Exam 4: Elasticity

Consider two goods: peanut butter and jelly. If the price of jelly increases from $2 a jar to $3 per jar and the quantity demanded of peanut butter decreases from 50 jars to 45 jars, what is the cross elasticity of demand? Are the goods substitutes or complements?

-The table above gives the demand schedule for snow peas. If the price of snow peas falls from $4.00 to $3.00 a bushel, total revenue will

A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is

A 10 percent increase in income brings about a 15 percent decrease in the demand for a good. What is the income elasticity of demand and is the good a normal good or an inferior good?

If a 3 percent increase in the price of tennis shoes leads to a 7 percent increase in the number of tennis shoes supplied,

Last year when John graduated and received a 20 percent pay increase, the average number of restaurant meals he consumed rose from one a week to three a week. Hence his income elasticity for restaurant meals is

-The demand curve in the figure above illustrates the demand for a product with a price elasticity of demand

The demand for corn increases. As a result, the price of corn will ________, and the less elastic the supply of corn, the ________ will be the effect on the price.

A determinant of the price elasticity of demand is

-The table above gives the demand schedule for peas. Which of the following statements correctly describes the price elasticity of demand?

The price of milk rises, so the supply of ice cream decreases. there is, as a result a 5 percent increase in the price of ice cream and a 3 percent decrease in the quantity of ice cream sold. The revenue received by ice cream suppliers will ________ because the demand for ice cream is ________.

-Consider the straight-line demand curve illustrated in the above figure. At what price is total revenue maximized?

If the demand curve for a good is a downward sloping straight line, the demand for the good will be more price elastic the higher is the

Suppose that the quantity of pizza demanded decreased by 15 percent after an increase in price of 10 percent. What is the price elasticity of demand for pizza?

Suppose Clyde always eats ice cream and chocolate syrup together. If the price of syrup increases by 10 percent, and the cross elasticity of demand is -2, the demand for ice cream

Business people often speak about price elasticity without actually using the term. Which statement describes a good with an elastic demand?

If the price elasticity of demand for gasoline is 0.8 and the price elasticity of demand for plane tickets is 2.2 then the demand for gasoline is ________ and the demand for plane tickets is ________.

A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should

Jenny's weekly income increases from $500 to $650. As a result, she goes out for dinner one day a week instead of one day every other week. What is Jenny's income elasticity of demand for restaurant dinners?

-The above figure shows the demand curve for movie rentals from Blockbuster. At which of the following prices is the demand unit elastic?