Chapter 6 Elasticity

The total revenue received by sellers of a good is computed by:

Multiplying the price times the quantity sold

The price elasticity of demand is a measure of the:

Sensitivity of a good's price to changes in demand

Economists distinguish among the immediate market period, the short run, and the long run by noting that:

Supply is most elastic in the long run, and least elastic in the immediate market period

Total revenue falls as the price of a good is raised, if the demand for the good is:

elastic

What is the most likely effect of the development of DVDs, rental movies, and online movie streaming on the movie theater industry?

Increased price elasticity of demand for movie theater tickets

If the price-elasticity coefficient for a good is .75, the demand for that good is described as:

inelastic

Blossom, Inc. sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs forces Blossom to raise price to $9, and the firm only manages to sell 460 bottles of perfume. The price elasticity of demand is:

0.33 and inelastic

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity of demand coefficient for this product is:

1.5

The elasticity of supply for a product will be 2 if:

A 1 percent decrease in price causes a 2 percent decrease in quantity supplied

The price elasticity of demand for a popular sporting event is 2. If the price of a ticket to this event increases by 10 percent, the quantity of tickets demanded will:

Decrease by 20 percent

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition:

Have inelastic demand and students who use financial aid have elastic demand

You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1. To increase total revenues from that product, you should:

Increase the price of the software

In the immediate market period for a highly-perishable crop like tomatoes, the individual farmer's supply curve tends to be:

Perfectly Inelastic

Demand is said to be inelastic when:

The elasticity coefficient exceeds one

If an increase in the supply of a product in the market results in a decrease in price, but no change in the quantity traded, then:

The price elasticity of demand is zero

Which is not characteristic of a product with relatively inelastic demand?

There are a large number of good substitutes for the good

The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that

There are more substitutes for Cheerios than for cereals as a whole