micro chpt 5

An important determinant of the price elasticity of demand is the:

availability of substitutes.

The demand for strawberry ice cream tends to be relatively price elastic because:

for most people there are many close substitutes for strawberry ice cream.

The income elasticity of demand of a normal good is:

greater than 0

The cross price elasticity of demand of substitute goods is:

greater than 0.

If the price of a good is increased by 15 percent and the quantity demanded changes by 20 percent, then the price elasticity of demand is equal to:

approximately -1.33.

The price elasticity of a demand curve with a constant slope:

increases in absolute value as the price rises.

Reference: Ref 5- 2 (Exhibit: Demand for Shirts) The price elasticity of demand for the segment DE is:

-.7

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand is:

-0.5.

Suppose at a price of $10 the quantity demanded is 100. When price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between the prices of $10 and $8 is approximately

-1.17

(Exhibit: Demand for Shirts) The price elasticity of demand for the segment AB is:

-11

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.50 and $2.25?

-19

(Exhibit: Demand and Price Elasticity 1) What is the price elasticity of demand between $2.25 and $2.00?

-5.67

If the University of Michigan increases the price of football tickets, it will result in increasing revenues if the price elasticity of demand is

price inelastic.

if a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

price inelastic.

If the price elasticity of supply is greater than 1, then:

supply is price elastic

(Exhibit: Johnson's Income and Expenditures) Johnson's income elasticity of demand for magazines is:

1

Refer to the graph above. Calculate the approximate average elasticity of demand as the price falls from $18 to $0:

1 CorrectElasticity is [(9-0)/4.5]/[(18-0)/9] = (2)/(2) = 1.

According to Exhibitor Relations Co., between 2003 and 2004, average movie ticket prices rose by about 3.58 percent and attendance fell by about 1.66 percent. Other things equal, the data imply that the elasticity of demand for movie tickets is about:

C. 0.46. CorrectPrice elasticity of demand = % change in quantity / % change in price = 1.66/3.58 = 0.464.

According to Exhibitor Relations Co., in 2003 average movie ticket prices were $6.03 and attendance was 243 million; in 2004, average movie ticket prices were $6.25 and attendance was 239 million. Other things equal, the data imply that the elasticity of demand for movie tickets is about:

C. 0.464. CorrectElasticity = [(239-243)/241]/[(6.25-6.03)/6.14] = (4/241)/(0.22/6.14) = (.0166/.0358) = 0.46.

The price elasticity of demand is measured by:

The price elasticity of demand is measured by:

If demand is price elastic, it is certain that:

an increase in price will lower total revenue.

Calculating percentage changes relative to the average value of each variable between two points is:

arc elasticity

A shirt manufacturer sold 10 dozen shirts per day when the price was $4 per shirt but sold 15 dozen shirts per day when the price was $3 per shirt. Hence, the absolute value of the price elasticity of demand is:

greater than 1 but less than 3

If a good is a necessity with few substitutes, then the price elasticity of demand will tend to be

less price elastic

To say that two goods are complements, their cross price elasticities of demand should be:

less than zero

The cross price elasticity of demand for substitute goods is:

positive.

Along the upper half of a linear demand curve, the price elasticity of demand will be:

price elastic

Supply curves tend to be more ________ the greater the time period facing the producer.

price elastic

If total revenue goes up when price falls, the price elasticity of demand is said to be:

price elastic.

Demand is price inelastic when:

price falls and total revenue decreases.

If the total revenue received by a firm increases when it raises its price, this indicates that the demand for the firm's product is:

price inelastic

If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered:

substitute goods

If a 20 percent increase in the price of one good leads to a 10 percent increase in the quantity demanded of another good at a specific price, the goods are:

substitutes.

Suppose that the cross price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7. This implies that the two goods are:

substitutes.

Suppose that the cross price elasticity of demand for beer with respect to the price of wine is 1.2. This tells us that beer and wine are:

substitutes.

The price elasticity of a good will tend to be greater

the longer the relevant time period

Which of the following is not a factor in determining the price elasticity of demand?

the slope of the supply curve

As the price of beach front cottages in Florida was raised from $400,000 to $500,000, their quantity supplied rose from 2,000 to 2,100. The elasticity of supply of beach front cottages is:

0.2. CorrectElasticity = [(2,100-2,000)/2,150]/[(400,000-500,000)/450,000] = (100/2,150)/-(100,000/450,000) = -0.2. We state elasticity of demand as positive as a convention.

According to Exhibitor Relations Co., in 2003 average movie ticket prices were $6.03 and attendance was 243 million; in 2004, average movie ticket prices were $6.25 and attendance was 239 million. Other things equal, the data imply that the elasticity of demand for movie tickets is:

C. inelastic, so the increase in price caused total revenue to rise. CorrectElasticity = [(239-243)/241]/[(6.25-6.03)/6.14] = (4/241)/(0.22/6.14) = (.0166/.0358) = 0.46. Since elasticity is less than one, demand is inelastic. When demand is inelastic, an increase in price causes total revenue to rise. In this case, total revenue rose from about $1.465 billion to about $1.493 billion.

(Exhibit: Demand and Price Elasticity 2) The price elasticity of demand between points A and B is:

elastic, since total revenue increases when price falls from $8 to $6

Income elasticity of demand measures:

how demand for a good changes in response to changes in income

When price goes down, the quantity demanded goes up. Price elasticity measures:

how responsive the quantity change is in relation to the price change

An upward movement along a linear demand curve from lower prices to higher prices will result in:

increasing price elasticity.

If the income elasticity of demand for a good is negative, the good is said to be a(n):

inferior good.

If someone did not regard health care as very important, often using home remedies and other substitutes, his or her demand curve for health care would most likely be ________ over the relevant range of prices for health care.

more price elastic

The cross price elasticity of demand for complements is:

negative

If your income increases and your consumption of bagels increases, bagels are considered a(n):

normal good