Chpt. 5. (1-4)

Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1000 per month to 900 per month. Using the midpoint formula, the ___ percentage change in price lead to a ___ percentage change in the quantity demanded

12.5 and 10.5

Suppose the price of a box of cereal rises from $4 to $6 using the midpoint method, what is the percentage change in price?

40 %

If a small percentage change in the price brings a very large percentage in the quantity supplied, then the supply is almost perfectly ___ and the supply curve is almost ___.

Elastic and horizontal

Use the midpoint method to determine the cross elasticity of demand for ice cream and cake Price Cake Quanitity of Ice cream 2 - 10 4 - 6

The cross elasticity is -0.75

5.2 What is measured by the price elasticity of supply

The price elasticity of supply measures how responsive producers are to change in the price of a product

if the cross elasticity of demand between good A and good B is negative, then a decrease in the price of good A and good B would result in

an increase in the demand for good B

The price elasticity of demand is a measure of

buyers responsiveness to changes in the price of a product

To determine the price elasticity of demand, we

compare the percentage change in the quantity demanded to the percentage change in the price

5.3 The extent to which the demand for a good changes when then price of a substitute or complement changes, other things remaining the same, is measured as the

cross elasticity of demand

If we are trying to determine if two different products are substitutes, compliments, or not related at all, we should find the value of the

cross elasticity of demand

The cross elasticity of demand is a measure of how

demand for a product changes when the price of a substitute or compliment changes

The price elasticity of demand measures which of the following

how responsive the quantity demanded is to changes in price

If the percentage change in the price of a good exceeds the percentage change in the quantity supplied, then the supply is

inelastic

When the percentage change in the quantity supplied is less than the percentage change in price, the supply is

inelastic

The price elasticity of demand measures the ___ that results from a ___

it measures the percentage change in the quantity demanded; from a result of the percentage change in price

The elasticity of demand is used to

measure how responsive consumers are to a change in price

If the price of a good rises, then moving along a demand curve the percentage change in the quantity demanded will be

negative

If the supply line on the graph is horizontal the it is

perfectly elastic supply

If supply on the graph is a vertical line it is

perfectly inelastic supply

The cross elasticity of demand for butter and margarine is likely to be

positive because they are substitutes

What is the formula for the cross elasticity of demand? The percentage change in the

quantity demanded divided by the percentage change in the price of a substitute or compliment

Goods are ____ when the income elasticity of demand is positive

substitutes

If the price of a Brita water filter system increases and the quantity demanded of bottled water increases, then these two are

substitutes

Which of the following is correct

the cross elasticity of demand for substitute goods is positive

The Price elasticity of supply measures

the extent to which the quantity supplied of a good changes when the price of a good changes, other things remaining the same

The price elasticity of demand measures the extent to which the quantity demanded changes when

the price of the good changes

If we ignore the negative or positive sign, the midpoint method of calculating a percentage change in the price between two points on a demand curve results in

the same percentage, regardless of whether the price increases or decreases

The price elasticity of supply I always a positive value because

there is a direct realationship between the price and the quantity supplied

When the percentage change in the quantity supplied equals the percentage change in price, the supply is

unit elastic

If the supply curve is___, the elasticity of supply is ___.

vertical, 0