Econ chapter 4

If the price elasticity of demand for used cars priced between $4,000 and $6,000 is -0.9 (using the mid-point method), what will be the percent change in quantity demanded when the price of a used car falls from $6,000 to $4,000?

36 % -0.9 = % change in Qd/[(4,000 − 6,000)/(4,000 + 6,000)/2)] -0.9 = % change in Qd/-0.4 (-0.4) × -0.9 = % change in Qd 0.36 × 100 = % change in Qd 36 percent = % change in Qd

When the price of a bar of chocolate is $1.00, the quantity demanded is 100,000 bars. When the price rises to $1.50, the quantity demanded falls to 60,000 bars. Calculate the price elasticity of demand using the mid-point method. A: Suppose the price increases from $1.00 to $1.50. The price elasticity of demand is B: Suppose the price decreases from $1.50 to $1.00. The price elasticity of demand is

A: -1.25 B: -1.25

Suppose that when the average family income rises from $30,000 per year to $40,000 per year, the average family's purchases of toilet paper rise from 100 rolls to 105 rolls per year. A: The income-elasticity of demand for toilet paper is B: Toilet paper is C: The demand for toilet paper is

A: 0.17 B: a normal good C: income inelastic

Suppose that when the price of peanut butter falls from $3 to $2 per jar, the quantity of jelly purchased falls from 15 million jars to 10 million jars. A: The cross-price elasticity of demand between peanut butter and jelly using the midpoint method is B: the goods are_______

A: 1 B: substitutes

Refer to the demand schedule below: Price ($) Quantity demanded 80 0 70 50 60 100 50 150 40 200 30 250 20 300 10 350 0 400 A: Suppose the price increases from $10 to $20. Demand is ________ and total revenue _________ B: Suppose the price increases from $30 to $40. Demand is i________ and total revenue ________ C: Suppose the price increases from $50 to $60. Demand is _______ and total revenue __________

A: inelastic, increases B: inelastic, increases C: elastic, decreases

Which of the following has a more elastic supply in the short run? A: Hospitals or mobile clinics: B: Purebred dogs or mixed-breed dogs: C: On-campus courses or online courses:

A: mobile clinics B: mixed breed dogs C: online courses

Which of the following has a more elastic demand in the short run? A: Pomegranate juice or drinking water: B: Cereal or Rice Krispies cereal: C: Speedboats or gourmet chocolate:

A: pomegranate juice B: rice krispies C: speedboats

For each of the following pairs, predict whether the cross-price elasticity of demand will be positive or negative: A: Soap and hand sanitizer: B: CDs and MP3s: C: Sheets and pillowcases:

A: positive B: positive C: negative

You are working as a private math tutor to raise money during spring break. A: The price elasticity of demand for math tutoring might be elastic because: B:The price elasticity of demand for math tutoring might be inelastic because:

A: the break provides students with more time to look for a substitute tutor. Correct B: students may need to use the limited break time to catch up on work

Consider two markets: real estate in downtown Manhattan or real estate in rural Oklahoma. Which will have a more price-elastic supply over six months?

Rural Oklahoma because the supply can change more easily

If price elasticity of demand is -0.5 and price increases by 3 percent, quantity demanded will _______ by _____

decrease, <3 percent

Refer to the demand schedule below: Price ($) Quantity demanded 80 0 70 50 60 100 50 150 40 200 30 250 20 300 10 350 0 400 Price increases from $60 to $70. Demand is ______ and total revenue ________ .

elastic, decreases

You have been hired by the government of Kenya, which produces a lot of coffee, to examine the supply of gourmet coffee beans. Suppose you discover that the price elasticity of supply is 0.85. When you share your information with the Kenyan government, you explain that a price elasticity of supply is 0.85 means that:

if the price rises by 1%, the quantity supplied will increase by 0.85%

If price elasticity of supply is 0.3 and price increases by 2 percent, quantity supplied will ________ by _______ .

increase, <2 percent

Certain skilled labor, such as hair cutting, requires licensing or certification. This is costly and takes a long time to acquire. If this licensing requirement were removed, the price elasticity of supply for haircuts would:

increase, or become more elastic because more people could enter the occupation. Correct

what points on a graph are elastic, inelastic, and unit-elastic

inelastic: lower portion of the curve elastic: upper portion of curve unit-elastic: mid point

Consider two goods: chips and guacamole. These two goods can be expected to have a:

negative cross-price elasticity so that if the price of chips increases, the quantity demanded for guacamole will decrease

Consider the market for inexpensive hot dogs. You can expect that the income elasticity of demand would be:

negative since people buy fewer hot dogs as their incomes increase

If income increases by 5 percent and the quantity demanded of a good then increases by 10 percent, the good is:

normal and income-elastic

You are advising a coffee shop manager who wants to estimate how much sales will change if the price of a latte rises. You tell him that he should measure the change in sales using the percentage change in quantity of coffee sold rather than the number of cups of coffee or the total ounces of coffee sold. Similarly, you tell him that he should measure the price increase in percentage terms rather than in terms of absolute dollars. He should use percentages because this method is:

not dependent on the units of measure (cups, ounces, etc.)

Although we could describe both the cross-price elasticity of demand between paper coffee cups and plastic coffee lids and the cross-price elasticity of demand between sugar and artificial sweeteners as highly elastic, the first cross-price elasticity is negative and the second is positive. This is because:

paper coffee cups and plastic coffee lids are strong complements and sugar and artificial sweeteners are strong substitutes.

Consider two goods: brownies and cupcakes. These two goods can be expected to have a:

positive cross-price elasticity, so that if the price of brownies increases, the quantity demanded for cupcakes will increase

Consider the market for meals at fine dining restaurants. You can expect that the income elasticity of demand would be:

positive since people eat out more as their income increases

You are working as a private math tutor to raise money during spring break. Assuming you want to earn as much money as possible, you should:

raise your price if you think demand is inelastic.

In France, cheese is an important and traditional part of people's meals. The French eat about six times more cheese per person as is consumed in the United States. The demand for cheese can be expected to be more income-elastic in:

the United States because the French will eat cheese regardless of income changes

You are advising a coffee shop manager who wants to calculate how much sales will change if the price of a latte rises. You tell him he should measure elasticity by using the mid-point method in his calculations because the mid-point method will provide:

the same information whether the price rises or falls.

You have noticed that the price of tickets to your university's basketball games keeps increasing but the supply of tickets remains the same. Supply might be unresponsive to changes in price because:

there a fixed number of stadium seats.