of demand between Homer's Holesome Doughnuts and Krusty's Krispy Crullers is 5.0, which indicates that ___________. Homer's doughnuts and Krusty's crullers are substitutes and the relationship between the two goods is strong (that is, the quantity demanded of doughnuts is very responsive to changes in the price of crullers) Homer's doughnuts and Krusty's crullers are substitutes and the relationship between the two goods is weak (that is, the quantity demanded of doughnuts is not very responsive to changes in the price of crullers) Homer's doughnuts and Krusty's crullers are complements and the relationship between the two goods is weak (that is, the quantity demanded of doughnuts is not very responsive to changes in the price of crullers) Homer's doughnuts and Krusty's crullers are complements and the relationship between the two goods is strong (that is, the quantity demanded of doughnuts is very responsive to changes in the price of crullers)

Homer's doughnuts and Krusty's crullers are substitutes and the relationship between the two goods is strong (that is, the quantity demanded of doughnuts is very responsive to changes in the price of crullers)

LESSON 5-REVIEW COMPUTER GRADED ASSIGNMENT GRAPHS QUESTION 1 QUESTION 6-7

LESSON 5-REVIEW COMPUTER GRADED ASSIGNMENT GRAPHS QUESTION 1 QUESTION 6-7

An elasticity of demand is measured in _________. dollars per unit of output units of output dollars None of the above is correct because there are no units for an elasticity of demand.

None of the above is correct because there are no units for an elasticity of demand.

REVIEW GRAPH IN QUESTION 6, COMPUTER GRADED ASSIGNMENT LESSON 5...SERIOUS

REVIEW GRAPH IN QUESTION 6, COMPUTER GRADED ASSIGNMENT LESSON 5...SERIOUS

If demand is price elastic __________. a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent a 1 percent increase in the price leads to an increase in the quantity demanded that exceeds 1 percent the price is very sensitive to any shift of the supply curve a 1 percent decrease in the price leads to a decrease in the quantity demanded that is less than 1 percent.

a 1 percent decrease in the price leads to an increase in the quantity demanded that exceeds 1 percent

If the price elasticity of demand for clothing is 0.64, this implies that _________. a 10 percent increase in the price of clothing yields a 6.4 percent decrease in the quantity demanded of clothing if there is an increase in the price of clothing, there would be a decrease in total expenditures on clothing a 6.4 percent increase in the price of clothing yields a 10 percent decrease in the quantity demanded of clothing Both answers a and c are correct.

a 10 percent increase in the price of clothing yields a 6.4 percent decrease in the quantity demanded of clothing

Demand is inelastic if ____________. the smaller angle between the vertical axis and the demand curve is less than 45 degrees large shifts of the supply curve cause only small changes in price a leftward shift of the supply curve raises the total revenue the good in question has close substitutes

a leftward shift of the supply curve raises the total revenue

The income elasticity of demand for bicycles is +10, which implies that bicycles are _________. a complement good for motorbikes an inferior good a substitute good for motorbikes a normal good

a normal good

An increase in Abigail's income decreases her demand for cassette tapes. For her, cassette tapes are __________. a complement to any good a normal good a substitute good an inferior good

an inferior good

The route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines for that route is probably __________. inelastic but more elastic than the demand for all tickets for that route elastic but less elastic than the demand for all tickets for that route inelastic and less elastic than the demand for all tickets for that route elastic and more elastic than the demand for all tickets for that route

elastic and more elastic than the demand for all tickets for that route

Demand is inelastic if __________. a large change in quantity demanded results in a small change in price the price elasticity of demand is greater than one the price elasticity of demand is less than one the quantity demanded is very responsive to changes in price

the price elasticity of demand is less than one

The slope of a demand curve depends on ____________. the units used to measure quantity but not the units used to measure price neither the units used to measure price nor the units used to measure quantity the units used to measure price but not the units used to measure quantity the units used to measure price and the units used to measure quantity

the units used to measure price and the units used to measure quantity

Of the following, demand is likely to be the least elastic for __________. Toyota automobiles compact disc players Ford automobiles toothpicks

toothpicks

If an increase in price results in no change in total revenue, then demand must be ________. infinitely elastic inelastic unit elastic elastic

unit elastic

A good with a horizontal demand curve has a demand __________. with a price elasticity of demand of infinity for which there are no substitutes with an income elasticity of demand of zero with a price elasticity of demand of zero

with a price elasticity of demand of infinity

An increase in subway fares in New York City will boost your expenditures on subway rides if __________. the supply of subway rides is inelastic your demand for subway rides is elastic your demand for subway rides is inelastic the supply of subway rides is elastic

your demand for subway rides is inelastic