Microeconomics Chapter 5
At point A, total revenue is
$2,550
Which of the following is used to calculate cross-price elasticity of demand?
% change in quantity of Upper Y demanded Over % change in price of Upper X EndFraction % change in quantity of Y demanded % change in price of X.
Between points E and F is
-0.27
Between points C and D is
-1.00
The quantity of peanuts demanded increases from 6 pounds to 9 pounds when the price of peanuts decreases from $4 per pound to $3 per pound. In this price range and using the midpoint formula, the price elasticity of demand for peanuts is
-1.4
The quantity of peanuts demanded increases from 6 pounds to 9 pounds when the price of peanuts decreases from $4 per pound to $3 per pound. The price elasticity of demand for peanuts is
-2.0.
The slope of demand curve b is
-20
The quantity of peanuts demanded increases from 6 pounds to 9 pounds when the price of peanuts decreases from $4 per pound to $3 per pound. The percentage change in the price of peanuts is
-25%
A sporting goods store has estimated the demand curve for Brand A running shoes as a function of price. Use the diagram to the right to answer the following questions. Calculate demand elasticity using the midpoint formula between each set of points given below. (Enter your responses rounded to two decimal places and include a minus sign if necessary.) Demand elasticity between points A and B is
-3.67
The price of gasoline will be $ 4.684.68 per gallon.
4.68
The quantity of peanuts demanded increases from 6 pounds to 9 pounds when the price of peanuts decreases from $4 per pound to $3 per pound. The percentage change in the quantity of peanuts demanded is
50%
Which of the following is used to calculate income elasticity of demand?
A. StartFraction % change in quantity demanded Over % change in income EndFraction % change in quantity demanded % change in income.
If price falls to $47.5047.50 per unit and you move to point B, what is total revenue?
At point B, total revenue is $2,612.5
For the following statement, state the relevant elasticity and state what its value should be (negative, positive, greater than one, zero, and so on). The demand for Apple iPad Minis falls when the price of Samsung Galaxy Tabs falls.The demand for Apple iPad Minis falls when the price of Samsung Galaxy Tabs falls.
C. Cross dash price elasticity of demand is positive comma since the items are substitutes left parenthesis could be large or small right parenthesisCross-price elasticity of demand is positive, since the items are substitutes (could be large or small).
If total revenue increases as price decreases, demand is
Elastic
Why is demand likely to become more elastic, or responsive, in the long run?
In the long run, households make adjustments over time and producers develop substitute goods.
Explain whether demand is likely to be elastic or inelastic for automobile tiresautomobile tires.
Inelastic due to a lack of close substitutes
Suppose that the government imposes a price ceiling on gas at $1.201.20 per gallon. How would the relationship between consumers and gas station owners change? It would cause a shortage of gasoline.
Shortage
Which of the following is used to calculate elasticity of supply?
StartFraction % change in quantity supplied Over % change in price EndFraction % change in quantity supplied % change in price.
Taxicab fares in most cities are regulated. Several years ago, taxicab drivers in Boston obtained permission to raise their fares 10 percent, and they anticipated that revenues would increase by about 10 percent as a result. They were disappointed, however. When the commissioner granted the 10 percent increase, revenues increased by only about 5 percent. What can you infer about the elasticity of demand for taxicab rides?
Taxicab rides are more elastic than anticipated by taxicab drivers.
These graphs show that slope is a poor measure of responsiveness of quantity of hamburgers demanded to price changes because the slopes of the two curves are very different, yet the two curves show _______ behavior.
The exact same
Demand has unitary elasticity if:
The percentage change in a quantity of a product demanded is the same as the percentage change
Converting the numerical changes in price and quantity to percentages gives us a measure of responsiveness that ____ with the unit of measurement.
does not change
(point a on left of curve)At this point, demand is:
elasticelastic, because revenue increases as the price decreasesrevenue increases as the price decreases.
In terms of absolute value, elasticity values ________ as price decreases along a downward-sloping demand curve.
get smaller
The income elasticity of demand for education is 3.5. Thus, a 4% increase in income will
increase the quantity of education demanded by 14%.
If income is fallingfalling and income elasticity of demand for a particular good is negativenegative, then demand for the good is
increasing, and it is an inferioran inferior good.
If total revenue increases as price increases, demand is
inelastic
An increase in demand caused no change in the equilibrium price. Thus, supply must be
perfectly elastic.
As you move from point A to point B, total revenue
rises, so you know that demand price is elastic
For a demand curve to be more inelastic:
the item should represent a small portion of an individual's total budget.
Price elasticity of demand is defined as:
the ratio of the percentage of change in quantity demanded to the percentage of change in price.
For a demand curve to be more elastic:
there should be an availability of substitutes
If the store currently charges a price of $50, then increases that price to $60, what happens to total revenue from shoe sales?
total revenue Falls
If the store currently charges a price of $30, then increases that price to $40, what happens to total revenue from shoe sales?
total revenue remains constant
If the store currently charges a price of $10, then increases that price to $20, what happens to total revenue from shoe sales?
total revenue rises
Suppose price increases and demand is unitary elastic price increases and demand is unitary elastic. What happens to total revenue?
total revenue will not change
Every year Christmas tree vendors bring tens of thousands of trees from the forests of New England to New York City and Boston. During the last two years, the market has been very competitive; as a result, price has fallen by 10 percent. If the price elasticity of demand was minus−1.3, vendors would lose revenues altogether as a result of the price decline.
Disagree: When price decreases and demand is relatively elastic, total revenue will rise.
The demand for hamburgers is shown, with hamburgers priced in dollars in Figure a and pennies in Figure b.
The slope of demand curve a is −0.2.
In general, the more of your income a product consumes, the more elastic is its demand.
True
The demand for gasoline is likely to be more inelastic than the demand for sushi.
True
The more substitutes that are available for a product, the more elastic is its demand.
True
What can you conclude about the relationship between products Upper A and Upper BA and B? Products Upper A and Upper BA and B are
Unrelated goods
Every point along a linear demand curve has the same slope, and therefore has the same elasticity value.
False
In general, luxury items tend to have inelastic demands.
False
What can you conclude about the relationship between products Upper C and Upper DC and D? Products Upper C and Upper DC and D are
complements
For perfectly price inelastic supply
demand determines price soley
