Economics - Elasticity Chapter 6
average quantity =
(q1 + q2) / 2
Suppose the price of a pair of premium socks falls from $2.00 to $1.90 and the quantity of the socks demanded increases from 110 to 118. Rounded, the price elasticity of demand is:
1.4
Assume that at an initial price of $100, a bookstore will purchase 10,000 college textbooks, and at an increased price of $110, it will purchase only 8,000 textbooks. What is the price elasticity of demand for the textbooks? (Use the average price and quantity method for calculation.)
2.33
% change in quantity =
2/ q
The cross-price elasticity of demand measures which of the following?
The responsiveness of consumer purchases of one product due to a change in the price of some other product
Because of the law of supply, we know that the price elasticity of supply is
always positive
If two goods are complements, an increase in the price of one will ______ the demand for the other good.
decrease
A high-priced good, relative to buyers' incomes, will exhibit a low price elasticity of demand.
false
The price elasticity of demand tends to be more for items costing little relative to consumer income.
false
The higher the price of a good relative to a consumer's income, the _____ the price elasticity of demand.
higher
When demand is relatively price _____, the price elasticity of demand will be less than one
inelastic
The _____ _____ of demand measures the responsiveness of consumers' quantity demanded to a price change.
price elasticity
change in quantity =
q2 - q1
Evian water and Dasani water are ______ goods.
substitute
Cross-price elasticity is calculated as
(% change in the quantity demanded of X)/(% change in price of Y)
If the demand curve for a product is shifting, then we know that
a non-price determinant is changing.
Electric vehicle sales presently constitute a _____ share of the U.S. auto market.
negligible
If the price elasticity of demand is unitary elastic, an increase or decrease in price will ______ total revenue.
not change
When confronted with a higher price, consumers typically adjust their behavior
only after the passage of some time.
_____ revenue is calculated by multiplying the product price by the quantity sold.
total
True or false: Consumers often need time to adjust to changes in prices.
true
True or false: Price elasticity of demand will be greater when the price of a good is higher, relative to a consumer's income.
true
When an increase in the price of one good decreases the demand for another good, then the goods are called complementary goods.
true
The elasticity of demand for Reebok shoes is ______ the elasticity of demand for shoes in general.
more than
When the cross-price elasticity is _____, the goods are complementary.
negative
When calculating the price elasticity of demand, the % change in quantity demanded is calculated as
(change in quantity)/(average quantity)
Which of the following would be beneficial for electric vehicle sales in the United States?
- advances in battery technology - higher gasoline prices
How will the price elasticity of a product that has few substitutes compare with one that has many substitutes?
It will be less elastic.
How will the price elasticity of demand for a good that is considered to be a luxury compare to one that is a necessity?
It will exhibit a price elasticity coefficient greater than one.
Which of the following is true when the demand is unitary elastic?
The percentage change in quantity demanded is equal to the percentage change in price.
When the price elasticity of demand is relatively price inelastic, a price increase will have what effect on total revenue?
Total revenue will rise.
How is a consumer's responsiveness to price changes measured?
Using the price elasticity of demand
% change in quantity demanded =
change in quantity / average quantity
Digital cameras and memory sticks are what type of goods?
complementary
The _____-cross , Correct Unavailable-price elasticity of demand measures the sensitivity of the demand for one product to a change in the price of another product.
cross
While considering whether to lower the price of Sprite, the Coca-Cola Company would be interested in knowing the value of the _____ elasticity of demand between Sprite and Coke.
cross-price
The percentage change in quantity demanded of good X divided by the percentage change in the price of product Y is known as the:
cross-price elasticity of demand
When calculating the price elasticity of demand, the % change in quantity _____ (one word) is calculated as (change in quantity)/(average quantity)
demanded
The cross-price elasticity of demand is equal to the percentage change in the quantity demanded of one product _____ the percentage change in the price of another product.
divided by
If a 4% decline in the price of cut flowers results in an 8% increase in the quantity demanded, the price elasticity of demand for cut flowers is
elastic
What type of demand is represented by a small change in price that leads to a large change in the quantity demanded?
elastic
The income elasticity of demand shows the responsiveness of demand for a good or service when an individual's _____ changes.
income
Which type of elasticity shows how responsive demand is to a change in earnings?
income elasticity of demand
If two goods are substitutes, an increase in the price of one will do what to the demand for the other good?
increase it
An increase in price will increase total revenue if the price elasticity of demand is relatively price
inelastic
If a 4% decrease in the price of coffee leads to a 2% increase in the quantity demanded, the price elasticity of demand for coffee is relatively price
inelastic
If a 6% decrease in the price of sugar leads to a 4% increase in the quantity demanded, the price elasticity of demand for sugar is relatively price _____.
inelastic
What type of demand is represented by a relatively small percentage change in quantity demanded divided by a relatively larger percentage change in price?
inelastic
Which type of price elasticity of demand is occurring when a substantial price change causes only a small change in the amount purchased of that product?
inelastic demand
If product demand is relatively elastic, what will be the effect on the total revenue if the price is increased?
it decreases
The inverse relationship between price and quantity demanded is called the
law of demand
If goods X and Y are complements and the price of Y increases, then we expect to see the demand for X shift to the _____.
left
The price elasticity of demand tends to be low for _____ priced goods relative to income.
lower
When a product is unitary elastic and price increases or decreases, the total revenue will ______.
remain constant
If the cross-price elasticity between two goods is positive, then we know that the goods in question are
substitutes
The percentage change in quantity supplied divided by the percentage change in price measures the price elasticity of
supply
The relationship between price and quantity demanded is exemplified by
the demand curve
When the underlying determinants of demand change,
the entire demand curve shifts
If a 2% decrease in the price of a good causes a 2% increase in the quantity demanded, the demand is
unitary elastic
