Economics Ch. 5
In the figure above, using the midpoint method, what is the price elasticity of demand between points A and B?
0.43
To determine the price elasticity of demand, we
compare the percentage change in the quantity demanded to the percentage change in the price.
Ryan says that he would buy one cup of coffee every day regardless of the price. If he is telling the truth, Ryan's
demand for coffee is perfectly inelastic.
If the price elasticity of supply for a good is 10, then supply is
elastic.
The flatter the demand curve through a given point, the
greater the price elasticity of demand at that point.
Tennis balls and tennis rackets are complements. If a 3 percent change in the price of a tennis racket leads to a 9 change in the quantity of tennis balls demanded, the cross elasticity of demand equals
-3.
When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about
0.67.
Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is
1
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 percent
The total revenue test says that if a price decrease leads to
None of these
Demand is said to be price elastic if
buyers respond substantially to changes in the price of the good.
Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?
a 13.33 percent increase in the price of the good
To determine whether a good is considered normal or inferior, one could examine the value of the
income elasticity of demand for that good.
The supply of oil is likely to be
inelastic in the short run and elastic in the long run.
Total revenue
remains unchanged as price increases when demand is unit elastic.
For a good that is a luxury, demand
tends to be elastic.
If the price elasticity of supply for a good is 0.75, then
the percentage change in the quantity supplied is less than the percentage change in price.
Income elasticity of demand measures how
the quantity demanded changes as consumer income changes.
A perfectly inelastic demand implies that buyers
purchase the same amount as before when the price rises or falls.
When income increases from $20,000 to $30,000 the number of home delivered pizzas per year increases from 22 to 40. The income elasticity of demand for home delivered pizza equals
1.45
Tacos and pizza are substitutes. If a 2 percent change in the price of a taco leads to a 4 percent change in the demand for pizza, the cross elasticity of demand equals
2.
A 10 percent increase in price leads to a 20 percent decrease in the quantity demanded. The price elasticity of demand is equal to
2.0
If the cross elasticity of demand between good A and good B is negative, then a decrease in the price of good A results in
an increase in the demand for good B.
Suppose the San Francisco 49ers lower ticket prices by 15 percent and as a result the quantity of tickets demanded increases by 10 percent. This set of results shows that San Francisco 49ers tickets have
an inelastic demand.
The greater the price elasticity of demand, the
greater the responsiveness of quantity demanded to a change in price.
If a product is narrowly defined, it is likely to
have many substitutes and therefore its demand is elastic.
If the percentage change in the price of a good exceeds the percentage change in the quantity supplied, then the supply is
inelastic.
The supply of beach front property on St. Simon's Island is
inelastic.
The demand for necessities generally is ________ the demand for luxury goods.
less elastic than
Goods with many close substitutes tend to have
more elastic demands.
Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is
negative, and the good is an inferior good.
If a product is an inferior good, then its income elasticity of demand is
negative.
If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?
one year after the price increase
Economists compute the price elasticity of demand as the
percentage change in quantity demanded divided by the percentage change in price.
If two goods are substitutes, their cross-price elasticity will be
positive.
The price elasticity of demand measures how much
quantity demanded responds to a change in price.
Cross-price elasticity of demand measures how
the quantity demanded of one good changes in response to a change in the price of another good.
When supply is perfectly inelastic, the supply curve is
vertical.