Elasticity
Which of the following statements illustrates income elasticity of demand?
A salary cut and no other changes has resulted in Mary buying less fast food.
The shorter the time that has elapsed since a price change, the more =inelastic is demand
Demand for a luxury is more _ELASTIC_____ than demand for a necessity, because a luxury has _MORE_____ substitutes.
elasticity
Price elasticity of demand = Percentage change in the quantity demandeddivided by÷Percentage change in the price.
perfectly elastic demand?
Sherry is overwhelmed with buyers of her peaches when she lowers their price by a penny a pound compared to other sellers in the farmers' market.
The price elasticity of demand is calculated as the percentage change in the quantity demanded divided by the percentage change in the price. We calculate the change in price as the percentage of the average price and the change in the quantity demanded as the percentage of the average quantity.
The elasticity of demand when the price rises from $44 to $66 a pen =0.72
market for farm crops momentary supply is ______. market for farm crops, short-run supply is ______.
less elastic than short-run supply; less elastic than long-run supply
Goods and services that use rare resources in their production have a ______ elasticity of supply. The greater the amount of time available after a price change, the ______ is the elasticity of supply.
low; greater
If the price falls from $400 to $250 a night, total revenue _____. If the price falls from $250 to $200 a night, total revenue _____
remain same; remain same
If the cross elasticity of demand for pasta with respect to the price of a pizzai s positive, then pasta and pizza are ______.
substitutes
If the quantity of dental services demanded increases by 55 percent when the price of dental services falls by 10 percent, the demand for dental services is _______ =INELASTIC
The price elasticity of demand is equal to the percentage change in the quantity demanded divided by the percentage change in price. When the price elasticity of demand is greater than 1, demand is elastic. When the price elasticity of demand is less than 1, demand is inelastic. And when the price elasticity of demand equals 1, demand is unit elastic. In this question, the percentage change in the quantity demanded is less thanless than the percentage change in the price, so demand is inelasticinelastic.
perfectly inelastic demand?
Walgreens does not find any change in the number of people buying chlorthalidone after a 7 percent rise in its price.
ex: elastic demand
When the percentage change in quantity demanded exceeds the percentage change in price, the good has elastic demand "Mary's quantity demanded of milk decreased by 8 percent when the price of milk rose by 5 percent," implies that the percentage change in quantity demanded exceeds the percentage change in price"
inelastic demand?
When the percentage change in quantity demanded is less than the percentage change in price, the good has an inelastic demand. ex: Megan did not buy too many hockey tickets even though their price dropped by 10 percent, implies that the percentage change in quantity demanded of hockey tickets is less than the percentage change in price
An example of an income elastic good is ______ and an example of an income inelastic good is ______.
haircut; food
The fewer the substitutes for a good or service, the more ______ is the demand for it. The smaller the proportion of income spent on a good, the more ______ is the demand for it.
inelastic; inelastic
The cross elasticity of demand is a measure of the responsiveness of the demand for a good to a change in the ______, other things remaining the same.
price of a substitute or complement The cross elasticity of demand is a measure of the responsiveness of the demand for a good to a change in the price of a substitute or complement, other things remaining the same. We calculate the cross elasticity of demand by using the formula: Cross elasticity of demand = Percentage change in quantity demanded divided by÷Percentage change in price of a substitute or complemen
Elasticity of supply measures the responsiveness of the quantity supplied to a change in ______, when all other influences on selling plans remain the same.
price of good
The demand for hotel rooms is _____ because _____
unit elastic; a price cut leaves total revenue unchanged. Total revenue never reaches a maximum
The price elasticity of demand is a units-free measure of the responsiveness of ______. the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same
When supply increases, the equilibrium price falls and the equilibrium quantity increases. Elasticity is the measure that we use to see by how much the equilibrium price falls and by how much the equilibrium quantity increases.
A good with an income elasticity greater than one is ______. A good with an income elasticity that is positive and less than 1 is ______.
a normal good that is income elastic; a normal good that is income inelastic
The cross elasticity of demand for muffins with respect to the price of a smoothie equals the percentage change in quantity of muffins demanded divided by the percentage change in the price of a smoothie. When the price of a smoothie rises by $1 (from $2 to $3), the average price of a smoothie is $2.50. So the price of a smoothie rose by ($1/$2.50) × 100, or 40 percent. When the price of a smoothie rose by 40 percent, the quantity of muffins demanded increases from 80 million to 100 million, a change of 20 million. The average quantity of muffins is 90 million, so the percentage change in the quantity of muffins is ( 20 million/90 million) × 100, which equals 22.2 percent.
cross elasticity= .55
A successful campaign that decreases the supply of drugs will ______ the price of illegal drugs and ______ the total amount spent on them.
increase; increase
Because elasticity of supply is a units-free measure of the responsiveness of the quantity supplied of a good or service to a change in its price, _______.
we can compare the responsiveness of the same good when quantity is measured in different units, or we can compare across different goods
The total revenue test is a method of estimating the price elasticity of demand by observing the ______ that results from ______, when all other influences on the quantity sold remain the same.
change in total revenue; a change in the price
If the cross elasticity of demand for computers with respect to the price of a DVD is negative, then computers and DVDs are ______.
complements
The demand for plums is unit elastic if _____. When the percentage change in quantity demanded is equal to the percentage change in price, the good has unit elastic demand.
ex: "The demand for plums is unit elastic if a 5 percent rise in the price of plums results in a 5 percent decrease in the quantity of plums demanded," implies that the percentage change in quantity demanded is the same as the percentage change in price. So the statement is an example of unit elastic demand.
Price elasticity of demand is a measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers' plans remain the same
ex: "When the price of bananas increased by 5 percent and nothing else changed, the quantity of bananas demanded decreased by 2 percent" is an example of price elasticity of demand.
The income elasticity of demand is a measure of the responsiveness of the demand for a good or service to a change in ______, other things remaining the same.
income Income elasticity of demand = Percentage change in quantity demanded divided by÷Percentage change in income
The demand for a necessity is income ______, and the demand for a luxury is income ______.
inelastic; elastic
The supply of housing in Honolulu is ______. The ______ elastic the supply of housing, the greater the rise in the price of housing when demand increases.
inelastic; less There is a given quantity of land available in Honolulu for building. A small change in the price of housing does not result in a large increase in the quantity supplied. So it is the case that the supply of housing is inelastic. When the supply of housing is inelastic, the supply of housing curve is relatively vertical and an increase in demand increases the price by a large amount.
Price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price. The news clip tells us that if the price rises from $3 per gallon to $4 per gallon, the quantity demanded falls by 5 percent. So the percentage change in the quantity demanded is 5 percent.
price of a gallon of gasoline rises from $3 to $4, the increase in the price of a gallon of gasoline is $1, and the average price is $3.50. So the percentage increase in the price of gasoline is 28.6 percent. The price elasticity of demand is 5 percentdivided by÷28.6 percent, which is 0.17. The price elasticity of demand for gasoline is 0.17. When the price elasticity of demand is less than 1, demand is inelastic. The total revenue test tells us that when the price rises and demand is inelastic, total revenue increases.
Demand is elastic if a price ______ increases total revenue. Demand is inelastic if a price _________ increases total revenue. Demand is unit elastic if a price _____ leaves total revenue unchanged.
CUT; RISE; CUT OR RISE
The elasticity of supply is calculated by dividing ______ by ______.
Elasticity of supply = Percentage change in quantity supplieddivided by÷Percentage change in price.
The price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price.
The price increases from $44 to $66 a box, which is an increase of $2. The average price is $55. What is the percentage change in the price? The quantity demanded decreases from 1 comma 0001,000 to 600600 boxes, which is a decrease of 400. The average quantity is 800800 boxes. What is the percentage change in the quantity demanded? =DEMAND ELASTIC
demand for pens is elastic at _______.
all prices greater than $6 a pen
Which of the following statements describes cross price elasticity of demand?
As a result of a rise in the price of spinach with all else remaining constant, Ralph buys more broccoli, a substitute for spinach.
elasticity of supply? measure of the responsiveness of the quantity supplied of a good to a change in its price when all other influences on sellers' plans remain the same.
A 10 percent fall in the price of turkey with no other change decreases quantity supplied by 12 percent.
The price elasticity of demand is the ratio of the percentage change in the quantity to the percentage change in price. The price elasticity of demand for smoothies equals the percentage change in quantity (40 percent) divided by the percentage change in the price (20 percent)
The elasticity at the midpoint equals 2. Key Point: The price elasticity calculated is the price elasticiy of demand at the price midway beetween the original price and the new price.
Because elasticity is a units-free measure of the responsiveness of the quantity demanded of a good or service to a change in its price, _______= we can compare the responsiveness of the same good when quantity is measured in different units, or we can compare across different goods
The elasticity of demand is a units-free measure. Elasticity is a better measure than the slope for the responsiveness of the change in quantity demanded to price changes, because the slope changes when the units measuring the quantity of the good are different. The value of elasticity is independent of the units used to measure the price and quantity of the good. So elasticity can be compared across the same good when the quantity is measured in different units, or it can be compared across different goods.
average price of a CD from $21 to $15. The company expected the price cut to boost the quantity of CDs sold by 30 percent, other things remaining the same. What was Universal Music's estimate of the price elasticity of demand for CDs?
The price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price. The price decreases from $21 to $15 a CD, which is a decrease of $6. The average price is $18, so the percentage decrease in price is ($6divided by÷$18)times×100, which is 33.33 percent. The quantity demanded increases by 30 percent. The price elasticity of demand = 30 percentdivided by÷33.33 percent, which is 0.9.
When the price of tomatoes rises from $3 per pound to $4 per pound, the quantity of tomatoes sold decreases from 15 pounds to 10 pounds. Total revenue _____, and using the total revenue test, we can determine that the demand for tomatoes is _____ .
decreases from $45 to $40; elastic Total revenue is the amount spent on a good and received by its seller and equals the price of a good multiplied by the quantity sold. The total revenue from 15 pounds of tomatoes at $3 per pound is $3 times×15 = $45. The total revenue from 10 pounds of tomatoes at $4 per pound is $4 times×10 = $40. Total revenue decreased by $5. Total revenue test determines the price elasticity of demand by observing a change in total revenue that results from a price change (with all other influences on the quantity sold remaining unchanged). Because a rise in price brought a decrease in total revenue, we know that the quantity demanded decreased by a larger percentage than the percentage rise in price, so the demand for tomatoes is elastic.