Chapter 5
If demand is _____, a higher price yields _____ total revenue.
inelastic; higher
Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____.
infinity; perfectly elastic
Demand is more elastic when you are shopping in Walmart than when you shop at a small convenience store because:
more competing products means greater elasticity.
Suppose the price of gasoline rises. As time passes, people adjust to the higher price, and the demand for gasoline becomes:
more elastic
Price elasticity of demand is calculated by dividing the _____ by the _____.
percent change in quantity demanded; percent change in price
The price elasticity of demand for a good with a horizontal demand curve is
perfectly elastic
The price elasticity of demand for a good with a vertical demand curve is:
perfectly inelastic
When the absolute value of the price elasticity of demand is zero, demand is:
perfectly inelastic
Suppose the percent change in the quantity demanded for water for any price change is zero. The demand curve for water is _____, and the price elasticity of demand is perfectly _____.
vertical; perfectly inelastic
The figure shows the market for avocados. If the seller changes the price per avocado from $1.50 to $1.75, the change in total revenue is:
$12,750
The price of milk at the local grocery store is cut by 15%. In response to the price cut, the quantity of milk demanded falls by 5%. The absolute value of the price elasticity of demand for milk is _____, and the price elasticity of demand is _____.
.33; inelastic
The price of a dozen eggs rises from $3 to $4.70. In response to this price change, quantity supplied increases from 100,000 dozen eggs to 127,000 dozen eggs. What is the approximate price elasticity of supply for eggs?
.48
The price of a gallon of milk rises from $2 to $2.60. In response to this price change, the quantity demanded for milk falls by 5%. The absolute value of the price elasticity of demand for milk is _____, and the price elasticity of demand is _____.
0.17; inelastic
The price of milk at the local grocery store is cut by 25%. In response to this price cut, the quantity of milk demanded increases by 10%. What is the absolute value of the price elasticity of demand for milk?
0.4
The price of gluten-free buns falls by 7%. In response, the quantity supplied of gluten-free buns falls by 3.5%. The price elasticity of supply for gluten-free buns is:
0.5
(Figure: Market for Avocados) The figure shows the market for avocados. Which of the following is correct about this market between points A and B?
The demand curve is inelastic, and thus the seller gains revenue by raising price from $1.50 to $1.75.
Figure: Market for Avocados) The figure shows the market for avocados. Which of the following is correct about this market between points A and B?
The demand curve is inelastic, and thus the seller gains revenue by raising price from $1.50 to $1.75.
You are given some data for four different products — milk, eggs, beef, and orange juice. The absolute value of the price elasticity of demand for beef is 0.9. The absolute value of the price elasticity of demand for orange juice is 3.5. Which product has the most inelastic demand?
beef
Price elasticity of demand measures how responsive _____ are to _____ changes.
buyers; price
You are given some data for four different products — dryer sheets, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for dryer sheets is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most elastic demand?
dryer sheets
When the absolute value of the price elasticity of demand is greater than 1, demand is:
elastic
If demand is _____, a higher price yields _____ total revenue.
elastic ; lower
Demand for soda outside an airport is more elastic than inside of the airport because:
fewer choices means more inelastic demand.
When the absolute value of the price elasticity of demand is less than 1, demand is:
inelastic
(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which of the products has an elastic, but not perfectly elastic, supply curve?
product D, upward slopping
(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C, and D. Which of the products has a perfectly elastic supply curve?
product c, perfect horizontal
If a certain item has many substitutes, its demand curve will be:
relatively flat
If an item is a necessity rather than a luxury, its demand curve will be:
relatively steep
Price elasticity of supply measures how responsive:
sellers are to price change
The price of milk at the local grocery store is cut by 10%. The quantity of milk demanded increases by 5% in response to this price cut. What is the absolute value of the price elasticity of demand for milk?
0.5
Lyft cuts the price of a ride in New York City by 20%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?
1.25
The price of cakes rises by 15%. In response, the quantity supplied of cakes rises by 30%. The price elasticity of supply for cakes is:
2
Uber cuts the price of a ride in New York City by 20%, and the quantity of rides demanded rises by 40%. The absolute value of the price elasticity of demand for Uber rides is _____, and the price elasticity of demand for Uber rides is _____.
2 ; elastic
Lyft cuts the price of a ride in New York City by 10%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides?
2.5
Uber cuts the price of a ride in Los Angeles by 15%. Thereafter, the quantity of rides demanded rises by 45%. What is the absolute value of the price elasticity of demand for Uber rides?
3