Micro Chapter 5

the quantity demanded of one good changes in respoonse to a change in the price of another good

Cross-price elasticity of demand measures how

equal to 1

Demand is said to have unit elasticity if elasticity is

positive, and pizza is a normal good

For Susie, a 7 percent increase in income results in a 12 percent increase in the quantity demanded of pizza. For Susie, the income elasticity of demand for pizza is

demand tends to be inelastic

For a good that is a necessity

assuming that the demand for university education is inelastic

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

more elastic demands

Goods with many close substitutes tend to have

0.75

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elastic demand is

substitutes

If the cross-price elasticity of two goods is positive, then those two goods are

40 percent decrease in the quantity demanded

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a

Immediately after the price increase

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

one year after the price increase

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

quantity demanded stays the same whenever price changes

In the case of perfectly inelastic demand

A decrease in price of 2% causes an increase in quantity demanded of 0%

In which of these instances is demand said to be perfectly inelastic?

1.00

Price $24 $20 $16 $12 $8 $4 Quantity Demanded (Income = $5,000) 2 4 6 8 10 12 Quantity Demanded (Income = $7,500) 3 6 9 12 15 18 Quantity Demanded (Income = $10,000) 4 8 12 16 20 24 Using the midpoint method, at a price $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

1.80

Price $24 $20 $16 $12 $8 $4 Quantity Demanded (Income = $5,000) 2 4 6 8 10 12 Quantity Demanded (Income = $7,500) 3 6 9 12 15 18 Quantity Demanded (Income = $10,000) 4 8 12 16 20 24 Using the midpoint method, when income equal $7500, what is the price elasticity of demand between $16 and $20$

0.56

Price $24 $20 $16 $12 $8 $4 Quantity Demanded (Income = $5,000) 2 4 6 8 10 12 Quantity Demanded (Income = $7,500) 3 6 9 12 15 18 Quantity Demanded (Income = $10,000) 4 8 12 16 20 24 using the midpint method, when income equals $5000 what is the price elasticity of demand between $8 and $12

2.33

Price Quantity $15 0 $12 5 $9 10 $6 15 $3 20 $0 25 Using the midpoint method, what is the price elasticity of demand when prices rise from $9 to $12?

1.00

Price Quantity $15 0 $12 5 $9 10 $6 15 $3 20 $0 25 Using the midpoint method, when price rises from $6 to $9, the price elasticity of demand is

0.58

Refer to figure 5-12 Using the midpoint method, what is the price elasticity of supply between $100 and $220

1.0

Refer to figure 5-12 Using the midpoint method, what is the price elasticity of supply between $16 and $40

S3

Refer to figure 5-16 Which supply curve is most likely relevant over a very long period of time?

S1

Refer to figure 5-16 Which supply curve represents perfectly inelastic supply

decrease

Refer to figure 5-4 If the price decreases in the region of the demand curve between points B and C, we can expect total revenue to

decrease

Refer to figure 5-4 If the price increases in the region of the demand curve between points A and B, we can expect total revenue

unit elastic section of the demand curve

Refer to figure 5-4 The section of the demand curve at point B represents the

inelastic section of the demand curve

Refer to figure 5-4 The section of the demand curve from B to C represents the

Elastic section of the demand curve

Refer to figure 5-4 What section of the demand curve from A to B represents the

the equilibrium price increases, and the equilibrium quantity is unchanged

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. as a result,

an inferior good

Suppose good X has a negative income elasticity of demand. This implies that good X is

1

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X

horizontal

The case of perfectly elastic demand is illustrated by a demand curve that is

greater the price elasticity of demand at that point

The flatter the demand curve through a given point , the

buyers responsiveness to a change in the price of a good

The price elasticity of demand measures

always becomes larger

When we move upward and to the left along a linear, downward demand curve, price elasticity of demand

cookies

Which of the following is likely to have the most price inelastic demand

tends to be elastic

for a good that is a luxury, demand

complements

if the cross-price elasticity of tow goods is negative, then those two goods are

4 percent decrease in the quantity demanded

if the price elasticity of demand for a good is 0.4 then a 10 percent increase in price results in a