Economics Chapter 3 Homework Study Guide

The increase in demand for widgets, shown in the figure above, is the result of a decrease in the price of McBoover devices from $11 to $9. Therefore, the cross-price elasticity is

-2.0

If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is

0.5

A straight line demand curve with negative slopes intersects the horizontal axis at 100 tons per week. At the midpoint on the demand curve (corresponding to 50 tons per week) the price elasticity of demand is

1

The figure shows the demand curve for popsicles. The price elasticity of demand when the price of a popsicle increases from $0.30 to $0.50 is (0.30-->25 and 0.50-->15)

1

Using average price and average quantity, calculate the price elasticity of demand if a price rise from $8 to $10 and decreases the quantity demanded from 20 units to 15 units. The price elasticity of demand equals

1.29

The table above gives the demand schedule from snow peas. The price elasticity of demand between $6 and $7 per bushel is ($6->6,000 and $7->4,000)

2.6

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPhone. The CEO decided to decrease the price of iPhones in an attempt to increase total revenue from iPhone sales. One of his employees, Jess, disagrees and suggests than an iPhone price increase will increase total revenue. Who is CORRECT?

The CEO is correct if demand is price elastic

To maximize its revenue

a firm facing inelastic demand should always raise its price

If goods are complements, then their

cross elasticities are negative

Along a straight line demand curve, as the price falls the

demand becomes less elastic

According to the total revenue test, a price cut increases total revenue if demand is

elastic

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers by 8 percent. According to Dan, the demand for newspapers is

elastic

The figure above illustrates a linear demand curve. In the price range from $8 to 6$, demand is ______ and in the price range $4 to $2, demand is ________ (8-->10, 6--> 20) (4-->30, 2-->40)

elastic, inelastic

Suppose that the demand for corn is price inelastic. If a technological advance makes corn farms more productive, the equilibrium price of corn will ____ and the famer's total revenue will ______

fall, decrease

When Sam's annual income was only $15,000, he purchased 50 pounds of bananas a year. When his income rose to $18,000, he purchased 55 pounds a year. Therefore

for Sam, bananas are a normal good

Peter's monthly income increases from $1,500 to $1,600. As a result, he increases the number of DVDs he buys per month from 2 to 3. Peter's demand for DVDs is

income elastic

Bus rides and canned soup are inferior goods, so the _____ elasticity of demand is _____

income, negative

To say that turnips are inferior goods means that the income elasticity

is negative

The cross elasticity of demand measures the responsiveness of the quantity demanded of a particular good to changes in the prices of

its substitutes and its complements

Demand is inelastic if a relatively ______ price increase leads to a relatively ______ in the quantity demanded

large, small decrease

The cross elasticity of demand for pizza with the respect to the price of a soda is

negative because the goods are complements

The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the

price of furniture will decrease the quantity of furniture demanded by 1.3 percent

Demand is inelastic when a price ______ results in total revenue ______

rise, increasing

The price of elasticity of demand measures

the responsiveness of the quantity demanded to changes in the price

The figure above illustrates a liner demand curve. If the price falls from $8 to $6

total revenue increases