Macro Chapter 19 Elasticity

If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25 percent, the price elasticity of demand is:

1.25

The current price of wheat is $1.00 per bushel, and the price elasticity of demand for wheat is known to be 0.50. A bad harvest causes the supply of wheat to decrease and as a result the price of wheat rises by 20%. What will be the percentage change in quantity demanded for wheat and will farm revenues rise or fall?

10% Rise

Prior to the 1997 federal tobacco settlement a pack of cigarettes sold for $2.48. The terms of the settlement required a decrease in teenage smoking of 60 percent. If the elasticity of cigarette demand for teenagers is about 1.3 then the price of cigarettes should rise to __________ in order to achieve the target reduction of 60 percent.

3.62

If the supply of Good B is perfectly elastic and price falls the quantity supplied will:

Fall to zero

If the price elasticity of supply is 0.4, then a 20% increase in price will __________ the quantity supplied by __________ %.

Increase / 8.0

When you compute a price elasticity of demand the answer is always:

Negative

Along a linear demand curve, the slope __________ while the price elasticity of demand __________.

is constant, changes from one point to another