Chapter 5: Elasticity & Its Application

In the diagram, what is the elasticity of demand between a price of $100 and $200? Use the midpoint method of calculation to find your answer. -1.8 -0.2 -0.6 -0.9

-0.6

Identify which statements describe elastic, inelastic, or unit elastic price elasticity of demand. 1. When Cowboy Blues raises the price of their blue jeans by 48%, the number of jeans sold decreases by 55% 2. When Cowboy Blues lower the price of their blue jeans by 41%, the number of jeans sold increases by 28% 3. When Cowboy Blues lowers the price of their blue jeans by 27%, the number of jeans sold increases by 45% 4. When Cowboy Blues lowers the price of their blue jeans by 21%, the number of jeans sold increases by 11% 5. When Cowboy Blues lowers the price of their blue jeans by 12%, the number of jeans sold increases by 12%

1. Elastic 2. Inelastic 3. Elastic 4. Inelastic 5. Unit Elastic

Label the scenarios as examples of elastic, inelastic, or unit elastic demand. 1. When Ruko, a device used to stream movies at home, increases prices by 51%, total revenue decreases by 61% 2. When Cinema Supreme increases ticket prices by 5%, total revenue does not change 3. When Bluebox, a DVD rental kiosk, increases its prices by 51%, total revenue increases by 31%

1. Elastic 2. Unit Elastic 3. Inelastic

In anticipation of a major hurricane hitting the Gulf Coast, the quantity of gasoline sales rise from 360 million gallons to 375 million gallons. Based on this information, what is the percent change in gasoline sales? Please specify your answer to one decimal place and use the midpoint formula.

4.1%

Suppose that a demand curve exhibits two points. Initially, at price P0, the quantity demanded is Q0. When price changes to P1, quantity demanded is Q1. Price elasticity of demand =

= (Q1-Q0 / (Q1+Q0/2) / (P1-P0/(P1+P0/2)

Label each scenario with the term that best describes it. Use the midpoint method when applicable. Marcel Duchamp was a famous artist prior to his death, and was known for his Dada artwork, including works such as "Soft Toilet". All of his original sculptures and paintings go on sale. Paul owns a Tim Horton's, a famous donut and coffee franchise. He is willing to sell as many maple glazed donuts as customers want at a price of $1.00 each, but he refuses to sell any donuts for any price lower than $1.00. The price of facial tissues rises from $2.85 per box to $3.15. As a result, P&G increases production from 15 million boxes to 25 million boxes of facial tissue. With the school semester starting for both high school and college, Papermate chooses to increase production of pens from 38 million to 42 million after global prices of writing instruments increase from $$1.90 a package to $2.10 a package. Bright Ideas increases its production of lightbulbs by 15% after a 400% increase in the price of fluorescent bulbs.

A) perfectly inelastic supply B) perfectly elastic supply C) elastic supply D) unit-elastic supply E) inelastic supply

Suppose that the market for crack cocaine consists of two types of users, addicts and casual users. Casual users only use the drug occasionally, whereas addicts go to much greater lengths to make sure they have some of it readily available whenever they feel the need to consume it. What would you predict about the demand elasticities for these two types of consumers? A. Addicts and casual users are both likely to have very elastic demand. B. Addicts and casual users are both likely to have very inelastic demand. C. Casual users will have more elastic demand; their level of consumption will be less responsive to price changes. D. Addicts will have more inelastic demand; their level of consumption will be less responsive to price changes.

Addicts will have more inelastic demand; their level of consumption will be less responsive to price changes.

(Figure: Slave Redemption) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. When slave redeemers enter the market, the price of slaves: A. decreases to $17. B. exceeds $40. C. stays unchanged at $40. D. increases to $40.

D. increases to $40

The flatter the demand curve, the less is the elasticity of demand. True or false

False

The graph depicts five demand curves. Please rank each curve in terms of elasticity. A curve that is more elastic than another curve for any given quantity can be considered more elastic.

Elastic graphs look more horizontal while Inelastic graphs look more vertical.

Choose the correct price-elasticity label for each pair of goods. Assume this involves demand for the total of all people currently residing in Canada, the United States, and Mexico. cosmetic surgery, emergency surgery a cheeseburger at 7:00 p.m., a cheeseburger at 2:00 a.m.at a 24-hour restaurant at a 24-hour restaurant monthly electricity consumption, yearly electricity consumption all cars, red cars the Wall Street Journal, Wall Street Journal at the airport

More elastic than More elastic than Less elastic than Less elastic than More elastic than

Which of the following would NOT make elasticity of demand for a good more elastic? It is decided upon in less time. It has more substitutes. It is considered a luxury. It takes a large part of the budget.

It is decided upon in less time.

How does the price elasticity of supply for Henri Matisse paintings compare with the price elasticity of supply for Damien Hirst paintings? Note that Matisse is deceased, whereas Hirst still lives. A. Matisse paintings and Hirst paintings likely have the same price elasticity of supply. B. Matisse paintings and Hirst paintings likely differ in price elasticity of supply in an indeterminate direction. C. Matisse paintings likely have a higher price elasticity of supply. D. Matisse paintings likely have a lower price elasticity of supply.

Matisse paintings likely have a lower price elasticity of supply.

What does price elasticity of supply measure? A. how responsive supply is to a change in price B. how responsive price is to a change in quantity supplied C. how responsive quantity supplied is to a change in price D. how responsive price is to a change in quantity demanded

how responsive the quantity supplied is to a change in price

The most important determinant of the elasticity of demand is the: number of substitutes. level of income in the economy. size of the population. number of consumers.

number of substitutes.

The price of wheat increases, but few people cut back on their consumption of bread because: the price of bread is a large portion of the budget, and thus the demand for bread is elastic. a change in the price of wheat does not affect the price of bread. the price of bread is a small portion of the budget, and thus the demand for bread is inelastic. None of the answers is correct.

the price of bread is a small portion of the budget, and thus the demand for bread is inelastic.