Econ 201 Ch 5 Assessment

A. 2.6 (-36%/-14%) B. substitutes

According to the U.S. Department of Energy, the average price of gasoline in the U.S. fell by 14% in 2015. The number of hybrid electric vehicles (HEV) sold in the U.S. fell by 36% in the same year. Calculate the cross-price elasticity of demand for HEVs and gasoline. Round answer to one place after the decimal. a. Cross-price elasticity = b. Based on your answer in part a, gasoline and HEVs are

A. almonds have a more inelastic supply in the short run because little can be done to change production in the short run. B. C. the ability to store product ease of firms to enter or exit the market flexibility of inputs or resources used to make a product

Almonds are a crop that grows on trees. Farmers do not need to replant trees every year to produce a crop of almonds. It takes at least five years after planting for trees to bear fruit. Several factors such as weather, disease, and long term projections about price impact the supply of almonds available. Barley is a grass that must be planted each year to produce a crop. The growing season is short, about three to four months. Several factors influence farmers' decisions to plant barley each year, including price, weather, and disease. a. Based on this information, almonds have a more inelastic supply in the short run because little can be done to change production in the short run. it is impossible to infer anything about the price elasticity of supply for these two crops. the crops have the same price elasticity of supply because they are both agricultural commodities. barley has a more inelastic supply in the short run because barley is more dependent on price in the short run. b. Consider the graph which illustrates two potential supply curves. Move the points to label the curve that most likely represents the supply curve for each crop. c. Select each factor which helps determine the price elasticity of supply for a product. (select all that apply) the ability to store product ease of firms to enter or exit the market flexibility of inputs or resources used to make a product

The price elasticity of demand

An article in Forbes noted that the Intercounty Connector toll road that connects two counties in Maryland was not generating as much toll revenue as predicted. At that time, the toll rate was $8 for a passenger car making a round trip from end to end on the tollway during rush hour. What additional information would you need to know in order to determine if the toll should be increased or decreased? The price elasticity of supply The price elasticity of demand The number of vehicles using the tollway per day The income elasticity of drivers using the tollway

A. .64 (P: (6-8)/((6+8)/2x100)= 28.57%) (Q: (10000-12000)/((10000+12000)/2)x100=18.18%) (Q/P: 18.18%/28.57%) B. inelastic C. -$8000 D. increased

An experiment is conducted that provides the data in the accompanying table. a. What is the absolute value of price elasticity when the toll rate decreases from $8 to $6 (use the midpoint method)? Round to the nearest hundredth. Absolute value of price elasticity of demand: b. Price elasticity of demand for the toll road is considered to be c. What is the change in total revenue when the toll is decreased from $8 to $6? d. In order to maximize revenue, the toll rate should be

A. 2 (500%/250%) B. .32 (80%/250%) C. -.3 (-75%/250%) D. normal good, necessity, inferior good

Congratulations! You have just landed your first job out of college as an economic analyst at the Bureau of Labor Statistics. Your starting salary is $55,000 per year; an increase of 250% per year over the salary you made at the local coffee shop. The corresponding table gives the percentage change in your purchases of each good after your income increases. Use this information to estimate your income elasticity of demand for each of the items. a. Income elasticity for meals at restaurants is b. Income elasticity for cups of coffee is c. Income elasticity for instant noodles is d. Based on the calculations of income elasticity, meals at restaurants are a _____, coffee is a _____, and ramen noodles are an ______.

elastic, lower, price matching

Consumers now have easy access to internet shopping because of smartphones. Technology has caused demand to become more _____ for goods you can purchase at stores like Barnes and Noble and Best Buy. This is because the cost of getting price information from other retailers is now _____. To stay competitive, Best Buy uses a strategy called _____ where they offer to sell items at competitor prices.

less inelastic, lower

Europe has eight different companies selling devices similar to the EpiPen. If these devices were available for use in the U.S. market, you would expect price elasticity of demand to become _______. This would also lead Mylan to charge a ______ price.

14% (-1.5 = (-21%/P))

In 2017, Hurricane Irma had a significant, negative impact on the orange harvest in the state of Florida. The U.S. Department of Agriculture predicted that the quantity of oranges produced would be 21% lower than the previous year. If the price elasticity of demand for oranges is -1.5, what impact would Hurricane Irma have on the price of oranges? change in the price of oranges:

Netflix is a normal good.

In 2022, Netflix increased its monthly price for new subscribers by $1. In response, one individual tweeted the following: "So tired of being a college student. Can't wait until I have a stable job and won't have to give up Netflix cause they raised their price by $1". What does this statement indicate about the income elasticity of demand for Netflix? Netflix is a normal good. Netflix is a perfectly inelastic good. Netflix violates the law of demand. Netflix is an inferior good.

A. 3 B. -$15000 C. .48 D. $5000 E. $400 to leisure travelers and $500 to business travelers.

Individuals differ in their willingness to pay for air travel, and airlines would like to charge different prices to different individuals based on their willingness to pay. Airlines typically attempt to divide passengers into two types: leisure travelers and business travelers. Suppose that an airline is charging $400 per ticket for all passengers on flights between New York and Washington D.C. The accompanying tables provide information on quantity demanded for air travel for leisure travelers and business travelers. a. What is the absolute value of price elasticity for leisure travelers if the airline increases the price to $500? Round your answer to the nearest whole number. b.What is the change in total revenue for leisure travelers when the price increases to $500? c. What is the absolute value of price elasticity for business travelers if the airline increases the price to $500? Round your answer to the hundredths place. d. What is the change in total revenue for business travelers when the price increases to $500? e. To maximize total revenue, the airline should charge $500 to both groups. $400 to both groups. $500 to leisure travelers and $400 to business travelers. $400 to leisure travelers and $500 to business travelers.

A. .12 (4.878/40) B. inelastic C. elastic, flatter

Suppose the accompanying table contains data on how many Veggie Delite sandwiches Subway is willing to sell each day at two different prices. Calculate the daily price elasticity of supply when the price increases from $5.00 to $7.50. Please round to the nearest hundredth. a. Daily price elasticity of supply for Veggie Delite sandwiches = b. The daily price elasticity of supply for Veggie Delite sandwiches is relatively ____. Now consider how responsive Subway's supply of Veggie Delite sandwiches is to changes in price on an annual basis instead of a daily basis. c. Compared to the daily value, the annual price elasticity of supply for Veggie Delite sandwiches is likely to be more ______ and the annual supply curve is likely to be _____ than the daily supply curve.

decrease, less than

The EpiPen is a lifesaving device used by individuals with severe allergies. The U.S. manufacturer of the EpiPen raised its price by nearly 25% per year for nearly a decade. For each 25% increase in the price, quantity demanded would _____ by ______ 25%.

suggest decreasing the price on the leading generic drug to increase revenue. (the value of price elastic is >1 so demand is price elastic. if the demand is price elastic, the % increase in quantity would be much higher than the % fall in price so lowering the price would increase quantity)

You are a pricing manager at a generic pharmaceutical distributor. The CEO of the company calls a meeting of all the managers and states that it is critical to increase revenue soon or you may have to start laying off employees. You know that the price elasticity of demand for your leading generic drug is 1.5 and you sell it for three times what it costs. As the pricing manager, you should argue that the numbers must be off because the company is charging three times the cost of the leading generic drug and therefore must be making a profit. suggest decreasing the price on the leading generic drug to increase revenue. suggest laying off employees because elasticity of the leading generic drug is unit elastic, so there is no way to increase revenue by changing price. suggest increasing the price on the leading generic drug to increase revenue.

substitutes, large

You may have observed that items such as different brands of aspirin, tomato sauce, or gasoline are typically priced the same as each other. This is particularly true when consumers can find these goods in close proximity to each other. For example, prices are often the same at gas stations that are on opposite sides of the street. Prices are also generally the same for products next to each other on the same grocery store shelf. The aforementioned examples are goods that are likely to be _______. You would expect the value of the cross-price elasticity to be ______, because the opportunity cost of getting information on price is low.

A. substitutes, positive B. complements, negative C. Substitutes: shoes and sandals beef and chicken Complements: wine and cheese table and chairs shampoo and conditioner Independent: peanut butter and lumber

a. If the price of a good falls and this causes the quantity demanded of another good to fall, then the items are considered to be _____ and the cross-price elasticity is _____. b. If the price of a good falls and this causes the quantity demanded of another good to increase, then the items are considered to be ____ and the cross-price elasticity is _____. c. Classify each pair of goods as substitutes, complements, or independent. peanut butter and lumber wine and cheese table and chairs beef and chicken shampoo and conditioner shoes and sandals

A. Elastic: movie tickets pizza Inelastic: gasoline insulin for a diabetic electricity water B. a lifesaving medical treatment

a. Place the items in the appropriate box based on whether the price elasticity of demand is more likely to be elastic or inelastic. gasoline movie tickets insulin for a diabetic electricity water pizza b. Which of these items is most likely to have perfectly inelastic price elasticity of demand? a cup of coffee oranges your economics textbook a lifesaving medical treatment