Econ 3 Microeconomics Elasticity OpenStats
What is the price elasticity of demand for generic shoes if for every 10% price increase clothing demand decreases by 15%? ________ The price elasticity of demand would be ________.
-1.0
Which of the following describe a product with an inelastic demand?
An appointment with a dentist.
Which method for calculating elasticity uses the values of the average price and average quantity?
The percent change approach
Which of the following goods represent a cross-price elasticity likely greater than zero?
The substitute goods of blueberries and strawberries.
What happens to total revenue (TR) if the price rises on a product with demand that is price inelastic?
Total revenue will rise.
Good news for an industry that typically produces inelastic goods can
be bad news for individual producers because when these factors shift the supply curve to the right it decreases total revenues.
If you divide the change in quantity by the original quantity, you are calculating the
change in elasticity.
The government imposes an excise tax on house paint. The house paint tax incidence takes place within a market where the supply of house paint is elastic and the demand for house paint is inelastic. Who pays the most of the excise tax?
consumers of house paint
The ________ is negative for complementary goods and positive for substitute goods.
cross-price elasticity of demand
If the government wanted to encourage savings by offering a tax break, such a policy would work if the supply curve for financial capital is
elastic.
An increase in demand will shift the demand curve to the right, therefore ________ the equilibrium price.
increasing
Price and total revenue are positively related when demand is
inelastic.
When income increases and demand for a good falls, the good is considered a
inferior good.
If the elasticity of demand for a company's product is estimated to be 1.72, what would you advise the company to do if their objective is to increase revenue?
lower the price
If you divide the change in quantity by the original quantity, you are calculating the
percentage change.
When a 10% increase in income causes a 4% increase in quantity demanded of a good
the income elasticity is .4 and the good is a normal good.
Demand is relatively inelastic if ________.
there are foreign production inputs
You are the manager of the public transit system. You are informed that the system faces a deficit, but you cannot cut service, which means you cannot cut costs. Your only hope is to increase revenue by increasing fares. You are advised that the estimated price elasticity of demand for the first few months after a price change is about −0.3. Select the statement that best describes the results of raising the fare in the short run.
Total revenue rises immediately after the fare increase, since demand over the immediate period is price inelastic.
A tax is imposed on chewing gum. Consumers pay all of the tax while the producers pay none of the tax. If you were to draw a graph you would see that the demand curve
perfectly inelastic.
When supply is inelastic and demand is elastic, the tax incidence falls on ________.
the federal government
Elasticity allows economists to measure
the responsiveness of one variable to changes in another variable
A product is considered relatively elastic
when there are many substitutes
Given that total revenue = price x quantity, what will happen to total revenue if price increases when demand is elastic?
It will decrease.
If the price of Sperry shoes goes up from $100 to $120 and the quantity supplied increases from 800 to 900 pairs.
It would increase by 0.625.
Suppose the price elasticity of supply has been calculated as 0.80 for a particular product and the price increases by 5%. What would happen to the quantity supplied?
It would increase by 8%.
Kelly's salary was bumped up this year after she accepted the new position of Vice President of Marketing. Her income increased from $65,000 to $83,000. Last year Kelly purchased 2 used cars. This year she purchased 0 used cars. Assuming that all of the other things remain constant, what type of a good is a used car and what type of income elasticity of demand does Kelly have?
A used car is an inferior good and the income elasticity of demand is 8.22.
What happens to total revenue (TR) if the price decreases on a product with demand that is price elastic?
Total revenue will rise.
Joe received a promotion this year at work and now has an income which has increased by 21% since last year. Joe has now increased his quantity demanded of red wine by 7%. In this example, Joe's
income elasticity is .33 and the good is a normal good.
Teenage workers are assumed to have ________ labor supply; therefore a 5% increase in wages would result in ________ percentage change in quantity of labor supplied.
inelastic, greater
Higher costs can typically be passed on to consumers when a product is considered
inelastic.
Elastic supply occurs if the change in quantity supplied is ________ to a change in price.
relatively responsive
The elasticity of supply is defined as the
the percentage change in quantity supplied divided by the percentage change in price.
Total revenue is defined as ________ and represented as ________.
the price of a product times the number of units sold; TR=P x Qd
Suppose the price of apples increase by 20%, resulting in consumers to purchase 15% more pears. Given this information, it appears that
cross-price elasticity of pears is 0.75.
The percentage change in quantity divided by the percentage change in price is the
elasticity.
Sylvia's favorite burrito shop raised its prices from $6 to $9. The percentage change in price is
50%.
You read an article stating that HTC's latest cell phone price has increased from $450 to $550. At the same time the quantity demanded for the Samsung Galaxy 7s increases from 1000 to 1850. Calculate the cross price elasticity of demand using the midpoint method. Are these two cell phones complements or substitutes?
The cross price elasticity of demand is 2.98 and they are substitutes
If the demand curve for energy is at first inelastic, then changes over time and becomes increasingly elastic, then the demand curve is
getting flatter.
A perfectly elastic supply curve is
horizontal.
If a large change in price results in a small change in demand, then demand is
inelastic.
A person who takes aspirin most likely has a(n) ________demand for that drug. Therefore an increase in the price of aspirin will result in ________ total revenue for the drug company.
inelastic; decreased
The electric power company in a city increased its prices by 15% this year. Since the demand for electricity is a(n) ________ demand in the short run, the equilibrium price will ________.
inelastic; greatly increase
Demand "D" represents a demand curve that is
perfectly inelastic.
The ________ approach for calculating elasticity makes for simple math, but is not as accurate.
point elasticity approach
A new technological breakthrough increases production for an industry and shifts the supply curve to the right. If the firm ________, then the firm will likely be happy about this new technology.
produces products that are considered elastic
The wage elasticity of labor demand calculation is
the % change in quantity of labor demanded divided by the % change in wage.
If the demand for a product is inelastic but the supply is elastic, the ________ will bear the tax incidence.
the consumer
Elasticities are often ________ in the long run than in the short run.
the same
Which of the following factors does NOT influence the price elasticity of demand of a product?
the slope of the supply curve