Chapter 5 (LC/HW)

If the average income in the United States rises by 10%, housing expenditures by homeowners will increase by 5%. Based on this information, what is the income elasticity of demand for housing?

0.5

When Uber increased prices by 80% for a certain place and specific time it led to a 100% increase in Uber drivers supplying rides. Using the percent change in the price and the percent change in the quantity supplied, what is the price elasticity of supply for Uber rides?

1.25

When the government increased the minimum wage by 30%, it led to a 45% increase in workers providing labor. Based on the information given, what is the price elasticity of supply for labor?

1.5

If cutting the price of frozen pizza by 30% leads to an increase in the quantity demanded by 6%, what is the absolute value of the price elasticity of demand for frozen pizza?

0.2

What does the shaded area in the graph (quantity vs price box) below represent?

Total revenue

The quantity of parking permits demanded drops from 12,774 down to 7,265; use the midpoint formula to calculate the percentage change in quantity.

-55%

If increasing the price of tables by 7% leads to a decrease in the quantity demanded by 21%, what is the absolute value of the price elasticity of demand for tables?

3

When there's an elastic demand curve there's a decrease in total revenue when the price change has ____ since the customers are ____ responsive to the price change and will switch to a viable alternative, the % decrease in _____ outweighs the % in the _______

Increase more quantity demanded price increases

If the goal of the government is to raise funds by taxing a good or service, its easier to raise revenue if the demand curve for a good is ____ not if its is ____

Inelastic, perfectly elastic

With a demand curve that is elastic, a one percent change in price causes: (1) and (2)

Larger response in quantity demanded compared to an inelastic demand curve, greater than 1% change in quantity demanded

A supercenter provides more variety of goods than a small store does. You will find that you are _____ when shopping in a supercenter because _____.

More price sensitive; there are close substitutes to something you want

"Quantity demanded=

Price product*price elasticity

If the price of eggs were to rise by 15%, and if the price elasticity of demand for eggs is around −0.2, will the quantity demanded for eggs increase or decrease, and by what percent?

decrease by 3%

If the price of eggs were to fall by 25%, and if the price elasticity of demand for eggs is around −0.2, will the quantity demanded for eggs increase or decrease, and by what percent?

increase by 5%

We measure the price elasticity of demand by observing how the quantity demanded responds to a price change. That responsiveness is measured by the:

ratio of the percent change in quantity demanded and the percent change in the price.

Supply is inelastic if the price elasticity of supply is:

smaller than one.

The price elasticity of supply measures by what percent the quantity _____ will increase following a 1% _____.

supplied; price rise

The cross-price elasticity of demand measures all of these EXCEPT:

the ratio of the percent change in the price of a good to the percent change in its quantity demanded.

The price elasticity of supply is typically _____ when you're looking over a longer time horizon.

larger

As a manager, you will want to use the price elasticity of demand for your product to forecast the:

likely consequences of any change in price.