Econ Exam #2
At the price of $2, the quantity demanded for pens is 16. When the price increases to $3, the quantity demanded for pens in 14. Using the midpoint method, the price elasticity of demand for pens is ____
$-0.333 (price elasticity<1) inelastic
Nicolette raised her quantity demanded of hockey pucks from 100 to 150 when the price fell from $6 to $4 per puck. Using the midpoint method, her price elasticity of demand is ____
-1
Suppose that when the price of cereal rises by 10%, the quantity demanded of cereal falls by 20%. Based on this information, what is the approx. price elasticity of demand for cereal?
-20/-10 = $-2
When the price of scooters drops by 5%, the quantity demanded changes by 15%. We know that the price elasticity of demand for scooters is ____
15/5 = $3 (price elasticity>1) elastic
Between a five-star hotel, a doctor's visit, used clothing, and toilet paper, which of these goods would most likely have an income elasticity of demand equal to 8? Why?
Five-star hotel
What is the responsiveness of quantity consumers buy to price changes, if a business finds that demand for its good is very price elastic?
If a business finds that demand for its good is very price elastic, it knows that price is very important. A small change in price can lead to a higher change in quantity.
If the percentage change in the quantity consumed of pizza is 6% and the percentage change in income is 2%, what is the income elasticity of demand for pizza?
Income of elasticity of demand = 3; 6/2 = 3
What good amongst gourmet pizza, steak, designer/ fancy clothing or instant noodles is most likely to have negative income elasticity of demand?
Instant Noodles
When two goods are substitutes for each other, what will the cross-price elasticity be?
It will be postive
Shoes and socks likely to have a negative or positive cross-price elasticity of demand? Why?
Negative; shoes and socks are complements
Does the cost of producing a good affect the good's price elasticity of demand?
No, cost of producing a good does not affect the goods price elasticity of demand. If the cost of producing a good increases supply decreases. If the cost of producing a good decreases supply increases
The cross-price elasticity is determined by what formula?
Percentage change in the demand for one good divided by the percentage change in the price of the other good
Are pepsi and coke likely to have a positive or negative cross-price elasticity of demand? Why?
Positive; coke and pepsi are complements
Demand is almost always more price-elastic in the long run. T or F? Why?
True, people take some time to adjust with the prices thus demand of the products become more elastic
When can a firm lower price and still increase revenue?
When the demand is elastic, a small decrease in price will lead to a large increase in quantity
When the price elasticity of demand is -0.36, a decrease in price will result in ____
a smaller percentage change in quantity demanded
As we move downward along the demand curve, the price elasticity of demand ____
becomes more inelastic
If the cross-price elasticity of demand is -3, Goods A and B are ____
complements
When you measure the change in quantity demanded of one good because of a change in the price of another good, you are measuring ____
cross-price elasticity
Price elasticity of demand measures the change in ______ due to change in _____
demand; price
A price change does not affect firms total revenue when the price elasticity of demand is ____
elastic
When her income increases from $10000 to $20000, Juanita wants to buy more sushi rolls. From the midpoint method, the income elasticity of demand for sushi prices at $3 is _____
income elasticity of demand = 1.33
A 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will _____ because the price of elasticity of demand for cookies is ____
increase; inelastic 9/15 = -0.6
A local merchant raises the price of his good and finds that his total revenues increase. The demand for this good must have been _____
inelastic
Suppose that the price elasticity of demand is -0.08 for aspirin. We could then say that the demand for aspirin is ____
inelastic (less than 1)
Salima is a devoted Coca-Cola consumer, whereas Antonia will drink either Coca-Cola or Pepsi products. Salima's demand for Coca-Cola will be _____, while Antonia's demand will be relatively more _____
inelastic, elastic
Pepsi vendors who raise their price at professional sporting events increase total revenue because the price elasticity of demand is _____. When they raise their prices at gas stations, they decrease total revenue because price elasticity of demand is _____.
inelastic; elastic
If a friend says, "I am never going to buy another Dua Lipa remix again!" his or her price elasticity of demand for Dua Lipa remixes is _____
perfectly elastic
When the demand curve is perfectly horizontal, the price elasticity of demand is ____
perfectly elastic demand
"No matter the price, I will always buy five gallons of ice cream a week. I love ice cream!" This statement reflects a price elasticity of demand that is ____
perfectly inelastic, demand is not changing with change in prices of ice cream
When heavenly cookies prices its sugar cookies at $1.00, it sells 75 cookies. It lowers the price to $0.50 and sells 200 cookies. It total revenue ____ because the price elasticity of demand for sugar cookies is _____
rose; elastic
If the cross-price elasticity of demand is 4, Goods A and B are ____
substitutes
When the price increases by 20% and the quantity demanded drops by 20%, the price elasticity of demand is ____ elastic
unitary
In a typical demand curve, the price-elastic portion of demand is found in the ____ region and the price-inelastic portion of demand is found in the _____ region of the graph.
upper; lower
When the demand curve is vertical, the price elasticity of demand is ____
zero
