Exam 5: Elasticity: a Measure of Responsiveness

Suppose that the elasticity of supply is 0.60 and the price increases by 5%.We will predict a percent increase in the quantity supplied of:

Define price elasticity of demand.What does it measure?

Recall the application regarding the vanity plates in Virginia.Why would an increase in price for vanity plates raise the total revenue that the state of Virginia will receive from vanity plates?

In the short run,the price elasticity of supply is limited because of the principle of diminishing returns.

First Choice Cracker company needs to increase the price of crackers by 5%,based on a substantial increase in input costs such as flour.The price elasticity of demand for crackers is 0.4.The company can expect the consumption of cereal to:

When the price of milk increases 6%,quantity demanded decreases 4%.The elasticity for milk is:

The cross elasticity between natural gas and heating oil is estimated to be 2.3.The cross elasticity between natural gas and electricity is estimated to be -0.8.What is the relationship between natural gas and heating oil? What is the relationship between natural gas and electricity? Explain.

Suppose the demand for energy drinks decreases by 20% due to recent repercussions found in the consumption.If the supply elasticity is 1.2 and the demand elasticity is 0.80,the percentage change in the equilibrium price for energy drinks will:

Chris buys more new jewelry when her income rises.This means that,for Chris:

-Refer to Figure 5.5.Using the midpoint method,if the price of a gardenburger is increased from $6 to $7,the price elasticity of demand equals:

Suppose the revenues from citrus increased by 38% and the price increased by 56%.Calculate the percentage change in quantity demanded.

A sandwich shop observes that when it increases the price of a sandwich,total revenue from sandwich sales increases,and when they lower the price of a sandwich,total revenue from taco sales decreases.This suggests:

The price elasticity of demand for gasoline is 0.5 and the price elasticity of supply of gasoline is 1.5.If the demand for gasoline falls by 10%,what will happen to the price of gasoline?

Based on the determinants of elasticity as discussed in the text,explain what the price elastic of demand of the following products would be: a)diamond rings;and b)salt.

If the supply curve is relatively flat,then the price elasticity of supply will be:

Which of the following is likely to have an elastic demand?

Another word for elasticity would be flexibility.

If the price elasticity of demand is less than 1,then a 6% increase in the price will result in an increase in total revenue.

The demand for a product is:

An increase in demand shifts the demand curve to the right,increasing the equilibrium price.