Micro Chapter 5 Elasticity and its Application
In general, a flatter demand curve is more likely to be
price elastic
Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000 Using the midpoint formula, what is the price elasticity of demand for cable television in Small Town?
(20,000-30,000) / ((20,000+30,000)/2) X100 ----------------------------------------------------- (40-30) / ((40+30)/2) X100 10000/25000 .4x100=40 _______________ = 10/35 .28x100=.28 1.4
If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is
.15
If the income elasticity of demand for a good is negative, it must be
An inferior good
If the cross=price elasticity between two goods is negative, the two goods are likely to be
Complements
IF supply is price inelastic, the value of the price elasticity of supply must be
Less than 1
If the demand curve for a good is price inelastic, the good is a ________
Necessity
If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught, the fisherman's price elasticity of supply for fresh fish is
One
If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is
Price Elastic
If there is excess capacity in the production facility, it is likely that the firm's supply curve is
Price elastic
Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to
Reduce total revenue to farmers as a whole because the demand for food is inelastic
A decrease in supply, will increase total revenue in that market if
Supply is price Elastic
The demand for which of the following is likely to be the most price inelastic? Airline Tickets Bus tickets Taxi Rides Transportation
Transportation
If an increase in the price of a good has no impact on the total revenue in that market, demand must be
Unit Price elastic
If consumers think that there are very few substitutes for a good, then
demand would tend to be price inelastic
If demand is linear, then price elasticity of demand is
elastic in the upper portion and inelastic in the lower portion
In general, a steeper demand curve is more likely to be
price inelastic
The price elasticity of demand is defined as
the percentage change in the QD of a good divided by the percentage change in the price of that good
If a supply curve for a good is price elastic, then
the quantity supplied is sensitive to changes in the price of that good