learnsmart elasticity
The more a good or a service is considered to be a necessity, the relatively more
inelastic
When demand is , consumers are less responsive to changes in prices.
inelastic
in the range of the demand curve, the percentage change in quantity demanded is less than the percentage change in price.
inelastic
Supply is perfectly elastic when the value of the price elasticity of supply is
infinity
When demand is inelastic,:
it is easier for firms to raise prices to increase total revenue.
When the proportion of income spent on a good or service is relatively , demand is relatively more elastic.
large
If supply is relatively inelastic, firms are relatively
less
The lower range of a linear demand curve is relatively
less
range of a linear demand curve is relatively less elastic.
lower
If supply is relatively elastic, firms are relatively (more/less) responsive to an increase in price.
more
Over time, supply in a market evolves and becomes relatively
more
the the change in price, the less reliable the elasticity estimate is going to be.
more
The effect of policies will change over time as supply becomes relatively
more elastic
The more a good or a service is considered to be a
necessity
Cross-price elasticity of demand uses:
negative and positive values to determine if goods are substitutes or complements.
When the product price falls from $90 to $80, the quantity demanded rises from 600 to 700 units. The _____ in this range is -1.31.
price elasticity of demand
Cross-price elasticity of demand is a measure of the effect of a change in the:
price of one product on the quantity demanded of another.
A price elasticity of demand of -0.75 means that if the price decreases by 10%, the quantity demanded will
rise; 7.5
The time period in which at least one input of production is fixed but other inputs can be changed is the:
short run
the of a linear demand curve is constant along the curve.
slope
When the proportion of income spent on a good or service is relatively
small
Price elasticity of demand is a measure of how responsive:
the quantity demanded is to a change in price.
With cross-price elasticity of demand,:
the sign helps determine whether the goods or services are substitutes or complements.
When consumers have more to adjust, demand becomes relatively more elastic.
time
When considering different time periods:
we are essentially viewing the same market from three different time-period perspectives.
Suppose the price of movie tickets decreases by 4%, causing the quantity demanded of popcorn to increase by 10%. What would the cross-price elasticity for movie tickets and popcorn be in this example?
−2.5
Suppose the price of milk increases by 15%, causing the quantity demanded of cereal to decrease by 45%. What would the cross-price elasticity for milk and cereal be in this case?
−3
If the cross-price elasticity of hamburgers and ketchup is −0.6, and the price of hamburgers increases by 50%, how would be the percentage change in the quantity of ketchup demanded?
−30%
If the price elasticity of demand (|Ed|) equals 1.25, the demand is:
elastic
Using absolute values in the inelastic range of the demand curve,:
% change in quantity demanded < % change in price.
Using absolute values in the elastic range of the demand curve,:
% change in quantity demanded > % change in price.
When the product price falls from $80 to $60, the quantity demanded rises from 500 to 800 units. The slope in this range is:
-0.067.
When the product price falls from $150 to $120, the quantity demanded rises from 1000 to 1200 units. Using the midpoint formula, the price elasticity of demand in this range is:
-0.82.
When the product price falls from $80 to $60, the quantity demanded rises from 500 to 800 units. Using the midpoint formula, the price elasticity of demand in this range is:
-1.62.
Suppose that when the price of gasoline is $3.50 per gallon, the total amount of gasoline purchased in the United States is 6 million barrels per day. Also suppose that when the price of gas decreases to $3 per gallon, the total amount of gasoline purchased is 8 million barrels per day. Based on these numbers and using the midpoint formula, the price elasticity of demand for gasoline is:
-1.86.
Suppose that when the price of gasoline is $3 per gallon, the total amount of gasoline purchased in the United States is 8 million barrels per day. Also suppose that when the price of gas decreases to $2.25 per gallon, the total amount of gasoline purchased is 12 million barrels per day. Based on these numbers and using the midpoint formula, the percentage change in price is:
-28.6%.
As a result of a 4% decrease in income, the quantity of cereal demanded increases by 24%. What is the income elasticity of demand for cereal?
-6
If the price of peanut butter increases by 25%, causing the quantity demanded of almond butter to rise by 5%, then the cross-price elasticity for peanut butter and almond butter is:
.2
If the price of coffee decreases by 50%, causing the quantity demanded of tea to decrease by 20%, then the cross-price elasticity for coffee and tea is:
.4
If the price of peanut butter increases by 25%, causing the quantity demanded of almond butter to rise by 5%, then the cross-price elasticity for peanut butter and almond butter is:
0.2
Suppose that when the price of gasoline is $3.50 per gallon, the total amount of gasoline supplied in the United States is 8 million barrels per day. Also suppose that when the price of gas decreases to $3 per gallon, the total amount of gasoline supplied is 6 million barrels per day. Based on these numbers and using the midpoint formula, the price elasticity of supply for gasoline is:
1.86
Suppose that the quantity of umbrellas demanded at a price of $5 is 2,000 units. The company's total revenue is $
10000
Suppose the cross-price elasticity of peanut butter and jelly is −0.8. If the price of peanut butter decreases by 25%, the percentage change in the quantity of jelly demanded is
20
When there is a 10% increase in the price of sweaters and the price elasticity of supply is 2, the percentage change in the quantity supplied of sweaters is
20
Suppose that the quantity of umbrellas demanded at a price of $8 is 2,500 units. The company's total revenue is $
20000
Suppose the cross-price elasticity of travelling by bus and travelling by train is 0.7. If the price of traveling by bus increases by 40%, how much would the quantity of traveling by train change?
28%
When there is a 20% increase in the price of sweaters, and the price elasticity of supply is 1.5, the percentage change in the quantity supplied of sweaters is
30
When there is a 10% increase in the price of sweaters, and the price elasticity of supply is 3.5, the percentage change in the quantity supplied of sweaters is
35
When income increases by 5%, the quantity of designer clothing demanded increases by 20%. What is the income elasticity of demand for designer clothing?
4
Suppose that when the price of gasoline is $3 per gallon, the total amount of gasoline purchased in the United States is 8 million barrels per day. Also suppose that when the price of gas decreases to $2.25 per gallon, the total amount of gasoline purchased is 12 million barrels per day. Based on these numbers and using the midpoint formula, the percentage change in the quantity demanded is:
40.0%.
Suppose the cross-price elasticity of beef and pork is 0.3. If the price of beef increases by 25%, the quantity of pork demanded would change by
7.50
Which item would be considered the most elastic?
A car
Which of the following uses negative and positive values to assess whether goods are substitutes or complements?
Cross-price elasticity
Which of the following statements is true?
The elasticity calculation uses percentage changes in price and quantity. Slope uses changes in price and quantity. A relationship exists between slope and elasticity but they are not the same thing.
With income elasticity of demand:
a positive value indicates normal goods.
In terms of proportion of income spent on the item, place the following items in order from least elastic (most inelastic) to most elastic. The least elastic item should be placed on top/first in the list.
bottle water, clothing ,computer, luxury vacations
Whether a good or a service is a luxury or a necessity is determined by the
buyer
Economists find elasticity useful because it:
can be used to compare elasticities across countries.
If the price of good A increases and generates a decrease in the demand for good B, then the two goods are:
complements.
If the price of good A increases and generates a decrease in the demand for Good B. then the two goods are _____. As a result the cross-price elasticity will be ______.
complements; negative
The slope of a linear demand curve:
constant along the curve
If we want to evaluate the effect of a change in price of one good on the quantity demanded of a different good we use:
cross-price elasticity of demand.
If demand is elastic, increasing prices will
decrease
A cross-price elasticity of demand of -0.50 means that if the price of good A increases by 1%, the quantity demanded of good B will
decrease by .5
An income elasticity of demand of 0.50 means that if income decreases by 1%, the quantity demanded will
decrease by .5
An income elasticity of demand of 2.5 means that if income decreases by 10%, the quantity demanded will
decrease by 25
A cross-price elasticity of demand of -0.50 means that if the price of good A increases by 1%, the quantity demanded of good B will
decrease; .5
A price elasticity of demand of -1.25 means that if the price increases by 1% ,the quantity demanded will
decrease;1.25
When two goods are complements, if the price of good A increases,:
demand for good B decreases.
When two goods are substitutes, if the price of good A increases,:
demand for good B increases.
Income elasticity of demand is a measure of how responsive:
demand is to a change in consumer income.
In economics, a measure of how responsive one variable is to a change in another variable is:
elasticity
The more broadly a market is defined, the
fewer
Relatively elastic demand curves tend to be (flatter or steeper) than relatively inelastic demand curves.
flatter
When comparing the elasticity of two different supply curves, the one that is __ is relatively more elastic all else held constant.
flattest
Elasticity
has no units attached to it.
period is the time period in which producers cannot increase their use of economic resources to increase quantity supplied.
immediate
When two goods are substitutes, if the price of good A increases, it generates a(n)
increase
A price elasticity of supply of 1.25 means that if the price increases by 10% the quantity supplied will
increase by 12.5
A cross-price elasticity of demand of -0.75 means that if the price of good A decreases by 10%, the quantity demanded of good B will
increase by 7.5
A price elasticity of supply of 0.75 means that if the price increases by 10% the quantity supplied will
increase by 7.5
A cross-price elasticity of demand of -1.25 means that if the price of A decreases by 1%, the quantity demanded of good B will
increase. 1.25
A price elasticity of demand of -0.75 means that if the price decreases by 10%, the quantity demanded will
increase; 7.5
A price elasticity of demand of -1.25 means that if the price decreases by 10%, the quantity demanded will
increase;12.5
If Ed = -0.85, the demand is:
inelastic
If |Ed| = 0.25, the demand is:
inelastic
The price elasticity of demand is a negative number because:
of the law of demand.
Price elasticity of supply is a
positive
With cross-price elasticity of demand,:
positive values indicate substitutes and negative values indicate complements.
when the changes, the price elasticity of demand will influence the change in total revenue.
price
when there are few for a good or service, demand tends to be relatively more inelastic.
substitutes
If the price of good A increases and generates an increase in the demand for Good B, then the two goods are _____. As a result the cross-price elasticity will be _____.
substitutes; positive
The effect of policies will change over time as:
supply becomes relatively more elastic.
The slope of a linear demand curve is:
the change in price divided by the change in the quantity demanded.
The greater the change in price,:
the less reliable the elasticity estimate is going to be.
The time periods associated with a set of supply curves include all of the following EXCEPT:
the market period
