ECON 1001 Chapter 4 Homework

If a 5 percent increase income leads to a 2.5 percent decrease the quantity of oatmeal demanded, then the absolute value of the income elasticity of demand for oatmeal is _____.

0.5 2.5 / 5.0 = 0.5

inelastic

< 1

unit elastic

= 1

elastic

> 1

If the income elasticity of demand for lottery tickets is negative, then lottery tickets are _____.

an inferior good

If the cross-price of demand for ice cream with respect to the price of apple pie is negative, then the two goods are _____.

complements

When the price elasticity of demand is greater than 1, changes in price and changes in total expenditure _____.

move in opposite directions

If the price elasticity of supply is infinite, then supply is _____.

perfectly elastic

Total expenditure equals _____.

total revenue P X Q

Price * Quantity = _____

total revenue total expenditure

The percentage change in quantity supplied that results from a 1% change in its price is the _____.

elasticity of supply

The income elasticity of demand for iPhones is _____.

the percentage by which the quantity of iPhones demanded changes in response to a 1% change in income

stays the same for total expenditure

unit elastic = 1

total daily expenditure

daily number of units bought * price for sale P * Q = total revenue will increase when will decrease when

same direction of total expenditure

elastic < 1

If a store has a 10% off everything sale, then the store's total revenue will fall _____.

if the demand for the store's products is inelastic with respect to price

If the price elasticity of demand is greater than 1 and price decreases, the total expenditure will _____.

increase

opposite direction of total expenditure

inelastic > 1

If supply is perfectly elastic with respect to price, then the price elasticity of supply is _____.

infinite

price elasticity of demand

the percentage change in quantity demanded of a good or service that results from a 1% change in its price percentage change in quantity demanded / percentage change in price

The price elasticity of demand is _____.

the percentage change in quantity demanded that results from a 1% change in price

price elasticity of supply

the percentage change in quantity supplied that occurs in response to a 1% change in price ( Change in quantity / quantity ) / (change in price / price )

The cross price of elasticity of demand is _____.

the percentage change in the quantity demanded of one good in response to a 1% change in the price of another good

income elasticity of demand

the percentage of good's quantity demanded changes in response to a 1% change in income

cross-price elasticity of demand

the percentage of quantity demanded of the good 1 changes in response to a 1% change of good 2