Elasticities

If a one-of-a-kind Etruscan vase is offered for sale at an auction, which, if any, of the following correctly shows the supply curve for the vase?

Supply= horizontal across graph

If the demand for product X is perfectly elastic and the supply of product X decreases, which of the following will occur in the market for X ?

Total revenue will decrease.

Which of the following statements relating to income elasticity is true?

With an income elasticity coefficient of 5, a 10 percent increase in income will lead to a 50 percent increase in the quantity demanded of the good.

If the income elasticity of demand for good X is negative and the cross-price elasticity of demand between good X and good Y is negative, which of the following must be true of good X?

X is an inferior good and is a complement to Y.

Suppose that the demand for vegetables is price elastic. If the price of vegetables increases by 5 percent, the quantity of vegetables demanded would

decrease by more than 5 percent

If a 10 percent increase in the price of good leads to a 25 percent decrease in the quantity demanded of the good, demand is

relatively elastic

The cross-price elasticity of demand between good X and good Z measures the percentage change in the quantity demanded of good X in response to a percentage change in

the price of good Z

Following a decrease in the supply of oranges, the price of orange juice increased by 20 percent, which resulted in a 10 percent increase in the quantity of apple juice consumed. This implies that the cross elasticity of demand between orange juice and apple juice is

0.5

The cross-price elasticity of demand between goods J and K is −3−3. A 20 percent decrease in the price of good K will result in a

60 percent increase in the quantity demanded of good J

Assume that demand for bottled water is relatively price elastic. An increase in supply of bottled water will result in which of the following?

A decrease in price, leading to an increase in total revenue

Assume the income elasticity of demand for good Z equals −5.0−5.0. Which of the following is true?

An increase in income will lead to a decrease in demand.

A city transit authority increases the price of sub- way and bus tickets from $1.25 to $1.50. If the demand for these tickets is price inelastic, the number of people riding buses and subways and the city's revenues will most likely change in which of the following ways?

Number of People Riding= decrease City's Revenues= increase

In which of the following cases would a firm's total revenue increase?

Price decreases and demand is elastic.

Assume that the price of orange juice increases by 40 percent following a crop failure. If the quantity demanded falls by 10 percent, which of the following is true?

The absolute value of the price elasticity of demand for orange juice is 0.25.

Assume a consumer finds that his total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this price change?

The consumer's demand for compact discs is unit price elastic.

The price elasticity of demand for a product is 0.5. If the price of the product increases by 20 percent, which of the following will occur?

The quantity demanded of the good will decrease by 10%.

Assume that the price elasticity of supply for good Y is 0.5. If the price of good Y decreases by 30 percent, the quantity supplied of good Y will

decrease by 15 percent

Assume that the price of good X decreases from $10 to $9 per unit and that the quantity demanded of good X increases from 25 to 30 units. In this price range, the demand for good X is

elastic

The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to $5 per ton. The price elasticity of supply for peanuts over this price range is

elastic

If the demand for insulin is price inelastic, a 5 percent increase in the price of insulin will

increase the total revenue of insulin producers

Promoters of a rock group know that if they charged $8 a ticket, 400 people would buy tickets for a concert, and if they charged $4 a ticket, 800 people would buy tickets. Over this price range, demand for the concert tickets for the rock group is

unit elastic