CH. 6 Microeconomics
The demand for gasoline in the short run is
inelastic because there are very few good substitutes for gasoline.
If firms do not increase their quantity supplied when price changes, then supply is
perfectly inelastic.
Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product.
0.5; The product is inelastic.
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?
2.5 percent
Suppose the value of the price elasticity of demand is -3. What does this mean?
A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
Which of the following would result in a higher absolute value of the price elasticity of demand for a product?
A wide variety of substitutes are available for the good.
Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?
It is elastic at the highest prices and inelastic at the lowest prices.
When Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue?
Sales revenue decreased.
Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic, and that the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes?
The demand for cantaloupes at $2.00 must be inelastic.
Suppose you own a bookstore. You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35. You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day. Compute the price elasticity of demand using the midpoint formula and these data. Select the correct implication from your work.
The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered.
Consider a demand curve that has a constant elasticity value of 0. What happens to quantity demanded and total revenue when price increases?
The quantity demanded does not change but total revenue increases.
Consider the following pairs of items: a.shampoo and conditioner b.iPhones and earbudsc.a laptop computer and a desktop computerd. beef and porke. air travel and weed killer Which of the pairs listed will have a negative cross-price elasticity?
a and b only
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.
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 lead to an increase in revenue for beer sellers and beer is a normal good.
Income elasticity measures how a good's quantity demanded responds to
change in buyers' incomes.
If the cross-price elasticity of demand for computers and software is negative, this means the two goods are
complements.
If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is
elastic.
When there few close substitutes available for a good, demand tends to be
relatively inelastic
Most people buy salt infrequently and in small quantities. Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded. Therefore
the demand for salt is relatively inelastic.
When demand is elastic, a fall in price causes total revenue to rise because
the increase in quantity sold is large enough to offset the lower price.
If the demand for iPods is price elastic, then
the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).
If the cross-price elasticity of demand between Breeze Detergent and Gain Detergent is a relatively large positive number, then it indicates that
the two brands of detergent are close substitutes.
If the demand for a product is perfectly inelastic, a decrease in the price of the product
will decrease total revenue.