Microeconomics Ch 5

Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

-0.71, and X and Y are complements

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

0.8

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

0.85

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

a 5 percent increase in the price.

A linear, upward-sloping supply curve has

a constant slope and a changing price elasticity of supply.

In which of the following situation will total revenue increase?

always become larger.

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

always become larger.

When demand is elastic, a decrease in price will cause

an increase in total revenue.

The midpoint method for calculating elasticities is convenient in that it allows us to

calculate the same value for the elasticity, regardless of whether the price increases or decreases.

Which of the following is likely to have the most price inelastic demand?

chocolate

If the cross-price elasticity of two goods is negative, then the two goods are

complements.

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

considers athletic shoes to be normal goods.

Scenario 5-4, Milk has inelastic demand, and beef has an elastic demand. Suppose that the mysterious increase in bovine infertility decreases both the population of hair cows and the population of beef cattle by 50 percent. Refer to Scenario 5-4. The Equilibrium price will

decrease in both the milk and beef markets.

Refer to Figure 5-8. An increase in price from $15 to $20 would

decrease total revenue by $500

There are very few, if any, good substitutes for motor oil. Therefore, the

demand for motor oil would tend to be inelastic.

Refer to Figure 5-13. Between point A and point B on the graph, demand is

inelastic

Assume that 4 percent decrease in income results in 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

negative, and the good is an inferior good.

A perfectly inelastic demand implies that buyers

purchase the same amount as before when the prices rises or falls.

Refer to Figure 5-4. Assume the section of the demand curve from B to C corresponds to Prices between $0 and $15. Then, when the price changes between $7 and $9.

quantity demanded changes proportionately less than the price.

Refer to Table 5-9. Which of the three supply curves represent the least elastic supply?

supply curve A

For a good that is a necessity, demand

tends to be inelastic.

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

wheat farmers would experience an increase in there total revenue

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food" The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program

will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price.

Refer to Figure 5-5. Using the midpoint method, between prices of $50 and $60, price elasticity of demand is about

1.22

A candle manufacturers produces 4,000 units when the market price is $11 per unit and produces 6,000 units when the market price is $13 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

2.4

Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

3.5

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the unity supplied of cheese will increase by

9% in the sort run and 21% in the long run.

Which of the following statement is correct?

All of the Above The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. The demand for grandfather clocks is more elastic than the demand for clocks in general. The demand for cardboard is more elastic over a long period of time than over a short period of time.

Refer to Figure 5-15. Along which of these segments of the supply curve is supply least elastic?

GH

Which of the following is likely to have the most price elastic demand

Haagen-Daz vanilla bean ice cream

In which of the following situation will total revenue increase

Price elasticity of demand is 1.2, and the price of the goods decreases. Price elasticity of demand is 0.5, and the price of the good increase. Price Elasticity of demand is 3.0, and the price of the good decrease. ALL OF THE ABOVE ARE CORRECT

For which of the following goods is the income elasticity of demand likely highest?

diamonds

Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is

elastic

Refer to Figure 5-7. For prices above $5, demand is price

inelastic, and raising price will increase total revenue.

Refer to Figure 5-7. For prices below $5, demand is price

inelastic, and raising price will increase total revenue.

Which of the following is likely to have the most price elastic demand?

lattes

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

supply decreases, demand is unaffected, and price increases.

If the quanity supplied responds only slightly to changes in price, then

supply is said to be inelastic

The value of the price elasticity of demand for a good will be relatively large when

the good is a luxury rather than a necessity.

Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of

the time horizon in determining the price elasticity of demand

If the cross-price elasticity of demand for two goos is 1.25, then

the two goods are substitutes