Micro Economics Chapter 5
If price falls within the C range of the demand curve we can expect total revenue to
decrease.
Using the midpoint method, the income elasticity of demand for good Y is
-2.33 and Y is an inferior good
Using the midpoint method, between prices of $12 and $18, price elasticity of demand is
0.33
The price elasticity of supply between point A and point B, using the midpoint method, is approximately
0.71
The elasticity of demand between point B and point C, using the midpoint method, is
0.75
The price elasticity of supply between point B and point C, using the midpoint method, is approximately
0.78
Sellers' total revenue would increase if the price
All of the above are correct
Along which of these segments of the supply curve is supply least elastic?
between A and B
If demand is inelastic, then
buyers do not respond much to a change in price.
If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $8, then sellers' total revenue would
increase
If price falls within the A range of the demand curve we can expect total revenue to
increase.
Sellers' total revenue would increase if the price
increased from $4 to $6
The smaller the price elasticity of demand, the
steeper the demand curve will be through a given point
How does the concept of elasticity allow us to improve upon our understanding of supply and demand?
Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept
Which of the following price changes would result in no change in sellers' total revenue?
The price decreases from $12 to $9
Along which of these segments of the supply curve is supply most elastic?
between A and B
Between point A and point B on the graph, demand is
elastic, but not perfectly elastic
Demand is inelastic if the price elasticity of demand is greater than 1.
false
Using the midpoint method, what is the price elasticity of supply between points D and E?
0.53
When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bubble gum is
elastic.
When demand is inelastic, a decrease in price increases total revenue.
false
Which supply curve is most likely relevant over a very long period of time?
S3
Demand is unit elastic between prices of
$24 and $36
At a price of $48 per unit, sellers' total revenue amounts to
$288
The maximum value of total revenue corresponds to a price of
$30
Using the midpoint method, what is the price elasticity of supply between points B and C?
1.19
The price elasticity of demand between point A and point B, using the midpoint method, is
2.5
Using the midpoint method, what is the income elasticity of demand for good X?
3.5
If the price elasticity of demand for a good is 1.65, then a 3 percent decrease in price results in a
4.95 percent increase in the quantity demanded
Using the midpoint method, between prices of $48 and $54, price elasticity of demand is about
5.67
Which supply curve represents perfectly inelastic supply?
S1
As price falls from PA to PB, which demand curve represents the most elastic demand?
D1
As price falls from PA to PB, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?
D3
How does total revenue change as one moves downward and to the right along a linear demand curve?
It first increases, then decreases
If price is originally within the C range of the demand curve and then it increases to a value within the A range of the demand curve, we can expect total revenue to
This determination cannot be made without further information
Demand is said to be elastic if
demand shifts substantially when income or the expected future price of the good changes
When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather,
macaroni is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
Demand is said to be unit elastic if
quantity demanded changes by the same percent as the price
The price elasticity of demand measures how much
quantity demanded responds to a change in price.
For a good that is a luxury, demand
tends to be elastic
The value of the price elasticity of demand for a good will be relatively large when
the good is a luxury as opposed to a necessity
Whether a good is a luxury or necessity depends on
the preferences of the buyer
Consider airfares on flights between New York and Minneapolis. When the airfare is $250, the quantity demanded of tickets is 2,000 per week. When the airfare is $280, the quantity demanded of tickets is 1,700 per week. Using the midpoint method,
the price elasticity of demand is about 1.43 and an increase in the airfare will cause airlines' total revenue to decrease
Between point A and point B,
the slope is equal to -1/4 and the price elasticity of demand is equal to 3/2
If the price decreased from $18 to $6,
total revenue would increase by $1,200 and demand is elastic between points A and C
