Econ 528: Chapter 3 ULL Online
Suppose the value of the price elasticity of demand is -3. What does this mean?
A 1% increase in the price of the good causes quantity demanded to decrease by 3%
Linesha, a college student working part-time receives a wage increase. An avid movie buff, she increased her purchases of Blu-ray discs and reduced her purchases of DVDs. Based on this information
Blu-ray discs are normal goods and DVDs are inferior goods
If an economist says that firm practices price discrimination, that firm is
Charging different prices for the same good or service
True or False Charging a different price for tickets to movies at twilight than after 6:00 is an example of bundling
False: This does not group units. it is an example of third degree price discrimination
Which of the statements about price discrimination is (are) false: a. Public utilities practice first-degree price discrimination. b. It must be difficult to transfer the seller's product from one market segment to another. c. It must be possible to segment the market. d. There must be differences in the elasticity of demand from one segment to another
Public utilities practice first-degree price discrimination.
If a firm charges customers $ 200 per unit of the first unit purchased, and $160 per unit for each additional unit purchased in excess of one unit. Then, what is the economic term of this strategy
Second-degree price discrimination
For a price discriminating airline, if the demand for business travelers were to expand, a proactive price discriminator would expand the number of seat assignments to business travelers and likely raise business traveler ticket prices. TRUE OR FALSE
TRUE
First (Perfect) degree price discrimination means that a firm charge
The maximum amount that buyers are willing to pay for each unit
True or false about the price elasticity of demand. Demand is more elastic in the long run than it is in the short run.
True
If a 5 percent increase in income leads to a 10 percent increase in quantity demanded for airline travel, then airline travel is
a luxury
If an increase in income leads to an increase in the demand for peanut butter, then peanut butter is
a normal good
Consider the following pairs of items: a. shampoo and conditioner b. i Phones and earbuds c. a laptop computer and a desktop computer d. beef and pork e. air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity
a. shampoo and conditioner & b. i Phones and earbuds
Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that
an increase in the price of beer will lea to an increase in revenue for beer sellers and beer is a normal good
If an increase in income leads to a decrease in the demand for popcorn, then popcorn is
an inferior good
A restaurant in an isolated spot on the coast of Maine sells only complete meals at a fixed price (called prix fixe), with the opportunity to select à la carte choices. Which type of price discrimination is being practiced
bundling
If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because
buyers of steel are more sensitive to a price change if they have more time to adjust to the price change
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are
complements
Elvira decreased her consumption of bananas when the price of peanut butter increased. For Elvira, peanut butter and bananas are
complements in consumption
A sale on men's slacks at T.J. Maxx, where if you buy the first pair at full price, you can buy the second pair at half price, is an example
differential pricing
The demand for gasoline in the short run is
inelastic because there are no good substitutes for gasoline
Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is
negative, so Sefton considers potatoes to be an inferior good
A change in which variable will change the market demand for a product?
population
The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded?
price elasticity of demand = %change in quantity/ % change in price -4=-10/%change in price =-10/(-4) % CHANGE IN PRICE = 2.5%
Suppose that when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simon
strawberries and whipped cream are complements.
Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are
substitutes in consumption
If the price of music downloads was to decrease, then
the demand for MP3 players would increase
Vacation tours to Europe invariably package visits to disparate regions: cities, mountains, and the seaside. Bundling, a type of second degree price discrimination, is most profitable when
the preference rankings of vacationers travelling together are negatively correlated
A change in all of the following variables will change the market demand for a product except Select one: a. income. b. population and demographics. c. tastes. d. the price of the product
the price of the product
third degree price discrimination exists whenever
the seller can separate markets by geography, income, age, etc., and charge different prices to these different groups
Selling tickets in the orchestra region of the Metropolitan Opera for $55 and selling tickets in the upper balcony for $28 to listen to Luciano Pavoratti describes which type of price discrimination
third-degree price discrimination
If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demand
will decrease by 45%
