ECO 202 Quiz 7/Ch.6
If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would
remain constant
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.
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
Refer to Table 6-6. Based on the data in the table, between a price of $9.99 and $14.99, the demand for books is
elastic
If the price elasticity of demand for canned soup is estimated at -1.62. What happens to sales revenue if the price of canned soup rises?
it falls
Refer to Figure 6-4. The inelastic segment of the demand curve
lies below the midpoint of the curve
The price elasticity of an upward-sloping supply curve is always
positive
If the cross-price elasticity of demand between beer and wine is 0.31, then beer and wine are
substitutes
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.
If the demand for cell phone service is inelastic, then
the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
Total revenue is equal to
the price of a product multiplied by the number of units of the product sold.
The income elasticity of demand measures
the responsiveness of quantity demanded to changes in income.
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.
1.62; price elasticity of demand = ((Q2-Q1)/(Q1+Q2/2)) / ((P2-P1)/(P1+P2/2)
Refer to Figure 6-11. What is the value of the price elasticity of supply between g and h?
2
Which of the following statements is true?
If the price of a good is raised and total revenue increases, demand is inelastic.
Refer to Figure 6-1. A perfectly inelastic demand curve is shown in
Panel A -a vertical line
Refer to Figure 6-10. A perfectly elastic supply curve is shown in
Panel B
Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues. Which of the following best explains this?
The demand for tomatoes is price inelastic.
Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product increases. Which of the following statements accurately predicts the resulting increase in price?
The more elastic the supply curve, the smaller the price increase.
Consider the following pairs of items: a. shampoo and conditioner b. iPhones 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 and b only
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.
Demand for a luxury item, such as a yacht, is likely to be
both income elastic and price elastic.
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.
Income elasticity measures how a good's quantity demanded responds to
change in buyers' incomes
Which of the following products comes closest to having a perfectly inelastic demand?
cholesterol medication in general