Elasticity

Which of the following describes a product with an elastic demand? A pack of cigarettes for a chain smoker. A mobile device for surfing the internet. An appointment with a neurosurgeon.

A pack of cigarettes for a chain smoker.

An organic farmer grows custom vegetables for high-end restaurants. She finds that the demand for her products is inelastic with respect to the price. This year, she restricts output by 15% to increase the price she obtains for her products. Which of the following outcomes is most likely to occur. Total revenues would increase. Total revenues would decrease. Consumers would buy more tobacco

Total revenues would increase.

When income increases and the demand for a good increases, the good is considered a normal good. a complementary good. an inferior good.

a normal good.

When income increases and demand for a good falls, the good is considered a an inferior good. a normal good. a substitute good. a complementary good.

an inferior good.

The demand for cigarettes is highly inelastic. This suggests that the incidence of a higher tax on cigarettes will fall primarily on government. cigarette consumers. cigarette sellers.

cigarette consumers.

If the government wanted to encourage savings by offering a tax break, such a policy would increase savings most effectively if the supply curve for financial capital is relatively steep steep. inelastic. elastic.

elastic.

The percentage change in quantity divided by the percentage change in price is the elasticity. midpoint approach. revenue growth rate.

elasticity.

What is the price elasticity of demand for generic shoes if prices increase by 10% price and quantity demanded of generic shoes decreases by 15%? ________ , which means the demand for generic shoes would be ________. -1.0; unitary elastic -.67; inelastic -.5; inelastic -1.5; elastic

-1.5; elastic

Using the midpoint method, the price elasticity of demand is determined to be about 0.67. What change in the price would cause a 12% increase in the quantity demanded? An increase in the price from $7 to $8.50. A 8% decrease in the price. A 13% increase in the price. A 17.9% decrease in the price.

Elasticity does equal the calculation %∆Q/%∆P so 0.67=12%/%∆P so %∆P=12%/0.67=17.9%

Suppose the price elasticity of supply has been calculated as 0.80 for a particular product and the price increases by 5%. What would happen to the quantity supplied? It would increase by 16%. It would decrease by 6.3% It would increase by 4%. It would increase by 6.3%.

It would increase by 4%.

Epson's office printer price increased from $97 to $150. At the same time the quantity demanded for printer ink decreased from 260 to 160. Calculate the cross price elasticity of demand using the midpoint method. Are these products complements or substitutes? The cross-price elasticity of demand is 1.11 and they are substitutes. The cross-price elasticity of demand is -1.11 and they are complements. The cross-price elasticity of demand is .90 and they are complements.

The cross-price elasticity of demand is 1.11 and they are substitutes.*

Question Which method for calculating elasticity uses the values of the average price and average quantity? The point elasticity approach The endpoint elasticity method The midpoint (arc) elasticity approach The percent change approach

The midpoint (arc) elasticity approach

Which of the following describes a product with an inelastic demand? organic meat an appointment with a medical specialist a pair of walking shoes computer tablet for surfing the internet

an appointment with a medical specialist

The ________ is negative for complementary goods and positive for substitute goods. cross-price elasticity of demand price elasticity of supply price elasticity of demand income elasticity of demand

cross-price elasticity of demand

In a market with relatively inelastic demand, if the supply curve shifts due to a fall in production costs, the equilibrium price will ________ by ________ than equilibrium quantity. decrease; less increase; less decrease; more

decrease; more

Elasticity refers to how long it takes a market to reach equilibrium. how responsive one variable is to changes in another variable. how frequently a demand curve or supply curve changes slope.

how responsive one variable is to changes in another variable.

Based on the following information, calculate the price elasticity of demand using the midpoint method. The price for virtual reality goggles is $100 with the quantity demanded at 12,000 a day. On Black Friday the VR goggles were selling for $85 and the quantity demanded increased to 13,000 a day. The VR goggles are ________. elastic unit elastic inelastic

inelastic

Higher costs can typically be passed on to consumers when a product is considered perfectly inelastic. unitary elastic elastic. inelastic.

inelastic.

If demand is ________, an increase in price also causes an increase in total revenue. unit elastic. elastic. inelastic.

inelastic.

Marge, who is 46, is more likely to have an ________ labor supply, while Jessica, who is 17, is more likely to have an ________ labor supply. inelastic; elastic elastic; elastic elastic; inelastic

inelastic; elastic

The electric power company in a city increased its prices by 15% this year. Since the demand for electricity is a(n) ________ demand in the short run, the firm's revenues will ________. elastic; decrease inelastic; greatly increase elastic; increase inelastic; decrease

inelastic; greatly increase

If the price of organic beef steak, regular beef steak, and pork chops each increased by 10%. Which of the products would you think was the most elastic. In other words, which has the most change to the quantity demanded because of the increase in price? organic beef steak non-organic beef steak non-organic pork chops

organic beef steak

The price elasticity of supply is defined as the ________ change in quantity supplied divided by the ________ change in price. Responses total; percentage percentage; percentage marginal; percentage

percentage; percentage

When the quantity demanded for a product does not fluctuate when there is a change in price, the good is ________. perfectly inelastic unitary elastic perfectly elastic elastic

perfectly inelastic

When a good is perfectly inelastic the the demand curve is a perfectly horizontal line. quantity demanded varies when there is a change in price. quantity demanded does not vary when there is a change in price.

quantity demanded does not vary when there is a change in price.

The price elasticity of demand measures the responsiveness of price to a change in quantity demanded. quantity demanded to a change in quantity supplied. quantity demanded to a change in price.

quantity demanded to a change in price.

Percentage change in quantity demanded is calculated as (point approach) the change in elasticity divided by the quantity demanded. initial quantity demanded divided by the change in quantity demanded. the change in quantity demanded divided by the initial quantity demanded.

the change in quantity demanded divided by the initial quantity demanded.

When supply is inelastic and demand is elastic, the tax incidence falls on ________. consumers and producers equally the producer the federal government the consumer

the producer

As we move along a typical negatively sloping, linear demand curve the slope is constant. it results in elasticity and slope being the same. the elasticity is constant. the slope changes.

the slope is constant.

one of the characteristics of a negatively sloping, linear demand curve is that the slope is constant. elasticity and slope are the same. the elasticity is constant.

the slope is constant.

You are the manager of the public transit system. You are informed that the system faces a deficit, but you cannot cut service, which means you cannot cut costs. Your only hope is to increase revenue by increasing fares. You are advised that the estimated price elasticity of demand for the first few months after a price change is about −0.3 and that it is expected to become -1.5 in 2 years. Select the statement that best describes the results of raising the fare price. A-In the long run, total revenue will fall as the demand becomes price elastic. B-In the short run, total revenue will fall, since demand is price elastic. C-In the long run, total revenue will stay the same D-Total revenue falls immediately after the fare increase, since demand over the immediate period is price inelastic.

A-In the long run, total revenue will fall as the demand becomes price elastic.

Elasticity allows economists to measure A-the frequency of shifts in demand. B-the responsiveness of one variable to changes in another variable. C-how product prices can be affected by competition. D-how firms can maximize profits.

B-the responsiveness of one variable to changes in another variable.