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Exam 5: Elasticity and Its Application

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Question 141

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

A) natural gas
B) doctor's visits
C) hamburgers
D) boats

E) B) and C)
F) C) and D)

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Question 142

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If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

A) True
B) False

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Question 143

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If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

-Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $2 and $4?

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $7 and $8?

Using the midpoint method, compute the elasticity of demand between points A and B. Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded. Now compute the elasticity of demand between points B and C. Is demand along this portion of the curve elastic or inelastic?

At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50, the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the price elasticity of supply is about

The price elasticity of supply measures how responsive

Figure 5-4 -Refer to Figure 5-4. If the price increases in the region of the demand curve between points A and B, we can expect total revenue to

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

When demand is perfectly inelastic, the price elasticity of demand

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

In general, demand curves for necessities tend to be price elastic.

Suppose the point Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the