ECO 202 Chapter 5

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease total revenue?

.8

If a 39 percent change in price results in a 35 percent change in quantity supplied, then the price elasticity of supply is about

0.90, and supply is inelastic

Refer to Figure 5-3. At a price of $70 per unit, sellers' total revenue equals

1050

Refer to Figure 5-4. Total revenue when the price is P1 is represented by

areas B + D

The price elasticity of demand measures

buyers' responsiveness to a change in the price of a good

Cadence says that she would smoke one pack of cigarettes each day regardless of the price. If she is telling the truth, Cadence's

demand for cigarettes is perfectly inelastic

The demand for grape-flavored Hubba Bubba bubble gum is likely

elastic because there are many close substitutes for grape-flavored Hubba Bubba

Refer to Figure 5-7. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

increase

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

the equilibrium price increases, and the equilibrium quantity is unchanged

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good

Suppose that gasoline prices increase dramatically this month. Jahzara commutes 100 miles to work each weekday. Over the next few months, Jahzara drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of

the time horizon in determining the price elasticity of demand

A key determinant of the price elasticity of supply is the

time horizon

Refer to Table 5-3. Using the midpoint method, the income elasticity of demand for good Y is

−2.33, and good Y is an inferior good.