ECON QUIZ 2.4, 2.5, 2.6, 2.7

If the price of a good increases by 15%, and quantity demanded changes by 5%, then the price elasticity of demand is equal to:

Approximately 0.33.

If a consumer has more time to search for a low-cost alternative for an item, their demand curve for that item will be:

relatively more elastic.

If an item is a necessity rather than a luxury, its demand curve will be:

relatively steep

Taking the absolute value of the income elasticity of demand is incorrect because it would:

remove the ability to tell whether the product is an inferior good or a normal good.

Taking the absolute value of the cross-price elasticity of demand is incorrect because it would:

remove the ability to tell whether the two products are substitutes or complements.

Suppose the price elasticity of demand for lemons is 1.8. If a fall frost destroys one-third of the nation's lemon crop, how will that affect total revenue from lemons, all other things equal?

rise in price is larger in magnitude than the percent decline in quantity demanded.

(Figure: Market for Movie Tickets) The figure shows the market for movie tickets. If the movie theater changes the price per ticket from $12 to $13.50, the change in total revenue is:

-$18,000

If income rises by 20% and the quantity demanded of an item falls by 20%, the income elasticity of demand for this item is:

-1

The price of product A falls by 50%. As a result, the quantity demanded of product B rises by 50%. The cross-price elasticity of demand between product A and product B is _____, and they are _____.

-1; complements

Because of declining stocks in the Caspian Sea, Beluga caviar prices recently increased by a whopping 25% (to about $700 per ounce). As a result, purchases of Beluga caviar decreased by 5%. The price elasticity of demand for Beluga caviar is: 5. 2. 0.2. 0.5.

.2

The state of Texas recently saw a gasoline price increase of 5%, which brought about a fall in the quantity of gasoline purchased of 1%. The price elasticity of demand is equal to _____, and demand is described as _____. 0.2; inelastic 5; inelastic 0.2; elastic 5; elastic

0.2; inelastic

Choose the correct price-elasticity label for each pair of goods. Assume this involves a demand for the total of all people currently residing in Canada, the US, and Mexico.1.Cosmetic surgery is __________ Emergency surgery2. A cheeseburger at 7 PM at a 24 HR restaurant is ______ a cheeseburger at 2 am at a 24 HR restaurant.3. monthly electricity consumption is _________ yearly electricity consumption.4.All cars are _______ red cars.5. The wall street journal is _________ The wall street journal at the airport

1. More elastic than 2. More elastic than 3. Less elastic than 4. Less elastic than 5. More elastic than

A Smoothie King manager has estimated that the price elasticity of demand for exotic fruit smoothies is 2. If the store increases menu prices by 5%, she can expect the quantity of exotic fruit smoothies sold to decrease by _____ and total revenue to _____.

10%; fall

If income rises by 10% and the quantity demanded of an item rises by 20%, the income elasticity of demand for this item is:

2 20%/10%=2

Which of the following statement about the price elasticity of demand is correct? Demand is more elastic in the long run than it is in the short run. Demand is more elastic the smaller the percentage of the consumer's budget the item takes up. The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. The absolute value of the elasticity of demand ranges from zero to one.

Demand is more elastic in the long run than it is in the short run.

The price elasticity of demand for snowboarding lessons at Jay Peak resort in Vermont is greater than 1. This means that the demand for snowboarding lessons is _____.

ELASTIC

The graph depicts five demand curves. Please rank each curve in terms of elasticity. A curve that is more elastic than another curve for any given quantity can be considered more elastic.

From most elastic to inelastic:Elastic graphs look more horizontal while Inelastic graphs look more vertical. C,E,B,D,A

Which of the following could explain why the demand for table salt is inelastic?

Households devote a very small portion of their income to salt purchases.

Suppose the price elasticity of demand for Baconators at Wendy's is 0.6. This means that the demand for Baconators is:

INELASTIC

You manage a restaurant, and lately revenues have been rather poor. One of your servers suggests that raising food prices will increase revenues, but your chef suggests that decreasing food prices will increase revenues. You aren't sure who is right, but you know that your server believes that the demand for your food is _____, and your chef believes that the demand for your food is _____.

Inelastic, elastic

In general, the long-run price elasticity of demand for a good tends to be _____ the short-run price elasticity of demand for it.

LARGER THAN

If an increase in the price of coconut oil brings about an increase in total revenue, then the percent rise in price is _____ in magnitude than the percent decline in quantity demanded.

Larger

(Figure: Demand Curves) The figure shows four different demand curves for four products. Which of the products has a perfectly elastic demand curve?

PRODUCT B A horizontal Demand line.

(Figure: Market for Avocados) The figure shows the market for avocados. Which statement is correct about this market between points A and B?

The demand curve is inelastic, and thus the seller gains revenue by raising price from $1.50 to $1.75.

Suppose the price of cupcakes decreases by 5%, and the quantity of cupcakes demanded increases by 15%. Demand for cupcakes is:

The elastic would 15/5=3 CORRECT ANSWER: price elastic

Which statement best characterizes the relationship between the elasticity of demand, price, and total revenue?

When demand is elastic and price falls, total revenue rises

If income rises by 10% and the quantity demanded of an item falls by 30%, the income elasticity of demand for this item is:

YED = (% Change in Quantity Demanded) / (% Change in Income) = (-30%) / (10%) = -3

If the price elasticity of demand for air travel is 4:

a 20% decrease in the price of air travel will increase quantity demanded by 80%. the demand for air travel is inelastic.

The demand curve for one particular brand of cough syrup will _____ the demand curve for cough syrup as a general category.

be more elastic than

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.

The wireless communications company Telefon has been testing the effect of a reduction in the price of its monthly service. When the company lowered its rate from $36 to $30 per month, it found that the number of users tripled. This suggests that the:

demand for cell phone service is elastic in this price range

If the price of herring increases by 8%, and the quantity demanded falls by 20%, demand is _____. This increase in price will therefore lead to a _____ in total revenue.

elastic; decrease

If demand is _____, a higher price yields _____ total revenue.

elastic; lower

Demand for soft drinks outside an airport is more elastic than inside of the airport because:

fewer choices mean more inelastic demand

After North Carolina State University raised its tuition by 12%, a survey was conducted to determine how many students would transfer to another university as a result. Only about 1 in 300 students indicated they would transfer. Based on this information, the price elasticity of demand for education at this university is: 1. highly elastic. highly inelastic. 0.

highly inelastic.

The slope of a demand curve is not used to measure the price elasticity of demand because

the measurement of slope is sensitive to the units chosen for price and quantity.

The price elasticity of demand for gasoline tends to be rather inelastic as:

there are few or no available subsitutes

Two products have a cross-price elasticity of demand of 1.5. Based on this value of cross-price elasticity, which products are they most likely to be?

two competing brands of soft drinks

Suppose the percent change in the quantity demanded for water for any price change is zero. The demand curve for water is _____, and the price elasticity of demand is perfectly _____.

vertical; inelastic