Economics - Elasticity Chapter 6

average quantity =

(q1 + q2) / 2

Suppose the price of a pair of premium socks falls from $2.00 to $1.90 and the quantity of the socks demanded increases from 110 to 118. Rounded, the price elasticity of demand is:

1.4

Assume that at an initial price of $100, a bookstore will purchase 10,000 college textbooks, and at an increased price of $110, it will purchase only 8,000 textbooks. What is the price elasticity of demand for the textbooks? (Use the average price and quantity method for calculation.)

2.33

% change in quantity =

2/ q

The cross-price elasticity of demand measures which of the following?

The responsiveness of consumer purchases of one product due to a change in the price of some other product

Because of the law of supply, we know that the price elasticity of supply is

always positive

If two goods are complements, an increase in the price of one will ______ the demand for the other good.

decrease

A high-priced good, relative to buyers' incomes, will exhibit a low price elasticity of demand.

false

The price elasticity of demand tends to be more for items costing little relative to consumer income.

false

The higher the price of a good relative to a consumer's income, the _____ the price elasticity of demand.

higher

When demand is relatively price _____, the price elasticity of demand will be less than one

inelastic

The _____ _____ of demand measures the responsiveness of consumers' quantity demanded to a price change.

price elasticity

change in quantity =

q2 - q1

Evian water and Dasani water are ______ goods.

substitute

Cross-price elasticity is calculated as

(% change in the quantity demanded of X)/(% change in price of Y)

If the demand curve for a product is shifting, then we know that

a non-price determinant is changing.

Electric vehicle sales presently constitute a _____ share of the U.S. auto market.

negligible

If the price elasticity of demand is unitary elastic, an increase or decrease in price will ______ total revenue.

not change

When confronted with a higher price, consumers typically adjust their behavior

only after the passage of some time.

_____ revenue is calculated by multiplying the product price by the quantity sold.

total

True or false: Consumers often need time to adjust to changes in prices.

true

True or false: Price elasticity of demand will be greater when the price of a good is higher, relative to a consumer's income.

true

When an increase in the price of one good decreases the demand for another good, then the goods are called complementary goods.

true

The elasticity of demand for Reebok shoes is ______ the elasticity of demand for shoes in general.

more than

When the cross-price elasticity is _____, the goods are complementary.

negative

When calculating the price elasticity of demand, the % change in quantity demanded is calculated as

(change in quantity)/(average quantity)

Which of the following would be beneficial for electric vehicle sales in the United States?

- advances in battery technology - higher gasoline prices

How will the price elasticity of a product that has few substitutes compare with one that has many substitutes?

It will be less elastic.

How will the price elasticity of demand for a good that is considered to be a luxury compare to one that is a necessity?

It will exhibit a price elasticity coefficient greater than one.

Which of the following is true when the demand is unitary elastic?

The percentage change in quantity demanded is equal to the percentage change in price.

When the price elasticity of demand is relatively price inelastic, a price increase will have what effect on total revenue?

Total revenue will rise.

How is a consumer's responsiveness to price changes measured?

Using the price elasticity of demand

% change in quantity demanded =

change in quantity / average quantity

Digital cameras and memory sticks are what type of goods?

complementary

The _____-cross , Correct Unavailable-price elasticity of demand measures the sensitivity of the demand for one product to a change in the price of another product.

cross

While considering whether to lower the price of Sprite, the Coca-Cola Company would be interested in knowing the value of the _____ elasticity of demand between Sprite and Coke.

cross-price

The percentage change in quantity demanded of good X divided by the percentage change in the price of product Y is known as the:

cross-price elasticity of demand

When calculating the price elasticity of demand, the % change in quantity _____ (one word) is calculated as (change in quantity)/(average quantity)

demanded

The cross-price elasticity of demand is equal to the percentage change in the quantity demanded of one product _____ the percentage change in the price of another product.

divided by

If a 4% decline in the price of cut flowers results in an 8% increase in the quantity demanded, the price elasticity of demand for cut flowers is

elastic

What type of demand is represented by a small change in price that leads to a large change in the quantity demanded?

elastic

The income elasticity of demand shows the responsiveness of demand for a good or service when an individual's _____ changes.

income

Which type of elasticity shows how responsive demand is to a change in earnings?

income elasticity of demand

If two goods are substitutes, an increase in the price of one will do what to the demand for the other good?

increase it

An increase in price will increase total revenue if the price elasticity of demand is relatively price

inelastic

If a 4% decrease in the price of coffee leads to a 2% increase in the quantity demanded, the price elasticity of demand for coffee is relatively price

inelastic

If a 6% decrease in the price of sugar leads to a 4% increase in the quantity demanded, the price elasticity of demand for sugar is relatively price _____.

inelastic

What type of demand is represented by a relatively small percentage change in quantity demanded divided by a relatively larger percentage change in price?

inelastic

Which type of price elasticity of demand is occurring when a substantial price change causes only a small change in the amount purchased of that product?

inelastic demand

If product demand is relatively elastic, what will be the effect on the total revenue if the price is increased?

it decreases

The inverse relationship between price and quantity demanded is called the

law of demand

If goods X and Y are complements and the price of Y increases, then we expect to see the demand for X shift to the _____.

left

The price elasticity of demand tends to be low for _____ priced goods relative to income.

lower

When a product is unitary elastic and price increases or decreases, the total revenue will ______.

remain constant

If the cross-price elasticity between two goods is positive, then we know that the goods in question are

substitutes

The percentage change in quantity supplied divided by the percentage change in price measures the price elasticity of

supply

The relationship between price and quantity demanded is exemplified by

the demand curve

When the underlying determinants of demand change,

the entire demand curve shifts

If a 2% decrease in the price of a good causes a 2% increase in the quantity demanded, the demand is

unitary elastic