Elasticity Study Plan
The price for a fidget spinner is $5 with the quantity demanded at 7,000 a day. As time goes on the price for a fidget spinner drops to $3 and the quantity demanded increases to 12,500 a day. What is the price elasticity of demand for fidget spinners using the midpoint method?
Price elasticity of demand = 1.13
You read an article stating that HTC's latest cell phone price has increased from $450 to $550. At the same time the quantity demanded for the Samsung Galaxy 7s increases from 1000 to 1850. Calculate the cross price elasticity of demand using the midpoint method. Are these two cell phones complements or substitutes?
The cross-price elasticity of demand is 2.98 and they are substitutes.
Demelza purchased her favorite perfume three months ago, J'adore by Dior, for $75. She logs online to purchase one for her friend's birthday and it is now $100. What is the percentage change in the perfume price? (use the point approach)
33%
Kelly's salary was bumped up this year after she accepted the new position of Vice President of Marketing. Her income increased from $65,000 to $83,000. Last year Kelly purchased 2 used cars. This year she purchased 0 used cars. Assuming that all of the other things remain constant, what type of a good is a used car and what type of income elasticity of demand (using the midpoint formula) does Kelly have?
A used car is an inferior good and the income elasticity of demand is -8.22.
Elasticities are often ________ in the long run than in the short run.
higher
If the % change in quantity demanded divided by the % change in price in gasoline is less than 1, the demand for gasoline is considered
inelastic.
A new technological breakthrough increases production for an industry and shifts the supply curve to the right. If the firm ________, then the firm will likely increase revenues with this new technology.
produces products that are price elastic
Supply is described as elastic if the percentage change in quantity supplied is ________ to the percentage change in price.
relatively responsive
The wage elasticity of labor demand calculation is
the % change in quantity of labor demanded divided by the % change in wage.
The price elasticity of demand is defined as
the percentage change in quantity demanded divided by the percentage change in price.
Total revenue is defined as ________ and represented by the formula ________.
the price of a product times the number of units sold; TR=P x Qd
When supply is inelastic and demand is elastic, the tax incidence falls on ________.
the producer
Elasticity allows economists to measure
the responsiveness of one variable to changes in another variable.
As we move along a typical negatively sloping, linear demand curve Responses
the slope is constant.
Which of the following factors does NOT influence the price elasticity of demand of a product?
the slope of the supply curve
When elasticity of demand is equal to one, the change in the quantity demanded and the change in price are exactly proportional. This type of elasticity is described as ________.
unitary elastic
