Section 4

Suppose that an increase in the price of a good leads to an increase in total revenue. Ignoring other factors (like supply), at its current price the good must be:

price-inelastic.

The price elasticity of demand measures the responsiveness of the change in the:

quantity demanded to a change in the price.

Suppose the price of university sweatshirts increases from $10 to $20 and the quantity supplied increases from 20 to 30. The price elasticity of supply, using the midpoint formula, is:

0.60.

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

0.75.

If the price of chocolate-covered peanuts decreases from $2.00 to $1.55 and the quantity demanded increases from 180 bags to 220 bags, then the price elasticity of demand (by the midpoint method) is:

0.79.

There are several close substitutes for Bayer aspirin but fewer substitutes for a complete medical examination. Therefore, all other things equal, you would expect the demand for:

Bayer aspirin to be more price-elastic than is the demand for medical examinations.

The price elasticity of demand can be found by:

comparing the percentage change in quantity demanded to the percentage change in price.

Use Table: Johnson's Income and Expenditures. By the midpoint method, Johnson's income elasticity of demand for pizzas is:

approximately -0.7.

A hotel has a fixed capacity of 100 rooms in the short run. Which statement best describes the short-run elasticity of supply for rooms at this hotel?

The elasticity of supply is zero in the short run because the short-run supply curve is vertical.

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

availability of substitutes.

The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged?

Total revenue will rise.

A men's tie store sold an average of 30 ties per day at $5 per tie but sold 50 of the same ties per day at $3 per tie. The price elasticity of demand, by the midpoint method, is:

equal to 1.

A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student in about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is:

highly inelastic.

A perfectly elastic supply curve is:

horizontal.

After a price decrease, the quantity effect tends to:

increase total revenue.

Use Figure: The Demand for e-Books. The demand schedule _____ when the price increases from $4 to $6 _____ when it increases from $6 to $8.

is less elastic; than

Use Figure: The Demand for Shirts. By the midpoint method, the price elasticity of demand for the segment EF is:

less than the price elasticity of demand for segment DE.