Exam 4: Elasticity

The marketing people for AT&T believe that if they lower the price of long-distance phone calls by 5 percent, their quantity demanded will increase by 15 percent. If they are correct in their belief, then

A recent report shows that sales at Target stores increased compared to the previous year. (Source: Business Wire, August 30, 2012) Incomes grew slightly between 2011 and 2012. Using that fact and the sales data given above means that Target definitely is selling goods and services that

If the price elasticity of demand for a good is 0.8, then a

-Cory enjoys listening to all types of music. His demand schedules for CDs in 2009 and 2010 are shown in the table above. Cory's income was $30,000 in 2009 and $35,000 in 2010. In 2010, he bought an iPod so he started to download music files from the Internet. a) Draw Cory's demand curves for CDs in 2009 and 2010. How did Cory's demand for CDs change? Why? b) For each year, calculate Cory's price elasticity of demand as the price of CDs decreases from $16 to $12. (Use the midpoint method in your calculations.) c) Why might the price elasticity of Cory's demand for CDs in 2010 be different from that in 2009? d) If all CD buyers have the same demand as does Cory, what price should the record companies charge in 2010 to maximize their total revenue from CD sales?

What factors determine the magnitude of the price elasticity of demand?

If the demand is unit elastic, a price cut will leave the quantity demanded unchanged.

Using the average price and average quantity, what is the elasticity of demand for oranges when the price of oranges changes from $200 to $160 per bushel and so the quantity demanded changes from 1000 to 1400 bushels?

If goods are complements, then their

All normal goods have

Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is

Unit elastic demand means that the

Along a straight-line demand curve, as the price falls the

If the price elasticity of demand for peanut butter is 2.4, then peanut butter

If a rise in the price of good B increases the quantity demanded of good A,

If addiction makes cigarettes such a necessity, is it correct to think that cigarettes are perfectly inelastic in both supply and demand.

The price elasticity of supply is calculated as the

-The table above gives the demand schedule for peas. Between point C and point D, the price elasticity of demand is

A rise in the price of a product lowers the total revenue from the product if the

Of the following, demand is likely to be the most elastic for

Toothpaste and toothbrushes are complements, so the ________ elasticity of demand is ________.