Econ 200 Ch. 4
cross price elasticity formula?
% Change in qty demanded of one item / % change in price of another item
what is price elasticity of supply?
% change in Qs / % change in P
Suppose that when the price of cereal rises by 10%, the quantity demanded of cereal falls by 20%. Based on this information, what is the approximate price elasticity of demand for cereal?
-20%/10% = -2
If the percentage change in quantity demanded of Good B is 2% and the percentage change in the price of Good A is -10%, what is the cross- price elasticity of demand?
2/-10 --> -1/5
Price elasticity of demand measures the change in _______ due to a change in _______
Demand, Price
Over time, the price elasticity of supply becomes more inelastic. T or F?
False, it becomes more elastic
what good amongst gourmet pizza, steak, designer/fancy clothing, or instant noodles is most likely to have a negative income elasticity of demand?
Instant noodles, as it is an inferior good
Are Shoes and Socks likely to have a negative or positive cross-price elasticity of demand? Why?
They are likely to have a negative cross price elasticity, because they are complementary
Are Pepsi and Coke likely to have a positive or negative cross- price elasticity of demand? Why?
They are likely to have a positive cross-price elasticity, because they are substitutes
Demand is almost always more price - elastic in the long run. T or F? Why?
True. More options become available and people can make different choices
As we move downward along a demand curve, the price elasticity of demand
becomes more inelastic
If the cross - price elasticity of demand is -3, Goods A and B are:
complementary, complementary goods: Ec < 0
When you measure the change in qty demanded of one good because of a change in the price of another good, you are measuring:
cross price elasticity
Between a five-star hotel, a doctor's visit, used clothing, and toilet paper, which of these goods would most likely have an INCOME elasticity of demand equal to 8? why?
five-star hotel, because it isn't a necessity and if it is greater than 1, then it is a luxury
When the price of scooters drops by 5%, the quantity demanded changes by 15%. You know that the price elasticity of demand for scooters is:
highly elastic
a perfectly elastic supply curve is :
horizontal
when can a firm lower the price and still increase revenue?
if demand is elastic
a 15% increase in the price of cookies results in a 9% decrease in the quantity of cookies sold. The revenue received by cookie suppliers will _______ because the price elasticity of demand for cookies is _________
increase, inelastic
When Heavenly Cookies prices its sugar cookies at $1.00, it sells 75 cookies. It lowers the price to $0.50 and sells 200 cookies. Its total revenue __________ because the price elasticity of demand for sugar cookies is ___________.
increased, elastic
a local merchant raises the price of his goods and finds that his total revenues increase. The demand for his good must have been:
inelastic
Pepsi vendors who raise their price at professional sporting events INCREASE total revenue because the price elasticity of demand is ________. When they raise their prices at gas stations, they DECREASE total revenue because the price elasticity of demand is __________
inelastic, elastic
Salima is a devoted Coca-Cola consumer, whereas Antonia will drink either Coca- Cola or Pepsi products. Salima's demand for Coca-Cola will be ________, while Antonia's demand will be relatively more __________
inelastic, elastic
over time, the price elasticity of supply for sunglasses will become ____
more elastic
As price elasticity of supply becomes ______ over time, the overall shape of the supply curve becomes _______________________
more elastic, more horizontal
does the cost of producing a good affect the good's price of elasticity of demand?
no
a vertical supply curve can be described as _______ inelastic
perfectly
when the demand curve is perfectly horizontal, the price elasticity of demand is
perfectly elastic
"No matter the price, I will always buy five gallons of ice cream a week. I love ice cream!" This statement reflects a price elasticity of demand that is:
perfectly inelastic
if a friend says, "I am never going to buy another Dua Lipa remix again!" his or her price elasticity of demand for Dua Lipa remixes is _____________
perfectly inelastic
when two goods are substitutes for each other, what will the corss- price elasticity be?
positive
when two goods are substitutes for each other, what will the cross-price elasticity be?
positive
when the price elasticity of demand is -0.36, a decrease in price will
reduce total revenue
If the percentage change in the quantity consumed of pizza is 6% and the percentage change in income is 2%, what is the income elasticity of demand for pizza?
relatively elastic.
suppose that the price elasticity of demand is -0.80 for aspirin. We could then say that the demand for aspirin is
relatively inelastic
If the cross price elasticity of demand is 4, Goods A and B are:
substitutes, Substitute goods: Ec > 0
what is the price elasticity of supply?
the responsiveness of the qty supplied to a change in price
a price change does not affect the firm's total revenue when the price elasticity of demand is :
unitary
when the price increases by 20% and the quantity demanded drops by 20%, the price of elasticity of demand is ________ elastic
unitary
Nicolette raised her quantity demanded of hockey pucks from 100 to 150 when the price fell from $6 to $4 per puck. Using the midpoint method, her price elasticity of demand is _______
unitary. ((150 - 100)/((150+100)/2))/((4-6)/((6+4)/2= 4/-4 = -1
in a typical demand curve, the price- elastic portion of demand is found in the ______ region and the price - inelastic portion of demand is found in the ______ region of the graph
upper, lower
when the demand curve is vertical, the price of elasticity of demand is
zero
