Chapter 5 HW

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly a. elastic, and the demand curve will be horizontal. b. inelastic, and the demand curve will be horizontal. c. elastic, and the demand curve will be vertical. d. inelastic, and the demand curve will be vertical.

a. elastic, and the demand curve will be horizontal.

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is a. inelastic. b. perfectly inelastic. c. unit elastic. d. elastic.

a. inelastic.

The price elasticity of supply measures how much a. the quantity supplied responds to changes in the price of the good. b. the price of the good responds to changes in supply. c. sellers respond to changes in technology. d. the quantity supplied responds to changes in input prices.

a. the quantity supplied responds to changes in the price of the good.

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross-price elasticity of demand is about a. 0.1, and X and Y are substitutes. b. 1.2, and X and Y are substitutes. c. −1.2, and X and Y are complements. d. −0.1, and X and Y are complements.

b. 1.2, and X and Y are substitutes.

If a 15% increase in price for a good results in a 20 percent decrease in quantity demanded, the price elasticity of demand is a. 0.75. b. 1.33. c. 1.60. d. 1.25.

b. 1.33.

Demand is said to be price elastic if a. the price of the good responds substantially to changes in demand. b. buyers respond substantially to changes in the price of the good. c. demand shifts substantially when income or the expected future price of the good changes. d. buyers do not respond much to changes in the price of the good.

b. buyers respond substantially to changes in the price of the good.

If a 25 percent change in price results in a 40 percent change in quantity supplied, then the price elasticity of supply is about a. 1.60, and supply is inelastic. b. 0.63, and supply is inelastic. c. 1.60, and supply is elastic. d. 0.63, and supply is elastic

c. 1.60, and supply is elastic

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 a. 2.89. b. 0.35. c. 2.33. d. 0.43.

c. 2.33.

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent. The equilibrium price will a. increase in both the aged cheddar cheese and bread markets. b. decrease in the aged cheddar cheese market and increase in the bread market. c. decrease in both the aged cheddar cheese and bread markets. d. increase in the aged cheddar cheese market and decrease in the bread market.

c. decrease in both the aged cheddar cheese and bread markets.

The demand for grape-flavored Hubba Bubba bubble gum is likely a. inelastic because there are many close substitutes for grape-flavored Hubba Bubba . b. elastic because the market is broadly defined. c. elastic because there are many close substitutes for grape-flavored Hubba Bubba. d. inelastic because the market is broadly defined.

c. elastic because there are many close substitutes for grape-flavored Hubba Bubba.

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is a. perfectly inelastic. b. somewhat inelastic, but not perfectly inelastic. c. unit elastic. d. perfectly elastic.

c. unit elastic.

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about a. 2.0. b. 0.45. c. 200. d. 2.2.

d. 2.2.

The price elasticity of demand measures a. how much more of a good consumers will demand when incomes rise. b. the movement along a supply curve when there is a change in demand. c. the extent to which demand increases as additional buyers enter the market. d. buyers' responsiveness to a change in the price of a good.

d. buyers' responsiveness to a change in the price of a good.

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is a. negative, and the good is an inferior good. b. positive, and the good is an inferior good. c. negative, and the good is a normal good. d. positive, and the good is a normal good.

d. positive, and the good is a normal good.