05 Economics

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?

3.0

__________ is the change in what is on the horizontal axis (quantity) divided by the change in what is on the vertical axis (price).

Elasticity

A price cut will increase the total revenue a firm receives if the demand for its product is:

elastic

Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.

elastic

Youth smoking seems to be more __________ than adult smoking—that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price.

elastic

If the supply curve for a product is vertical, then the elasticity of supply is:

equal to zero

If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:

fall and the equilibrium quantity to stay the same

A perfectly elastic supply curve is:

horizontal

If the demand curve is perfectly elastic, then an increase in supply will:

increase the quantity exchanged but result in no change in the price.

The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:

increasing the price of game tickets because demand is inelastic

Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price.

inelastic

The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be __________.

inelastic

When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________.

inelastic

A demand or supply curve with ______________ would be horizontal in appearance.

infinite elasticity

The elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in __________.

price

The price elasticity of demand measures the:

responsiveness of quantity demanded to a change in price

Price elasticity of demand is defined as:

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

A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:

total revenue will decrease

Demand is said to be __________ when the quantity demanded changes at the same proportion as the price.

unit elastic