Economics Chapter 6
If the demand for cigarettes is inelastic,
Total revenue will rise if the price of cigarettes rises.
The total revenue effect of a movement along a demand curve can best be predicted using the
price elasticity of demand
Along a linear or straight-line demand curve, demand is more elastic at higher prices.
True
If demand is elastic, a price reduction will lead to an increase in total revenue.
True
Technically the elasticity number is negative because
When price falls quantity demanded will rise, but for simplicity economists take the absolute value of the elasticity number.
The price elasticity of demand is equal to
the percentage change in quantity demanded divided by the percentage change in price
The formula for the elasticity of supply is
the percentage change in quantity supplied divided by the percentage change in price
If demand is elastic, then
The elasticity number E is greater than 1
The World view article on the rise in gold prices indicates that
The law of supply is true: as the price of gold rises, miners around the world search for new deposits of gold.
If two goods are substitute goods,
The percentage change in quantity demanded for good X will fall if there is a reduction in price of good Y.
If the demand for a product is elastic, then
The percentage change in quantity demanded is greater than the percentage in price.
Supply is very inelastic when
The quantity supplied changes little when the price increases.
Which of the following products will have elastic demand
Travel souvenirs
If demand is perfectly elastic
demand curve is horizontal
If the price of cell phones increases by 5 percent and the quantity demanded falls by 2 percent, the absolute value of the price elasticity of demand is
0.4
Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat. The absolute value of the price elasticity of demand is closest to
1.29
If the price of sandals increases by 10 percent and the quantity demanded falls by 20 percent, then the price elasticity of demand in absolute value is
2
If the price of the iPhone X falls by 3 percent and the price elasticity of demand for iPhone X is 2.0 then quantity demanded will fall by what percentage?
6 percent
If the price elasticity of demand is 0.6, then 10 percent increase in the price of the good will lead to a _______in quantity demanded.
6 percent decrease
Suppose computer prices at an office supply store fall from $1,000 to $900 and as a result the quantity demanded of typewriters decreases from 40 to 20 per month. The cross-price elasticity of demand is closest to
6.3 The cross-price elasticity of demand is equal to the percentage change in the quantity demanded of typewriters divided by the percentage change in the price of computers. Because a 10.5 percent decrease in computer prices caused a 66.7 percent decrease in the demand for typewriters, the cross-price elasticity of demand is equal to 6.3.
If demand is elastic, then
An increase in price will reduce total revenue.
The article "samsung stung by Apple Moves" related to the price cuts for the iPhone indicates that
Apple lowered the price for the iPhone because the cross-price elasticity between it and the other competitors was positive.
The World View "Rebounding Oil Price Spurs More Rigs" relate to oil prices and oil rigs suggests
As the price of oil increases,there is an increase in oil rigs and thus the amount of quantity supplied, indicating that supply is elastic.
Which of the following most likely have a price elasticity coefficient less than 1?
Coffee
Assume the price elasticity of demand for U.S. Frisbee Co. Frisbee is 0.5. If the company increases the price of each Frisbee from $12 to $16, the number of Frisbees demanded will
Decrease by 14.e3
If the price of Good X falls and total revenue rises, then
Demand for Good X is elastic.
A price decreases will cause total revenue to fall if
Demand is inelastic
The demand will be ______ if the consumer has ______substitute goods to choose from
Elastic, more
The price elasticity number for necessities will be greater than 1.
False
To increase U.S. energy independence, price mist be lowered on gasoline and electricity.
False
demand is more inelastic for luxury goods
False
Ceteris Paribus, if income increases and as a result, the demand for good X increases and the demand for good Y falls
Good X is a normal good and good Y is an inferior good.
When demand is elastic, the absolute number of price elasticity will be
Greater than 1
Elasticity of supply tells us
How much sellers will increase production in response to a change in price
Elasticity of supply looks at
How responsive sellers are to a change in price.
price elasticity of demand refers to
How sensitive buyers are to a change in price.
Assume the price elasticity of demand for MC Pretzel Co. pretzels is 0.8. If the company increases the price of each bag of pretzels, total revenue will
Increase because the percentage increase in price is greater than the percentage change in quantity demanded.
If the elasticity of demand for cigarettes is 0.4, a seller should
Increase price to increase total revenue.
Ceteris Paribus, the longer the time period, the
More elastic the demand for the good.
Reter to figure 20.2. Comparing the price elasticity of demand at points A and C, we can say that
Point A has a greater price elasticity of demand in absolute value.
A good normal if the sign on the income elasticity formula is
Positive
Ceteris Paribus, as the number of substitutes for a good increases, the
Price elasticity of demand should become larger.
When demand is price-inelastic, ceteris paribus, an increase in
Price leads to greater total revenue.
In the $80 to $40 price range in figure 20.1 demand is
Price-inelastic
The demand for normal goods
Rises when incomes rise.
A demand curve that is completely elastic is
horizontal
If a good is inferior, its
income elasticity of demand is negative
Total revenue is equal to
income from sales
Which of the following products will have more inelastic demand?
medicines
The basic formula for price elasticity of demand is
percentage change in quantity demanded/percentage change in price
