ch.5

If the price of windmills rises by 20%, and the quantity supplied rises by 2%, what is the price elasticity of supply of windmills? 0.001 0.1 10 40

0.1

On weeknights an Uber driver can expect to earn $130 driving a six-hour shift. Surge pricing on Saturday nights means that Uber drivers can expect to earn $170 driving a six-hour shift. On weeknights, there are 150 drivers on the road, which rises to 270 on Saturdays. Calculate the price elasticity of supply of Uber drivers using the midpoint formula. 57% 2.1 27% 0.47

0.47

If increasing the price of solar panels by 20% leads to a decrease in the quantity demanded by 10%, what is the absolute value of the price elasticity of demand for solar panels? −0.5 −2.0 2.0 0.5

0.5

If cutting the price of shoes by 8% leads to an increase in the quantity demanded by 12%, what is the absolute value of the price elasticity of demand for shoes? 1.5 −1.5 0.67 −0.67

1.5

If the quantity changed from Q1 to Q2, using the midpoint formula, what is the percentage change in quantity? = ((Q2 − Q1) ÷ (Q2 −Q1)/2) × 100 = (Q2 − Q1) ÷ (Q2 + Q1)/2 = ((Q2 − Q1) ÷ (Q2 + Q1)/2) × 100 = ((Q2 + Q1) ÷ (Q2 + Q1)/2) × 100

= ((Q2 − Q1) ÷ (Q2 + Q1)/2) × 100

If demand is elastic,

a higher price yields less revenue.

If demand is inelastic,

a higher price yields more revenue.

A _____ absolute value of the price elasticity of supply means that the quantity is more responsive to _____ changes. bigger; demand smaller; demand smaller; price bigger; price

bigger; price

The cross-price elasticity of demand measures by what percent the quantity _____ following a 1% increase in the price of another good. demanded will fall demanded will rise supplied will rise supplied will fall

demanded will rise

If your customers are very responsive to price changes, that is, if their demand is _____, then a modest price rise will lead to _____ in quantity. elastic; a large decline elastic; a small decline inelastic; a large decline inelastic; no change

elastic; a large decline

The _____ measures how responsive your demand for a good is to changes in your income. income elasticity of demand total revenue cross-price elasticity of demand price elasticity of supply

income elasticity of demand

income elasticity of demand

measures how responsive your demand for a good is to changes in your income. Specifically, it measures by what percent the quantity demanded will change following a 1% change in income.

Elasticity is mainly about the price elasticity of supply. the cross-price elasticity of demand and the income elasticity of demand. the interdependence principle. measuring how responsive people are to changing conditions.

measuring how responsive people are to changing conditions.

The price elasticity of supply is a _____ number, because changes in price lead to changes in quantity in _____ along a supply curve. positive; the same direction positive; the opposite direction negative; the same direction negative; any direction

positive; the same direction

Total revenue is defined as the total amount you receive from buyers, which is calculated as: price divided by quantity. price minus quantity. price times quantity. price plus quantity.

price times quantity.

The price elasticity of demand measures by what percent the _____ will change following a 1% price increase. revenue quality price quantity demanded

quantity demanded