Homework: Chapter 5 Homework
A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. The income elasticity of demand for calculators is _____. Income elasticity of demand = Percentage change in quantity demanded÷Percentage change in income
-0.1
When income rises by 2 percent and other things remain the same, the quantity demanded of good C decreases by 3 percent. The income elasticity of demand for good C is _____. Income elasticity of demand is -3 percent divided by 2 percent, which is -1.5.
-1.5
When the price of a good increased by 10 percent, the quantity demanded of it decreased 2 percent. The price elasticity of demand is ______. A price rise will ______ total revenue.
0.20; increase
A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. The income elasticity of demand for computers is _____. Income elasticity of demand = Percentage change in quantity demanded÷Percentage change in income
1.2
Drought cuts the quantity of wheat grown by 2 percent. The price elasticity of demand for wheat is 0.4 Calculate the answers below. The price of wheat will rise by _____ percent. Price elasticity of demand = Percentage change in the quantity demanded divided by ÷Percentage change in price.
5
The table gives the demand schedule for peanuts. When the price of peanuts falls from $1.20 to $0.80 a packet, what is the change in total revenue? The change in total revenue is _____ dollars. Total revenue equals price multiplied by quantity. When the price is $1.20, the quantity demanded is 60 packets. Total revenue is $1.20×60, which is $72. When the price is $0.80, the quantity demanded is 100 packets. Total revenue is $0.80×100, which is $80.
8
A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. Choose the correct statement.
A computer is a normal good, a smartphone is a normal good, and a calculator is an inferior good.
Read Eye on Elasticity At The Coffee Shop, then explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Which demand is likely to be more inelastic: the demand for latte or the demand for coffee? The demand for latte is inelastic while the demand for a Starbucks latte is elastic because _______.
a Starbucks latte has many substitutes such as lattes from other coffee shops, but latte in general has poor substitutes
When income rises by 2 percent and other things remain the same, the quantity demanded of good C decreases by 3 percent. Good C is ______ good and as income rises, the demand for good C ______.
an inferior; decreases
Read Eye on Elasticity At The Coffee Shop, then explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Explain why the demand for latte is inelastic while the demand for a Starbucks latte is elastic. Which demand is likely to be more inelastic: the demand for latte or the demand for coffee? The demand for _______ is likely to be more inelastic than _______.
coffee; latte because a latte has more substitutes than coffee
A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. The demand for _____ is income elastic and the demand for _____ is income inelastic.
computers and smartphones
One winter recently, the price of a cruise increased by 10 percent and the quantity demanded decreased by 15 percent. Use the total revenue test to determine whether the demand for a cruise is elastic or inelastic. Total revenue ______ because the percentage increase in the price is ______ than the percentage decrease in the quantity demanded.
decreases; less
China is the world's fastest-growing market for "vanity" spending China's market for the consumption of goods aimed at enhancing one's appearance or status grew an average of 15.6 percent a year for the past five years. Given the information that incomes grew at about 7 percent a year, is the demand for "vanity" goods in China income elastic or income inelastic? Explain. The demand for "vanity" goods in China is income _______.
elastic because the percentage change in the quantity demanded of "vanity" goods exceeds the percentage change in income
Price elasticity of demand is not _______.
equal to the slope of the demand curve
Almonds galore! The quantity of almonds harvested in 2008-2009 is expected to increase by 22 percent, while total receipts of growers are expected to increase by 17 percent. Is the price of almonds expected to rise or fall? Did a change in the supply of or demand for almonds bring about this expected change in the price? The price of almonds is expected to ______. This expected change in the price comes about by ______.
fall; an increase in supply
When the price of a good increased by 8 percent, the quantity demanded of it decreased 4 percent. Most likely, this good ______ and ______.
is a necessity; has poor substitutes
Read Eye on the Price of Gasoline, and then explain why the demand for gasoline is more inelastic in the short run than in the long run. Which is likely to be more inelastic, the demand for premium gasoline or the demand for all grades of gasoline? The demand for premium gasoline is likely to be _______ the demand for all grades of gasoline.
less inelastic than
The income elasticity of demand for haircuts is 1.5, and the income elasticity of demand for food is 0.14. You take a weekend job, and the income you have to spend on food and haircuts doubles. If the prices of food and haircuts remain the same, you will _______.
more than double your expenditure on haircuts and less than double your expenditure on food
One winter recently, the price of a cruise increased by 10 percent and the quantity demanded decreased by 15 percent. Use the total revenue test to determine whether the demand for a cruise is elastic or inelastic. Because total revenue and the price change in _________, the demand for a cruise is ______.
opposite directions; elastic
Read Eye on the Price of Gasoline, and then explain why the demand for gasoline is more inelastic in the short run than in the long run. Which is likely to be more inelastic, the demand for premium gasoline or the demand for all grades of gasoline? The demand for gasoline is more inelastic in the short run than in the long run because in the short run _______.
people don't quickly change from gas-guzzling cars to fuel-efficient cars when the price of gasoline rises
Economy forces many to shorten summer vacation plans Americans are taking fewer exotic holidays and are visiting local scenic places instead. The financial crisis has encouraged many to cut their holiday budgets. Are exotic holidays and local holidays substitutes? Explain your answer. Exotic holidays and local holidays are substitutes if ______.
the cross elasticity of demand is positive
The elasticity of supply of a good today is influenced by _______.
the possibility to store some of today's production for later sale
When the price of a good increased by 10 percent, the quantity demanded of it decreased 2 percent. An example of a good with such a demand is _______.
toothpaste
An advance in technology lowers the price of a laptop. If the demand for laptops is price inelastic, the number of laptop sold will ______ and total revenue will ______.
increase; fall
Drought cuts the quantity of wheat grown by 2 percent. The price elasticity of demand for wheat is 0.4 Calculate the answers below. Pasta sauce makers estimate that, with the change in the price of pasta that the quantity of pasta sauce demanded will decrease by 4 percent. The pasta sauce makers' estimate of the cross elasticity of demand for pasta sauce with respect to the price of pasta is _____. -4 percent ÷ 8 percent = -0.5
-0.5
Why the tepid response to higher gasoline prices? Most studies report that when U.S. gas prices rise by 10 percent, the quantity purchased falls by 1 to 2 percent. In September 2005, the average retail gasoline price was $2.90 a gallon, about $1.00 higher than a year before but purchases of gasoline fell by only 3.5 percent. The studies imply that the price elasticity of demand for gasoline is between a low of _____ and a high of _____.
0.1 and 0.2
Drought cuts the quantity of wheat grown by 2 percent. The price elasticity of demand for wheat is 0.4 Calculate the answers below. Pasta makers estimate that this change in the price of wheat will increase the price of pasta by 8 percent, and decrease the quantity demanded of pasta by 4 percent. The pasta makers' estimate of the price elasticity of demand for pasta is _____. Price elasticity of demand for pasta = Percentage change in quantity demanded of pasta divided by ÷Percentage change in price of pasta
0.5
A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: computers up by 12 percent, smartphones up by 8 percent, and calculators down by 1 percent. Calculate the income elasticity of demand for computers, smartphones, and calculators. The income elasticity of demand for smartphones is _____. Income elasticity of demand = Percentage change in quantity demanded÷Percentage change in income
0.8
Tuition and enrolment data Enrolment increased from 15,539,000 in 2000 to 20,618,000 in 2013. The net cost of college (average for all types) increased from $12,357 to $14,860. Calculate the price elasticity of supply of college. Is the supply of college elastic or inelastic? The price elasticity of supply of college is _____. The price elasticity of supply is equal to the percentage change in the quantity supplied divided by the percentage change in the price. The average enrollment is (15,539,000 + 20,618,000)÷2, which is 18,078,500. When enrollment increases from 15,539,000 to 20,618,000, the percentage change in the quantity supplied is [(20,618,000−15,539,000)÷18,078,500]×100, which is 28.1 percent. The average price is ($12,357 + $14,860)÷2, which is $13,608.50. When the price rises from $12,357 to $14,860, the percentage change in price is [($14,860−$12,357)÷$13,608.50]×100, which is 18.4 percent. The price elasticity of supply is 28.1 percent ÷ 18.4 percent, which is 1.53.
1.53
Which of the following statements is an example of price elasticity of supply?
A 10 percent fall in the price of turkey with no other change decreases quantity supplied by 12 percent.
Oil prices rise ahead of OPEC meeting The Organization of the Petroleum Exporting Countries (OPEC) produces about 40 percent of the world's output of crude oil. With the global demand for oil falling, OPEC has cut production in an attempt to stop the price sliding further from its high of $147 a barrel. OPEC knows that to raise the world price of oil it has to cut the total production of its member countries. OPEC also knows that the demand for crude oil is inelastic. Is it possible to conclude from these facts that OPEC's total revenue would increase if it were to cut its production?
No because non-OPEC oil producers can increase production, which lowers the price.
The table gives the demand schedule for peanuts. When the price of peanuts falls from $1.20 to $0.80 a packet, what is the change in total revenue? Over the price range of $0.80 and $1.20, the demand for peanuts is ______.
elastic
Tuition and enrolment data Enrolment increased from 15,539,000 in 2000 to 20,618,000 in 2013. The net cost of college (average for all types) increased from $12,357 to $14,860. Calculate the price elasticity of supply of college. Is the supply of college elastic or inelastic? The supply of college is _______.
elastic