Econ Quiz Ch 6

Nico rents 10% more DVDs when his income increases by 20%. Based on this information, we know that DVDs:

are a normal good.

If a good is a necessity with few substitutes, all other things equal, then demand will tend to:

be less price-elastic

The percentage change in quantity demanded of one good or service divided by the percentage change in the price of a related good or service is the _____ of demand.

cross-price elasticity

The price elasticity of demand along a demand curve with a constant slope:

increases in absolute value as the price rises

On a linear demand curve, demand at very low prices will be:

price-inelastic

When a public transit system (such as a subway or bus line) raises its fares, its total revenue may increase. This suggests that demand is:

price-inelastic

An important determinant of the price elasticity of demand is the:

proportion of the household budget spent on the good.

If your purchases of good A increase from 9 units per year to 11 units per year when the price of good B increases from $8 to $12, all other things equal, for you, good A and good B are considered _____ goods.

substitute

Goods are _____ when the cross-price elasticity of demand is positive and _____ when the cross-price elasticity of demand is negative.

substitutes; complements

If the price elasticity of supply is greater than 1:

supply is price-elastic

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 180. If the price is $1.55, total revenue is _____, and if the price is $2.00, total revenue is _____.

$341; $360

Eric's income increased from $40,000 to $50,000 per year. Eric's consumption of tickets to pro football games increased from two to four per year. By the midpoint formula, his income elasticity of demand for pro football game tickets is equal to _____, and football game tickets are _____ goods.

+3; normal

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _____, and demand is described as _____.

0.2; inelastic

If the price of tacos increases from $1 to $2 and customers decrease their consumption from 10 tacos to 8 tacos, what is the price elasticity of demand (by the midpoint method)?

0.33

The Cozy Chair Company believes it can sell 200 chairs at $200 per chair or 300 chairs at $150 per chair. Using the midpoint formula, what do they think is the price elasticity of demand?

1.4

(Table: Market for Pizza) When income changes from $1,000 to $1,400 per month, the income elasticity of demand for pizza, by the midpoint method, at a price of $14 per pizza is: https://www.macmillanhighered.com/brainhoney/Resource/14442999,8,0,0/Assets/resources/chapter_06-_elasticity/q181-1.png

1.5

An attorney supplies 40 hours of work per week when her fee is $100 per hour but supplies 60 hours of work per week when her fee rises to $120 per hour. Using the midpoint formula, her elasticity of supply is equal to:

2.2

(Table: Price Elasticity) Use Table: Price Elasticity. What is the price elasticity of demand (using the midpoint formula) between $2.25 and $2.00? https://www.macmillanhighered.com/brainhoney/Resource/14442999,8,0,0/Assets/resources/chapter_06-_elasticity/q39-1.png

5.67

(Figure: Demand Curves) Use Figure: Demand Curves. Which graph shows a perfectly inelastic demand curve? https://www.macmillanhighered.com/brainhoney/Resource/14442999,8,0,0/Assets/resources/chapter_06-_elasticity/q90-1.png

C

Suppose the cross-price elasticity between demand for Chipotle burritos and the price of Qdoba burritos is 0.8. If Qdoba increases the price of its burritos by 10%:

Chipotle will sell 8% more burritos.

(Figure: Estimating Price Elasticity) Use Figure: Estimating Price Elasticity. Between the two prices, P1 and P2, which demand curve has the HIGHEST price elasticity? https://www.macmillanhighered.com/brainhoney/Resource/14442999,8,0,0/Assets/resources/chapter_06-_elasticity/q102-1.png

D3

(Figure: Estimating Price Elasticity) Use Figure: Estimating Price Elasticity. Between the two prices, P1 and P2, which demand curve has the LOWEST price elasticity? https://www.macmillanhighered.com/brainhoney/Resource/14442999,8,0,0/Assets/resources/chapter_06-_elasticity/q101-1.png

D4

The price elasticity of demand for gasoline in the short run has been estimated to be 0.4. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total revenue from gasoline in the short run, all other things unchanged?

Quantity demanded will decrease; total revenue will rise.

Use of the midpoint method to calculate the price elasticity of demand eliminates the problem of computing:

different elasticities, depending on whether price decreases or increases

The price elasticity of demand is measured by _____ the percentage change in _____ the percentage change in _____.

dividing; quantity demanded by; price

If two goods are substitutes, their cross-price elasticity of demand should be:

greater than 0.

For a good to be considered normal, the _____ elasticity of demand must be _____.

income; greater than 0

You manage a nightclub, and lately revenues have been disappointing. Your bouncer suggests that raising drink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues. You aren't sure who is right, but you do know that your bouncer thinks the demand for drinks is _____ and your bartender thinks the demand for drinks is _____.

inelastic; elastic

If your income increases and your consumption of bagels increases, other things equal, bagels are considered a(n) _____ good.

normal

Suppose the price elasticity of demand for cheeseburgers equals 0.37. This means the overall demand for cheeseburgers is:

price inelastic

If quantity supplied responds substantially to a relatively small change in price, supply is:

price-elastic

The price elasticity of demand for a good will tend to be larger:

the longer the time available to adjust to price changes.

Which factor does NOT determine the price elasticity of demand?

the slope of the supply curve

If a 20% price increase generates a 20% decrease in quantity demanded, then this is a(n) _____ response.

unit-elastic