Elasticity Quiz
What is the price elasticity of demand for shoes if for every 20% price increase clothing demand decreases by 5%? ________. The price elasticity of demand would be ________.
-.25; inelastic
Kel loves orange soda. Unfortunately, the price has increased from $2 to $4. The percentage change in price is (use the point approach)
100%
Demand is ________ if a change in price creates a larger change in quantity demanded.
Price elastic
If the price elasticity of supply was calculated as 0.40 for a product and the price increases by 12%, what would happen to the quantity supplied?
Quantity supplied would increase by 4.8%.
Epson's office printer price increased from $97 to $150. At the same time the quantity demanded for printer ink decreased from 260 to 160. Calculate the cross price elasticity of demand using the midpoint method. Are these products complements or substitutes?
The cross-price elasticity of demand is -1.11 and they are complements.
What is the name of the method that uses the average price and average quantity to calculate elasticity?
The midpoint (arc) elasticity approach
Suppose there is a major technological issue in the production of a good that causes production costs and prices to rise. If demand for the product is relatively inelastic, what will happen in the market?
The percentage price increase will be relatively greater than the percentage decrease in quantity.
What is the name of the method for calculating elasticity that makes the math easier but is less accurate?
The point elasticity approach
Using the midpoint method, calculate the price elasticity of demand of Good X using the following information: When the price of good X is $50, the quantity demanded of good X is 400 units. When the price of good X rises to $60, the quantity demanded of good X falls to 300 units. Responses
The price elasticity of demand for good X = 1.57.
Sebastian received a raise this year so his income climbed from $45,000 to $52,000. Last year Sebastian purchased 2 sunglasses. This year he has purchased 7 sunglasses. Assuming that all of the other things remain constant, what type of a good are sunglasses and what type of income elasticity of demand does Sebastian have?
The sunglasses are a normal good and the income elasticity of demand is 7.7.
An organic farmer grows custom vegetables for high-end restaurants. She finds that the demand for her products is inelastic with respect to the price. This year, she restricts output by 15% to increase the price she obtains for her products. Which of the following outcomes is most likely to occur.
Total revenues would increase.
The demand for cigarettes is highly inelastic. This suggests that the incidence of a higher tax on cigarettes will fall primarily on
cigarette consumers.
Supply is said to be ________ when the quantity supplied is very responsive to changes in price. Responses
elastic
Complete the following sentence. Given that total revenue = price x quantity, a reduction in price will lead to an increase in total revenue when demand is ________.
elastic.
The electric company in a city increased its prices by 15% five years ago. Over time more people have purchased efficient appliances or switched to gas, and the demand of electricity in the long run has become more ________. Also in the long run the equilibrium quantity demanded has ________
elastic; decreased
Based on the following information, calculate the price elasticity of demand using the midpoint method. The price for virtual reality goggles is $100 with the quantity demanded at 12,000 a day. On Black Friday the VR goggles were selling for $85 and the quantity demanded increased to 13,000 a day. The VR goggles are ________.
inelastic
Demand "A" represents a demand curve that is
perfectly elastic.
If buyers do not respond much to a change in price, then demand is considered
relatively inelastic
Demand "C" represents a demand curve that is
relatively inelastic.
If consumers find cola and iced tea to be substitute goods, then it is likely that Responses
the goods' cross-price elasticities are greater than zero.
What is the calculation to solve for the wage elasticity of labor demanded??
The % change in quantity of labor demanded divided by the % change in wage.
Which of the following describes a product with an elastic demand?
A mobile device for surfing the internet.
Which of these questions is the best example of elasticity?
How much will consumer purchases be reduced when prices increased by 15%?
In a market with relatively elastic demand, if the supply curve shifts due to a fall in production costs, the equilibrium price will ________ by ________ than equilibrium quantity.
decrease; more
Percentage changes are a way of calculating
growth rates.
Marge, who is 46, is more likely to have an ________ labor supply, while Jessica, who is 17, is more likely to have an ________ labor supply.
inelastic; elastic
On which part of the demand curve is demand considered the most inelastic?
lower part