Econ Hw 5 Chap 6

Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

elastic demand to see movies in the afternoon.

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will

increase the amount demanded by more than 10 percent.

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the

more inelastic the demand for the product.

In some markets consumers may buy many different brands of a product. Which of the statements below best represents a situation where demand for a particular brand would be very elastic?

"The different brands are almost identical. I always buy the cheapest."

In which price range of the accompanying demand schedule is demand elastic? PriceQuantity Demanded42342618

$4-$3

A 3 percent increase in the price of tea causes a 6 percent increase in the demand for coffee. The cross elasticity of demand for coffee with respect to the price of tea is

+2.0.

Refer to the diagram and assume that price increases from $2 to $10. The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about

.25, and supply is inelastic.

A price increase from $43 to $49 results in an increase in quantity supplied from 220 units to 240 units. The price elasticity of supply in this price range is

.67

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

0.33 and inelastic.

Refer to the total revenue graph above. Demand is price-elastic between points

A and B.

Answer the question on the basis of the following demand schedule. PriceQuantity Demanded$615243342516 Which of the following is correct?

Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges.

Refer to the graph above. Which demand curve is relatively most elastic between P1 and P2?

D1

Refer to the diagram. Between prices of $5.70 and $6.30,

D1 is more elastic than D2.

Assume that pizza and hamburgers are the only food items available to consumers. If the price of pizza increases, other factors constant, then which of the following will definitely happen?

Total revenues received by hamburger sellers will increase.

(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand. The firm might charge

a higher price to the group that has the less elastic demand.

The cross elasticity of demand between Quaker State motor oil and Texaco motor oil is likely to be

a positive number.

The demand for a product is inelastic with respect to price if

consumers are largely unresponsive to a per unit price change.

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to

decrease by approximately 12 percent.

Along a linear downward-sloping demand curve, the price elasticity of demand will be

different across each price range.

A union argues that a price cut will boost the revenues of the firm, while management argues that the opposite is true. This suggests that the price elasticity of demand is

elastic from the union's perspective, inelastic from management's perspective.

Refer to the above graphs. Which graph depicts a situation where sellers are increasing their output because their product is becoming more popular among buyers?

graph B

Refer to the graphs above. A price increase from $20 to $40 causes quantity demanded to decrease from 100 units to 50 units. Which graph best illustrates the demand for this good?

graph B

To economists, the main differences between "the short run" and "the long run" are that

in the long run all resources are variable, while in the short run at least one resource is fixed.

For an increase in demand, the price effect is smallest and the quantity effect is largest

in the long run.

It is argued that, with a rising demand for college education, if the supply were to become more elastic, then college tuition costs would

increase more slowly.

If the price elasticity of demand for a product is unity, a decrease in price will

increase the quantity demanded, but total revenue will be unchanged.

If the demand for product X is inelastic, a 4 percent decrease in the price of X will

increase the quantity of X demanded by less than 4 percent.

Refer to the total revenue graph above. If the quantity of product X demanded falls from 14,000 to 10,000 units, then it suggests that the price of X was

increased and the demand is inelastic.

Quantity DemandedPriceQuantity Supplied45$107750873566686146167257 Refer to the data. Suppose quantity supplied declined by 23 units at each price, changing the equilibrium price in a direction and amount for you to determine. Over that price range, demand is

inelastic.

state government wants to increase the taxes on cigarettes to increase tax revenue. Because cigarettes are addictive, we would expect its demand to be

inelastic. Thus,the government's cigarette-tax revenues would rise with a tax increase.

Price per TicketQuantity Demanded$131,000112,00093,00074,00055,00036,000 Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game

is perfectly inelastic.

The diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate market period, the short run, and the long run. Supply curves S1, S2, and S3 apply to the

long run, short run, and immediate market period, respectively.

We use percentage changes in the formula for estimating the price elasticity of demand coefficient in order to

make it irrelevant how we measure price: be it in cents, in dollars, or in thousands of dollars.

Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is

negative, and therefore X is an inferior good.

The diagram shows two product demand curves. On the basis of this diagram, we can say that

over range P1P2, price elasticity of demand is greater for D1 than for D2.

We would expect the cross elasticity of demand between Pepsi and Coke to be

positive, indicating substitute goods.

Refer to the diagram. In the P1P2 price range, demand is

relatively elastic.

If a 10 percent increase in the price of good A results in an increase of 5 percent in the quantity demanded of good B, then it can be concluded that goods A and B are

substitute goods.

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,

the demand for pizza is elastic above $5 and inelastic below $5.

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.