hw 6

Suppose that as the price of Y falls from $12 to $10, the quantity of Y demanded increases from 500 to 600. Then the absolute value of the price elasticity (using the midpoint formula) is approximately

1

Which of the following statements is inconsistent with an elastic demand curve?

Total revenue increases when price increases.

If a 5 percent decrease in the price of Good A results in an increase of 8 percent in the quantity demanded of Good B, then it can be concluded that Goods A and B are

complementary goods.

The demand for a product is inelastic with respect to price if

consumers are largely unresponsive to a per unit price change.

In the United States, peanut butter and jelly are viewed as complements. In other countries they are viewed as substitutes. If we wanted to know if a particular country viewed them as complements or substitutes, we would need to look at the

cross elasticity of the two goods.

When the price of a product increases by 15 percent, the quantity demanded decreases by 10 percent. We can therefore conclude that the demand for this product is

inelastic.

The price of Product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range

is elastic.

Supply curves tend to be

more elastic in the long run because there is time for firms to enter or leave the industry.

Suppose that a 20 percent increase in the price of normal Good Y causes a 10 percent decrease in the quantity demanded of normal Good X. The coefficient of cross elasticity of demand is

negative, and therefore these goods are complements.

We would expect the cross elasticity of demand between dress shirts and ties to be

negative, indicating complementary goods.

In the United States, peanut butter and jelly are viewed as complements. In other countries they are viewed as substitutes. If we investigate a new country, Elbonia, and determine that their cross elasticity of peanut butter and jelly is +0.35, we can conclude that

peanut butter and jelly are substitutes in Elbonia.

Suppose that a 10 percent increase in the price of normal Good Y causes a 20 percent increase in the quantity demanded of normal Good X. The coefficient of cross elasticity of demand is

positive, and therefore these goods are substitutes.

Refer to the table. Over the $8-$6 price range, supply is

inelastic

Suppose that as the price of Y rises from $16 to $19, the quantity of Y demanded decreases from 1,400 to 1,300. Then the absolute value of the price elasticity (using the midpoint formula) is approximately

0.43.

When the price of a product is increased 20 percent, the quantity demanded decreases 16 percent. The price-elasticity-of-demand coefficient for this product is

0.8

At a price of $4 per unit, Gadgets Inc. is willing to supply 20,000 gadgets, while United Gadgets is willing to supply 10,000 gadgets. If the price were to rise to $8 per unit, their respective quantities supplied would rise to 45,000 and 25,000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?

1.2

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, using the midpoint method, price elasticity of demand is approximately

1.2

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (using the midpoint formula) is approximately

1.37

price rises and Ed equals 2.47

1.37

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price-elasticity-of-demand coefficient for this product is

1.5

Alf's Hamburgers sells 200 hamburgers per day when the price is $8. Large increases in ground beef prices force Alf's to raise the price to $10, and the firm only manages to sell 140 burgers per day. Using the midpoint formula, the price-elasticity-of-demand coefficient is

1.59 and elastic.

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula) when price decreases from $9 to $7 is

1.6

Oskar's Odditorium sells fidget spinners. Oskar estimates the price elasticity of demand for fidget spinners is 1.2. If Oskar wants to increase sales by 15 percent and assuming no change (i.e., no shift) in the demand curve for fidget spinners, this suggests that Oskar should reduce the price by

12.5 percent.

Suppose the price elasticity of demand for bread is 0.2. If the price of bread falls by 10 percent, the quantity demanded will increase by

2 percent and total expenditures on bread will fall.

The price elasticity of demand for widgets is 0.8. Assuming no change in the demand curve for widgets, an increase in sales of 16 percent implies a

20 percent reduction in price.

Suppose the price elasticity of demand for streaming services is 1.2. If the price of streaming services falls by 20 percent, the quantity demanded will increase by

24 percent and total expenditures on streaming services will rise.

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula) when price decreases from $85 to $80 is

3.0

Suppose you are given the following data on demand for a product. The price elasticity of demand (based on the midpoint formula) when price decreases from $120 to $115 is

3.88.

The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by

5 percent and quantity supplied rises by 2 percent.

The supply of Product X is elastic if the price of X rises by

5 percent and quantity supplied rises by 7 percent.

The elasticity of supply of product X is unitary if the price of X rises by

7 percent and quantity supplied rises by 7 percent.

The price elasticity of demand for widgets is 1.5. Assuming no change in the demand curve for widgets, an increase in sales of 12 percent implies a

8 percent reduction in price.

Refer to the diagram. Total revenue at price P1 is indicated by area(s)

A + B.

Which product is most likely to be the most price elastic?

A 16-ounce hot chocolate from Starbucks

Which of the following is correct? Answer the question on the basis of the following demand schedule.

Although the slope of the demand curve is constant, price elasticity declines as we move from high to low price ranges.

Suppose the price elasticity coefficients of demand are 1.0, 0.45, 1.31, and 2.29 for products A, B, C, and D, respectively. A 1 percent increase in price will increase total revenue in the cases of

B only. C and D only. !!

The price elasticity coefficients are 2.6, 0.5, 1.4, and 0.18 for four different demand schedules, D1, D2, D3, and D4, respectively. A 2 percent increase in price will result in an increase in total revenues in which of the following cases?

D2 and D4

Which of the following is not characteristic of a product with relatively inelastic demand?

There are a large number of good substitutes for the good.

The Bear Corporation finds that its total spending on machine parts increases after the price of machine parts falls, other things being equal. Which of the following is true about the Bear Corporation's demand for machine parts with the price change?

It is price elastic.

In which of the following instances will total revenue decline?

Price rises and demand is elastic.

Suppose the income elasticity of demand for toys is 2.4. This means that

an 4 percent increase in income will increase the purchase of toys by 9.6 percent.

When the percentage change in price is greater than the resulting percentage change in quantity demanded,

an increase in price will increase total revenue.

A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; Good B makes up a significant portion of most families' budgets. A price increase for each good would most likely cause total revenues from Good A to

decrease and total revenues from Good B to decrease.

The price elasticity of demand for a popular sporting event is 2. If the price of a ticket to this event increases by 8 percent, the quantity of tickets demanded will

decrease by 16 percent.

Suppose the price elasticity of demand for beef is about 2. Other things equal, this means that a 5 percent increase in the price of beef will cause the quantity of beef demanded to

decrease by approximately 10 percent.

Refer to the diagram and assume a single good. If the price of the good decreases from $6.30 to $5.70, consumer expenditure would

decrease if demand were D2 only.

If the price elasticity of demand for a product is 3.0, then a price increase from $4.00 to $5.00 will

decrease the quantity demanded by about 75 percent.

Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded

decreased by 7 percent.

A straight-line downward-sloping demand curve has a price elasticity of demand which

decreases as price decreases.

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then

demand is price elastic.

Suppose that the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

inelastic for price declines that increase quantity demanded from 6 units to 7 units.

Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

elastic for price declines that increase quantity demanded from 1 unit to 4 units.

A 4 percent reduction in the price of a product has zero effect on the total dollar amount of consumer expenditure on the product. Therefore, price elasticity of demand is

equal to 1.

Refer to the diagram. If price falls from $10 to $2, total revenue

falls from A + B to B + C, and demand is inelastic.

Refer to the above graphs. For which graph is the supply perfectly inelastic?

graph C

Refer to the above graphs. Which graph shows the immediate market period for supply?

graph C

When universities announce a large tuition increase and follow it with an announcement that more financial aid will be available, they are assuming that students who pay full tuition

have inelastic demand and students who use financial aid have elastic demand.

If the government increases enforcement of laws against the sale of illegal drugs and this raises the costs for sellers of illegal drugs, then the dollar expenditures of those addicted and trying to satisfy their addiction will tend to

increase because their demand is price inelastic.

The price elasticity of demand for eggs has been estimated to be 0.32. If an unexpectedly large increase in egg production were to decrease the price of eggs by 10 percent, the quantity of eggs demanded will

increase by 3.2 percent.

If the price elasticity of demand for a product is 0.5, then a price cut from $3.00 to $2.40 will

increase the quantity demanded by about 10 percent.

If the price elasticity of demand for a product is unity, a decrease in price will

increase the quantity demanded, but total revenue will be unchanged.

If the demand for Product X is inelastic, a 4 percent decrease in the price of X will

increase the quantity of X demanded by less than 4 percent.

Refer to the diagram. In the P1P2 price range, demand is

increase total revenue by D − A.

Refer to the diagram. The decline in price from P1 to P2 will

increase total revenue by D − A.

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is

inelastic

In which of the following instances will total revenues decline?

price rises and Ed equals 2.47 Price rises and demand is elastic.

Refer to the total revenue graph above. An increase in the quantity of Product X demanded from 14,000 to 16,000 units implies that the price of Product X was

reduced and the demand is inelastic.

The supply curve of antique reproductions is

relatively elastic.

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is

relatively inelastic.

The demand for a luxury good whose purchase would exhaust a big portion of one's income is

relatively price elastic.

Answer the question based on the following table, which shows a demand schedule. Total revenues will decrease if price

rises from $4 to $5.

Sony is considering a 10 percent price reduction on its HD televisions. If the price elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause

sales quantity to increase but revenues to decrease.

Suppose that for Jaleel, the coefficient of cross elasticity of demand between sushi and pizza is −0.5, and for Keiko, the cross elasticity is +1.2. Based on this information we can conclude that

sushi and pizza are complements for Jaleel and substitutes for Keiko.

A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,

the demand for pizza is elastic above $5 and inelastic below $5.

Suppose that the price of running socks falls from $15 to $12 per pair, as a result, the total revenue received by running sock sellers changes from $20 to $24 million. Thus,

the demand for running socks is elastic.

If a firm finds that it can sell $20,000 worth of a product when its price is $6 per unit and $22,000 worth of it when its price is $5, then

the demand for the product is elastic in the $5-$6 price range.

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then

the demand for the product is elastic in the $6-$5 price range.

Nadia's Nails finds that it can sell $10,000 worth of a particular nail polish when its price is $10 per unit and $12,000 worth of it when its price is $13, then

the demand for the product is inelastic in the $10-$13 price range.

An increase in demand will increase equilibrium price to a greater extent

the less elastic the supply curve.

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that

the price elasticity of demand for farm products is less than 1.

If a firm can sell 3,000 units of Product A at $10 per unit and 5,000 at $8, then

the price elasticity of demand is approximately 2.25.

Street vendors in large cities can rapidly change their product mix from, say, sunglasses to umbrellas, as weather changes rapidly change demand. This implies that

the short-run supply curves for sunglasses and umbrellas are highly elastic.

We would expect the cross elasticity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because

there are fewer good substitutes for soft drinks as a whole than for Pepsi specifically.

Suppose the total-revenue curve is derived from a particular linear demand curve. That demand curve must be

unit elastic for price increases that reduce quantity demanded from 5 units to 4 units.