Ch. 4- Elasticity

Greater than 1.

Changes in price and changes in total expenditure move in the opposite direction when the price elasticity of demand is:

Perfectly Elastic Demand

Demand is perfectly elastic with respect to price if price elasticity of demand is infinite.

Perfectly Inelastic Demand

Demand is perfectly inelastic with respect to price if price elasticity of demand is zero.

Low

Given that most people spend a relatively small share of their budget on pencils, we would expect the elasticity of demand for pencils to be relatively. -High -Low

High

If Sal's Pizzeria uses tomato sauce, dough and cheese to make both pizza and calzones, then the price elasticity of supply for piizza at Sal's is likely to be relatively __________.

If the demand for the store's products is inelastic with respect to price.

If a store has a 10% off everything sale, then the store's total revenue will fall...

Zero

If demand is perfectly inelastic with respect to price, then the price elasticity of demand is ___________.

0.5

If quantity demanded goes down by 3 percent when price rises by 6 percent, then the price elasticity of demand is: a. 2 b. 9 c. 0.5 d. 3

5

If quantity demanded goes up by 10 percent when the price falls by 2 percent, then the price elasticity of demand is: A. 8 B. 5 C. 12 D. .2

Positive

If steak is a normal good, then the income elasticity of demand for steak will be... a. positive b. negative c. exactly equal to 1. d. zero

Decrease by 2.5 percent

If the cross-price elasticity of demand for bike helmets with respect to the price of bikes is -0.25, then if the price of bikes increases by 10 percent, the quantity of bike helmets demanded will...

Complements

If the cross-price elasticity of demand for ice cream with respect to the price of apple pie is negative, then the two goods are...

Could fall since fewer people may be willing to shop there.

If the owners of a local clothing boutique increase the price of their merchandise, then their total revenue...

Go down by 1.19 Percent

If the price elasticity of demand for beer is 1.19, and the price goes up by 1 percent, then the quantity of beer demanded will___________. a. Go up by 119 percent b. Go up by 1.19 percent. c. Go down by 119 percent d. Go down by 1.19 percent.

Go up by 0.25 percent

If the price elasticity of demand for coffee is 0.25, and the price of coffee goes down by 1 percent, then the quantity of coffee demanded will...

Elastic

If the price elasticity of demand for restaurant meals is 1.63, then the demand for restaurant meals is _____________.

Perfectly Elastic

If the price elasticity of demand is infinite, then demand is...

Decreases

If the price elasticity of demand is less than 1 and price increases, then total expenditure will... a. stay the same b. decrease c. increase

Decrease

If the price of sofas goes up by 10 percent and the quantity of sofas demanded falls by 15 percent, then the total expenditure on sofas will: a. decrease b. remain unchanged c. Increase

Perfectly Elastic

If the price of supply is infinite, then supply is ________.

Perfectly Elastic Supply

Supply is perfectly elastic with respect to price if elasticity of supply is infinite.

Elastic

The demand for a good is elastic with respect to price if its price elasticity of demand is greater than 1.

Inelastic

The demand for a good is inelastic with respect to price if its price elasticity of demand is less than 1.

Unit Elastic

The demand for a good is unit elastic with respect to a price if its price elasticity of demand equals 1.

Total Expenditure (Total Revenue)

The dollar amount that consumers spend on a product (P x Q) is equal to the dollar amount that sellers receive.

Low

The elasticity of demand for a good that has very few substitutes is usually relatively__________.

Income Elasticity of Demand

The percentage by which a good's quantity demanded changes in response to a 1 percent change in income.

Cross-Price Elasticity of Demand

The percentage by which the quantity demanded of the first good changes in response to a 1 percent change in the price of the second.

Price Elasticity of Supply

The percentage change in quantity supplied that occurs in response to a 1 percent change in price.

Price Elasticity of Demand

The percentage change in the quantity demanded of a good or service that results from a 1 percent change in its price.

Higher

The price elasticity of demand for water will be _________ in the long run than in the short run.

Infinite

The price elasticity of supply is: a. infinite b. zero c. one

- The time horizon is longer - It's easy to find or produce substitute inputs

The price elasticity of supply will tend to be higher when __________.

Move in the same direction

When the price elasticity of demand is *less than* 1, changes in price and changes in total expenditure...

Move in opposite directions

When the price elasticity of demand is greater than 1, changes in price and changes in total expenditure...

Food

Which of the following has the lowest price elasticity of demand? a. public transportation b. beer c. furniture d. food

Price Elastic

You notice that the price of your favorite candy bar has been relatively stable over time. A possible explanation for this is that both supply and demand are _________. a. Price elastic b. Unit elastic c. Price Inelastic