Microeconomics Homework 8

Suppose good X has a positive income elasticity of demand. This implies that good X could be: (i) a normal good. (ii) a necessity. (iii) an inferior good. (iv) a luxury.

(i), (ii), and (iv) only.

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

-0.8

When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the price elasticity of demand for bracelets is?

-1.00

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is?

-2.33

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about?

1.33, and supply is elastic.

If the price elasticity of demand for a good is -2.0, then a 10 percent increase in price results in a?

20 percent decrease in the quantity demanded.

When demand is elastic, a decrease in price will cause?

An increase in total revenue.

Demand is said to be price elastic if?

Buyers respond substantially to changes in the price of the good.

The cross-price elasticity of demand can tell us whether goods are?

Complements or substitutes.

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the?

Demand for the good is said to be inelastic.

For a good that is a necessity,

Demand tends to be inelastic.

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the?

Flatter the demand curve will be.

In general, elasticity is a measure of?

How much buyers and sellers respond to changes in market conditions.

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

Immediately after the price increase.

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would?

Increase by 6%.

If two goods are complements, their cross-price elasticity will be?

Negative.

Economists compute the price elasticity of demand as the?

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

The price elasticity of demand measures how much?

Quantity demanded responds to a change in price.

-1.5

Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to?

Supply curve A

Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

The price elasticity of supply measures how responsive?

Sellers are to a change in price.

1.00

The following table shows a portion of the demand schedule for a particular good at various levels of income. Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately -2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

The quantity of the good demanded decreases by 0.2 percent.

If the cross-price elasticity of demand for two goods is 1.25, then?

The two goods are substitutes.

Which of the following is likely to have the most price inelastic demand?

Toothpaste