Chapter 6 Test
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.
1.62
Assume that the price elasticity of demand for cocaine is -0.02. If legalization causes the price of cocaine to fall by 95 percent what will be the increase in the quantity of cocaine demanded?
1.9 percent
The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded?
2.5 percent
Refer to the graph above. Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.
3.125
A perfectly elastic demand curve is shown in
Horizontal Line
Using cross-sectional data from the two Housing Assistance Supply Experiment (HASE) sites--Brown County (WI) and St. Joseph County (IN)-- John Mulford estimates that the long-run "permanent" income elasticity of housing expenditures to be 0.45 for owners. Using this information, what is likely to happen to housing expenditures if the government increases income transfers to recipients in HASE sites?
Housing expenditures will increase, but not significantly.
Refer to figure above. The demand curve on which panel changes elasticity at every point?
Linear Line ( top left to bottom right ) of graph
Suppose the absolute value of the price elasticity of demand for meals at Fortune Buffet House is (Infinite) What happens to sales revenue if the restaurant increases its price by 5 percent?
Sales revenue falls by 100 percent.
Which of the following statements about price elasticity of demand is false?
The value of the price elasticity of demand is the reciprocal of the value of the demand curve's slope.
If the market for a product is narrowly defined, then there are likely to be many substitutes for the product and the demand for the product is relatively elastic. (True or False)
True!
A perfectly inelastic supply curve is shown as
Vertical Line
If demand is perfectly inelastic, the absolute value of the price elasticity of demand is
Zero
Consider the following pairs of items: a. shampoo and conditioner b. iPhones and headphones c. a laptop and a desktop computer d beef and pork e. air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity?
a and b only
Which of the following goods would have the most inelastic demand?
bread
If, for a given percentage increase in price, quantity supplied increases by a larger percentage, then supply is
elastic.
The demand for all carbonated beverages is likely to be ________ the demand for Dr. Pepper.
less elastic than
If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is
one that sells a luxury good.
If a firm is in an antitrust court case being accused of monopolizing a product, the firm would hire an economist to show
the cross-price elasticity of demand between the firm's good and another is positive.
When demand is unit-elastic, a change in price causes total revenue to stay the same because
the percentage change in quantity demanded exactly offsets the percentage change in price.
At the midpoint of the demand curve, in absolute value
the price elasticity coefficient is one.
If a firm lowered the price of the product it sells and found that total revenue did not change, then the demand for its product is
unit-elastic.
