elasticity
Suppose the price elasticity of supply has been calculated as 0.80 for a particular product and the price increases by 5%. What would happen to the quantity supplied?
It would increase by 4%.
Good news for an industry that typically produces inelastic goods can
be bad news for individual producers because when these factors shift the supply curve to the right it decreases total revenues.
Demand is relatively inelastic if ________
buyers do not respond much to a change in price
If in your equation you are using the percent change in both the numerator and denominator, you are most likely be
calculating the price elasticity of demand.
Demand "B" represents a demand curve that is
relatively elastic.
Elastic supply occurs if the change in quantity supplied is ________ to a change in price
relatively responsive
The price elasticity of demand measures the
responsiveness of quantity demanded to a change in price.
The wage elasticity of labor demand calculation is
the % change in quantity of labor demanded divided by the % change in wage.
Total revenue is defined as ________ and represented as ________.
the price of a product times the number of units sold; TR=P x Qd
When supply is inelastic and demand is elastic, the tax incidence falls on ________.
the producer
Elasticity allows economists to measure
the responsiveness of one variable to changes in another variable.
As we move along a typical negatively sloping, linear demand curve
the slope is constant.
Which of the following factors does NOT influence the price elasticity of demand of a product
the slope of the supply curve
The percentage change in quantity divided by the percentage change in price is the
elasticity
What is the price elasticity of demand for generic shoes if for every 10% price increase clothing demand decreases by 15%? ________ The price elasticity of demand would be _______
-1.5; elastic
Suppose the price for an Lyft ride in Austin, TX decreases from $15 to $12 causing the quantity of rides demanded to increase from 1000 to 1600. Using the midpoint method, the price elasticity of demand for an Lyft ride is ________
2.08
Demelza purchased her favorite perfume three months ago, J'adore by Dior, for $75. She logs online to purchase one for her friends birthday and it is now $100. What is the percentage change in the perfume price
33%
Sylvia's favorite burrito shop raised its prices from $6 to $9. The percentage change in price is
50%.
Kelly's salary was bumped up this year after she accepted the new position of Vice President of Marketing. Her income increased from $65,000 to $83,000. Last year Kelly purchased 2 used cars. This year she purchased 0 used cars. Assuming that all of the other things remain constant, what type of a good is a used car and what type of income elasticity of demand does Kelly have?
A used car is an inferior good and the income elasticity of demand is 8.22.
Which of the following describe a product with an inelastic demand?
An appointment with a dentist.
Given that total revenue = price x quantity, what will happen to total revenue if price increases when demand is elastic
It will decrease.
If the price of Sperry shoes goes up from $100 to $120 and the quantity supplied increases from 800 to 900 pairs
It would increase by 0.625.
If the % change in quantity divided by the % change in price from a graph for gasoline is less than 1, it is considered
Inelastic.
The price for a fidget spinner is $5 with the quantity demanded at 7,000 a day. As time goes on the price for a fidget spinner drops to $3 and the quantity demanded increases to 12,500 a day. What is the price elasticity of demand for fidget spinners using the midpoint method?
Price elasticity of demand = 1.13
You read an article stating that HTC's latest cell phone price has increased from $450 to $550. At the same time the quantity demanded for the Samsung Galaxy 7s increases from 1000 to 1850. Calculate the cross price elasticity of demand using the midpoint method. Are these two cell phones complements or substitutes?
The cross-price elasticity of demand is 2.98 and they are substitutes.
Which method for calculating elasticity uses the values of the average price and average quantity?
The midpoint (arc) elasticity approach
Suppose there is a major technological advance in the production of a good that causes production costs to fall. If demand for the product is relatively inelastic, what will happen in the market?
The price decrease will be relatively greater than the increase in quantity.
Using the midpoint method, calculate the price elasticity of demand of Good Z using the following information: When the price of good Z is $10 (P1), the quantity demanded of good Z is 85 units (Q1). When the price of good Z rises to $15 (P2), the quantity demanded of good Z falls to 60 units (Q2).</
The price elasticity of demand for good Z = 0.86.
You are the manager of the public transit system. You are informed that the system faces a deficit, but you cannot cut service, which means you cannot cut costs. Your only hope is to increase revenue by increasing fares. You are advised that the estimated price elasticity of demand for the first few months after a price change is about −0.3. Select the statement that best describes the results of raising the fare in the short run
Total revenue rises immediately after the fare increase, since demand over the immediate period is price inelastic.
Which of the following goods represent a cross-price elasticity likely greater than zero
The substitute goods of blueberries and strawberries.
What happens to total revenue (TR) if the price decreases on a product with demand that is price elastic?
Total revenue will rise.
What happens to total revenue (TR) if the price rises on a product with demand that is price inelastic?
Total revenue will rise.
The government imposes an excise tax on house paint. The house paint tax incidence takes place within a market where the supply of house paint is elastic and the demand for house paint is inelastic. Who pays the most of the excise tax
consumers of house paint
The ________ is negative for complementary goods and positive for substitute goods
cross-price elasticity of demand
Suppose the price of apples increase by 20%, resulting in consumers to purchase 15% more pears. Given this information, it appears that
cross-price elasticity of pears is 0.75.
The price for a cell phone case is $25 with the quantity demanded at 10,000 a day. As time goes on the price for a cell phone case increases to $30 and the quantity demanded decreases to 5,000 a day. Based on the price elasticity of demand using the midpoint method, this cell phone case is
elastic
If a small change in price creates a large change in demand, then we would say that the demand is
elastic.
If the government wanted to encourage savings by offering a tax break, such a policy would work if the supply curve for financial capital is
elastic.
Teenage workers are assumed to have ________ labor supply; therefore a 5% increase in wages would result in ________ percentage change in quantity of labor supplied
elastic; greater
The size of the change in the quantity demanded of a good or service due to change in its price is measured by the elasticity of demand. When the percentage change in the quantity demanded for a good or service is more than the percentage change in price, the demand for that good or service is ________ and price elasticity is ________.
elastic; greater than 1
If the demand curve for energy is at first inelastic, then changes over time and becomes increasingly elastic, then the demand curve is
getting flatter.
Elasticities are often ________ in the long run than in the short run.
higher
A perfectly elastic supply curve is
horizontal.
Joe received a promotion this year at work and now has an income which has increased by 21% since last year. Joe has now increased his quantity demanded of red wine by 7%. In this example, Joe's
income elasticity is .33 and the good is a normal good.
An increase in demand will shift the demand curve to the right, therefore ________ the equilibrium price
increasing
An addicted smoker likely has which type of demand?
inelastic
If a large change in price results in a small change in demand, then demand is
inelastic
Higher costs can typically be passed on to consumers when a product is considered
inelastic.
Price and total revenue are positively related when demand is
inelastic.
The electric power company in a city increased its prices by 15% this year. Since the demand for electricity is a(n) ________ demand in the short run, the equilibrium price will ________.
inelastic; greatly increase
A person who takes aspirin most likely has a(n) ________demand for that drug. Therefore an increase in the price of aspirin will result in ________ total revenue for the drug company
inelastic; increased
When income increases and demand for a good falls, the good is considered a
inferior good.
If the elasticity of demand for a company's product is estimated to be 1.72, what would you advise the company to do if their objective is to increase revenue?
lower the price
Which product would have the quantity demanded decrease the most (be the most elastic) to a price increase?
organic whole chicken
>If you divide the change in quantity by the original quantity, you are calculating the
percentage change.
When the demand for a product does not fluctuate when there is a change in price, the good is ________.
perfectly inelastic
A tax is imposed on chewing gum. Consumers pay all of the tax while the producers pay none of the tax. If you were to draw a graph you would see that the demand curve
perfectly inelastic.
Demand "D" represents a demand curve that is
perfectly inelastic.
The ________ approach for calculating elasticity makes for simple math, but is not as accurate
point elasticity approach
A new technological breakthrough increases production for an industry and shifts the supply curve to the right. If the firm ________, then the firm will likely be happy about this new technology
produces products that are considered elastic
The rate of change in units along the curve is the
slope of a curve.
If the demand for a product is inelastic but the supply is elastic, the ________ will bear the tax incidence
the consumer
When a 10% increase in income causes a 4% increase in quantity demanded of a good
the income elasticity is .4 and the good is a normal good.
The price elasticity of demand is defined as
the percentage change in quantity demanded divided by the percentage change in price.
The elasticity of supply is defined as the
the percentage change in quantity supplied divided by the percentage change in price.
<div>When elasticity of demand is equal to one and the change in the quantity demanded and the change in price are exactly proportional. This type of elasticity is described as ________
unitary elastic
Price elasticity of demand is
used to determine price sensitivity.
A product is considered relatively elastic _______
when there are many substitutes