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Exam 5: Elasticity and Its Application

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Question 211

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Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

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Question 212

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Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, demand is unit elastic between prices of

A) $20 and $40.
B) $40 and $50.
C) $40 and $60.
D) $50 and $70.

E) B) and D)
F) None of the above

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Question 213

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An advance in farm technology that results in an increased market supply is

Figure 5-2 -Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand?

Income elasticity of demand measures how

The price elasticity of demand for a good measures the willingness of

The measure of how willing consumers are to buy less of a good as its price rises is called

Suppose that when the price rises by 20% for a particular good, the quantity demanded of that good falls by 10%. The price elasticity of demand for this good is equal to 2.0.

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

Adam and Barb go to the store to purchase some lottery tickets. Without looking at the price, Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

Table 5-3 Consider the following demand schedule. -Refer to Table 5-3. Using the midpoint method, between which two prices is price elasticity of demand most inelastic?

Goods with many close substitutes tend to have

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $5 and $6?

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the

Scenario 5-6 Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000. -Refer to Scenario 5-6. Using the midpoint method, what is the income elasticity of demand for mobile service?

If the cross-price elasticity of demand for two goods is negative, then the two goods are complements.

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about