Ch. 5

A good will have more elastic demand, the

greater the availability of close substitutes.

The greater the price elasticity of demand, the

greater the responsiveness of quantity demanded to a change in price.

When the local used bookstore prices economics books at $15 each, it generally sells 70 books per month. If it lowers the price to $7, sales increase to 90 books per month. Given this information, we know that the price elasticity of demand for economics books is about

0.34, and an increase in price from $7 to $15 results in an increase in total revenue.

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 is

1.

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

1.33

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

1.43, and an increase in the price will cause hotels' total revenue to decrease.

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

40 percent decrease in the quantity demanded.

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers.

The price elasticity of demand for bread

a. is computed as the percentage change in quantity demanded of bread divided by the percentage change in the price of bread. b. depends, in part, on the availability of close substitutes for bread. c. reflects the many economic, social, and psychological forces that influence consumers' tastes for bread. All of the above are correct.

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

an 18 percent increase in the quantity demanded.

The price elasticity of demand measures

buyers' responsiveness to a change in the price of a good.

When the price of used cds is $4, Daphne buys five per month. When the price is $3, she buys nine per month. Daphne's demand for used cds is

elastic, and her demand curve would be relatively flat.

Demand is elastic if the price elasticity of demand is

greater than 1.

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

one year after the price increase

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is

price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

the flatter the demand curve will be.