Economics Chapter 6

If the demand for cigarettes is inelastic,

Total revenue will rise if the price of cigarettes rises.

The total revenue effect of a movement along a demand curve can best be predicted using the

price elasticity of demand

Along a linear or straight-line demand curve, demand is more elastic at higher prices.

True

If demand is elastic, a price reduction will lead to an increase in total revenue.

True

Technically the elasticity number is negative because

When price falls quantity demanded will rise, but for simplicity economists take the absolute value of the elasticity number.

The price elasticity of demand is equal to

the percentage change in quantity demanded divided by the percentage change in price

The formula for the elasticity of supply is

the percentage change in quantity supplied divided by the percentage change in price

If demand is elastic, then

The elasticity number E is greater than 1

The World view article on the rise in gold prices indicates that

The law of supply is true: as the price of gold rises, miners around the world search for new deposits of gold.

If two goods are substitute goods,

The percentage change in quantity demanded for good X will fall if there is a reduction in price of good Y.

If the demand for a product is elastic, then

The percentage change in quantity demanded is greater than the percentage in price.

Supply is very inelastic when

The quantity supplied changes little when the price increases.

Which of the following products will have elastic demand

Travel souvenirs

If demand is perfectly elastic

demand curve is horizontal

If the price of cell phones increases by 5 percent and the quantity demanded falls by 2 percent, the absolute value of the price elasticity of demand is

0.4

Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat. The absolute value of the price elasticity of demand is closest to

1.29

If the price of sandals increases by 10 percent and the quantity demanded falls by 20 percent, then the price elasticity of demand in absolute value is

2

If the price of the iPhone X falls by 3 percent and the price elasticity of demand for iPhone X is 2.0 then quantity demanded will fall by what percentage?

6 percent

If the price elasticity of demand is 0.6, then 10 percent increase in the price of the good will lead to a _______in quantity demanded.

6 percent decrease

Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month. The cross-price elasticity of demand is closest to

6.3 The cross-price elasticity of demand is equal to the percentage change in the quantity demanded of typewriters divided by the percentage change in the price of computers. Because a 10.5 percent decrease in computer prices caused a 66.7 percent decrease in the demand for typewriters, the cross-price elasticity of demand is equal to 6.3.

If demand is elastic, then

An increase in price will reduce total revenue.

The article "samsung stung by Apple Moves" related to the price cuts for the iPhone indicates that

Apple lowered the price for the iPhone because the cross-price elasticity between it and the other competitors was positive.

The World View "Rebounding Oil Price Spurs More Rigs" relate to oil prices and oil rigs suggests

As the price of oil increases,there is an increase in oil rigs and thus the amount of quantity supplied, indicating that supply is elastic.

Which of the following most likely have a price elasticity coefficient less than 1?

Coffee

Assume the price elasticity of demand for U.S. Frisbee Co. Frisbee is 0.5. If the company increases the price of each Frisbee from $12 to $16, the number of Frisbees demanded will

Decrease by 14.e3

If the price of Good X falls and total revenue rises, then

Demand for Good X is elastic.

A price decreases will cause total revenue to fall if

Demand is inelastic

The demand will be ______ if the consumer has ______substitute goods to choose from

Elastic, more

The price elasticity number for necessities will be greater than 1.

False

To increase U.S. energy independence, price mist be lowered on gasoline and electricity.

False

demand is more inelastic for luxury goods

False

Ceteris Paribus, if income increases and as a result, the demand for good X increases and the demand for good Y falls

Good X is a normal good and good Y is an inferior good.

When demand is elastic, the absolute number of price elasticity will be

Greater than 1

Elasticity of supply tells us

How much sellers will increase production in response to a change in price

Elasticity of supply looks at

How responsive sellers are to a change in price.

price elasticity of demand refers to

How sensitive buyers are to a change in price.

Assume the price elasticity of demand for MC Pretzel Co. pretzels is 0.8. If the company increases the price of each bag of pretzels, total revenue will

Increase because the percentage increase in price is greater than the percentage change in quantity demanded.

If the elasticity of demand for cigarettes is 0.4, a seller should

Increase price to increase total revenue.

Ceteris Paribus, the longer the time period, the

More elastic the demand for the good.

Reter to figure 20.2. Comparing the price elasticity of demand at points A and C, we can say that

Point A has a greater price elasticity of demand in absolute value.

A good normal if the sign on the income elasticity formula is

Positive

Ceteris Paribus, as the number of substitutes for a good increases, the

Price elasticity of demand should become larger.

When demand is price-inelastic, ceteris paribus, an increase in

Price leads to greater total revenue.

In the $80 to $40 price range in figure 20.1 demand is

Price-inelastic

The demand for normal goods

Rises when incomes rise.

A demand curve that is completely elastic is

horizontal

If a good is inferior, its

income elasticity of demand is negative

Total revenue is equal to

income from sales

Which of the following products will have more inelastic demand?

medicines

The basic formula for price elasticity of demand is

percentage change in quantity demanded/percentage change in price