Exam 4: Elasticity

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPod music player. CEO Steve Jobs also unveiled cheaper models of its Touch music player, a touchscreen-only device. An 8-gigabyte version now costs $229, down from $299. A 32-gigabyte model costs $399, down from $499. Steve Jobs decided to decrease the price of iPods in an attempt to increase total revenue from iPod sales. One of his employees, Jess, disagrees and suggests that an iPod price increase will increase total revenue. Who is correct?

In the nation of Transporta, the income elasticity of demand for used cars is -2.66. So when incomes in this nation increase by 10 percent,

Because of an increase in the price of leather, the price of a pair of women's dress shoes increased 12 percent. If the price elasticity of demand for women's dress shoes is 0.85, which of the following will happen?

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price inelastic, she should

When consumers' incomes increased 10 percent, the quantity of milk bought increased 5 percent. This result means

If the total revenue received by sellers of DVDs increases by 20 percent when price increases by 10 percent, then demand for DVDs is

The price elasticity of demand depends on the

"The Department of Agriculture came out today with its prediction for food price next year-4 to 5 percent increases on top of this year's already steep gains… Eggs, dairy products and cereals are up 10 percent... But the USDA says another big part of the American diet has seen only moderate price increases. Beef, poultry and pork will be up only 3 percent this year." Suppose a cattle producer increased the quantity of beef he supplies by 2 percent when the price of beef increased by 3 percent. His elasticity of supply is

Suppose inter-city bus travel is a substitute for transportation by train. Which of the following could then be true?

For baseball card collectors, Babe Ruth baseball cards from 1927 would most likely have a perfectly

The greater the magnitude of the absolute value of the income elasticity of demand for a good, the more the

When the price of milk goes up as a result of a rightward shift of the demand curve for milk, the total revenue collected by milk producers will

For inferior goods, the income elasticity of demand is negative.

Which of the following items has the largest price elasticity of demand?

Explain why the cross elasticity of demand for substitute goods is positive and the cross elasticity of demand for complements is negative.

When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes

During a recession when people's incomes drop, grocery chains experience much smaller declines in sales than do upscale department stores. Explain this phenomenon using the concept of elasticity.

If the price of salt increases and the quantity demanded does not change, then

-June makes holiday wreaths and sells them during the holiday season. The figure above shows her supply curve of wreaths per week. Use the midpoint method in this problem. a) Calculate the percentage change in quantity between points A and B. b) Calculate the percentage change in price between points A and B. c) Calculate the price elasticity of supply between points A and B.

Suppose tennis shoes cost $50 per pair and firms supply 50,000 pairs of shoes. If the price decreases to $45 and firms decide to supply 48,000, the elasticity of supply equals