Chapter 5

inelastic

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

B

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? A. there are no close substitutes for this good. B. the good is a luxury C. the market for the good is broadly defined D. the relevant time horizon is short

C

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? A. there are many close substitutes for this good B. this good is a luxury C. the market for the good is broadly defined D. the relevant time horizon is long

complements

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

substitutes

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

0.6 percent increase in the quantity demanded

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

3.6 percent increase in the quantity demanded

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

2.33, and Jim regards tickets to sporting events as normal goods

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

demand for ice cream cones in this price range is elastic

Suppose that 50 ice cream cones are demanded at a particular price. If the price o ice cream cones rises form that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

C

Suppose that good X has a positive income elasticity of demand. This implies that good X could be (i) a normal good (ii) a necessity (iii) an inferior good (iv) a luxury A. (i) only B. (i) and (ii) only C. (i), (ii), and (iv) only D. (iii) only

-0.71, and X and Y are complements

Suppose that when the price of a good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

gives the same answer regardless of the direction of change

The midpoint method is used to compute elasticity because it

0.67

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

A

Which of the following could be the cross-price elasticity of demand for two goods that are complements? A. -1.3 B. 0 C. 0.2 D. 1.4

less than 1

demand is inelastic if the price elasticity of demand is

buyers respond substantially to changes in the price of the good

demand is said to be price elastic if

tends to be elastic

for a good that is a luxury, demand

more elastic demands

gods with many close substitutes tend to have

buyers do not respond much to a change in price

if demand is price inelastic, then

the availability of close substitutes in determining the price of elasticity of demand

if the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

2.33

suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the price range is

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

the price elasticity of demand measures