econ exam 2 chapter 4
cross-price elasticity of demand is determined by what formula?
(%change Qd for 1 good)/(%change price of related good)
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 (2/-10)
At price of $2, the quantity demanded for pens is 16. When the price increases to $3, the quantity demanded for pens is 14. Using the midpoint method, the price elasticity of demand for pens is
-.33 price elasticity < 1, inelastic
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
-1
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?
-2
A local bakery gives information on consumer purchasing habits for muffins and cupcakes. It says that when the price of a muffin is $1, people buy 55 cupcakes. When the price of a muffin is raised to $2, cupcake purchases increase to 65 cupcakes. The cross price elasticity of demand using the midpoint method is
.25
When the price of a basketball is $15, the quantity supplied is 5,000. When the price increases to $20, the quantity supplied is 10,000. The price elasticity of supply is
2.33
If the percentage change in quantity consumed of pizza is 6% and the percentage change in income is 2%, what is the income elasticity of demand for pizza?
3 6/2=3
What is the responsiveness of quantity consumers buy to price changes, If a business finds that demand for its good is very price elastic?
It knows that price is important. A small change in price can lead to a higher change in quantity demanded
Demand is almost always more price elastic in the long run. T or F? why?
True because people take some time to adjust with the prices thus demand of the products becomes more elastic
As we move downward along the demand curve, the price elasticity of demand
becomes more inelastic
If the cross price elasticity of demand is -3, Goods A and B are
complements
When you measure the change in the quantity 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 doctors's visit, used clothing, and toilet paper, which of these goods would most likely have an income elasticity of demand equal to 8?
five star hotel
A perfectly elastic supply curve is
horizontal
A 15% increase in 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 (9/15= -.6
A local merchant raises the price of his good and finds that his total revenues increase. The demand for this 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
Suppose that the price elasticity of demand is -.80 for aspirin. We could then say that the demand for aspirin is
inelastic (less than 1)
What good amongst gourmet pizza, steak, designer/fancy clothing or instant noodles is most likely to have a negative income of elasticity of demand?
instant noodles
Over time, the prive 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
Are shoes and socks likely to have a negative or positive cross price of elasticity of demand? why?
negative because they are compliments
Does the cost of producing a good affect the good's price 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
A price change does not affect the firm's total revenue when the price elasticity of demand 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
"No matter the price, I will always buy 5 gallons of ice cream a week. I love ice cream!" This statement reflects a price elasticity of demand that is
perfectly inelastic (demand is not changing with change in prices)
When two goods are substitutes for each other, what will the cross-price elasticity of demand be?
positive
Are pepsi and coke likely to have a positive or negative cross price of elasticity of demand? why?
positive because they are substitutes
Price elasticity of demand measures the change in ________ due to change in _____
quantity demanded price
If the price elasticity of supply is 1.5, we know that supply is _____ elastic
relatively
When the price of scooters drops by 5%, the quantity demanded changed by 15%. We know that the price elasticity of demand for scooters is ______ elastic
relatively
When the price elasticity of demand is -.36, a decrease in price will
result in a smaller percentage change in Qd
When heavenly cookies prices its sugar cookies at $1, it sells 75 cookies. it lowers the price to $.50 and sells 200 cookies. its total revenue___ because the price elasticity of demand for sugar cookies is _____
rose elastic
If cross price elasticity of demand is 4, Goods A and B are
substitutes
What is the price elasticity of supply?
tells us about the positive relationship between price and quantity supplied
Over time, the price elasticity of supply becomes more inelastic, True of false?
true
When the price increases by 20% and the quantity demanded drops by 20%, the price elasticity of demand is _____ elastic
unitary
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 can a firm lower price and still increase revenue?
when the demand is elastic, a small decrease in price will lead to a large increase in quantity
If the supply of a good is perfectly inelastic, the price elasticity of supply will equal
zero
When the demand curve is vertical, the price elasticity of demand is (positive, negative, zero)?
zero
