Chapter 5,6,7,13,14,15

Refer to Figure 5-14. Over which range is the supply curve in this figure the most elastic?

$16 to $40

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

an inelastic demand for oil and a reduction in the amount of oil supplied.

Suppose good X has a negative income elasticity of demand. This implies that good X is

an inferior good.

Goods with many close substitutes tend to have

more elastic demands

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) a inferior good (iv) a luxury

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

Refer to Figure 5-1. Between point A and point B, the slope is equal to

-1/4, and the price elasticity of demand is equal to 3/2.

Refer to Scenario 5-2. Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross price elasticity of demand is about

-2.57, and X and Y are complements.

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is.....

0.33.

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

0.875.

Refer to Table 5-7. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

1.00

Refer to Table 5-7. Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000?

1.00

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

1.43, and an increase in the price will cause hotels' total revenue to decrease.

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

1.5

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

1.60, and supply is elastic.

Table 5-2 Price Quantity $250 0 $200 30 $150 70 $100 110 $50 150 $0 190 Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

2.8

Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

D1

Which of the following statements helps to explain why government drug interdiction increases drug- related crime?

Drug addicts will have an even greater need for quick cash to support their habits.

In which of the following situations will total revenue increase?

Price elasticity of demand is 1.2, and the price of the good decreases. Price elasticity of demand is 0.5, and the price of the good increases. Price elasticity of demand is 3.0, and the price of the good decreases.

If the price elasticity of supply for a window manufacturer is 1.5,

a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied.

If the cross-price elasticity of two goods is negative, then the two goods are

complements

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

complements or substitutes.

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

increase by 2.5%, and X is an inferior good.

Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a

decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range.

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the

demand for marijuana is inelastic.

Which of the following is likely to have the most price inelastic demand? ******* do not worry abt

gasoline in the short run

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

immediately after the price increase

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

income elasticity of demand is negative.

Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

increase by $120, so demand must be inelastic in this price range.

Table 5-2 Price Quantity $250 0 $200 30 $150. 70 $100 110 $50. 150 $0 190 Refer to Table 5-2. Using the midpoint method, if the price falls from $100-50, the price elasticity of demand is....

inelastic

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

inelastic.

The price elasticity of demand measures how much

quantity demanded responds to a change in price

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.

For a vertical demand curve,

the slope is undefined, and the price elasticity of demand is equal to 0.

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

wheat farmers would experience an increase in their total revenue.

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk- food ban program

will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price.