Econ Homework 4

If a 15% increase in price for a good results in a 20 percent decrease in quantity demanded, the price elasticity of demand is

1.33

Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

A is a luxury and B is a necessity

Which of the following is not a determinant of the price elasticity of demand for a good?

The steepness or flatness of the supply curve for the good

A good will have a more inelastic demand, the

broader the definition of the market.

Demand is said to be price elastic if

buyers respond substantially to changes in the price of the good.

The price elasticity of demand measures

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

Refer to Scenario 5-2. The equilibrium price will

decrease in both the aged cheddar cheese and bread markets.

Refer to Scenario 5-2. The change in equilibrium price will be

greater in the aged cheddar cheese market than in the bread market.

The price elasticity of supply measures how much

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

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

unit elastic.

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

$1,050

If a 25 percent change in price results in a 40 percent change in quantity supplied, then the price elasticity of supply is about

1.60, and supply is elastic

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 Scenario 5-2. The change in equilibrium quantity will be

greater in the bread market than in the aged cheddar cheese market.

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

inelastic.

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

positive, and the good is a normal good.

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic

Refer to Figure 5-3. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

0.33.

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross-price elasticity of demand is about

1.2, and X and Y are substitutes

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a luxury

A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

2.2.

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

2.33

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

40 percent

Refer to Figure 5-4 . If rectangle D is larger than rectangle A, then which of the following is not correct?

An increase in price from P1 to P2 will cause an increase in total revenue.

For which of the following goods is the income elasticity of demand likely highest?

Diamonds