Exam 4: Elasticity

Assume that a family spends 35 percent of its income on housing,20 percent on travel-related expenses,10 percent on utilities,25 percent on health care,and 5 percent on miscellaneous items.Demand for which category will be most responsive to a change in price?

Income elasticity refers to

When the price elasticity of demand is -0.66,a decrease in price will

When two goods are substitutes for each other,what will the cross-price elasticity be?

How can a firm increase total revenue?

The Sunny Softball league found that when it changed its ticket prices from $10 to $5,there was a more than proportional but not infinite increase in attendance.The price elasticity of demand is

When the quantity demanded is less sensitive to a change in price,then the absolute value of the price elasticity of demand is

Explain why you agree or disagree with the following statement: "Higher prices always yield higher revenues."

What is the price elasticity of demand? How is it calculated?

The city of Huntsville is known for its wide variety of ice cream shops.What will happen if Nicola's Ice Cream Castle raises the price of its shakes?

When the total revenue and price both move in the same direction (are directly related),demand is

Winged Treasures is a specialty store that sells butterfly ornaments.The owner wants to increase her total revenue and knows that the price elasticity of demand for her product is -0.4.What should she do to her price?

If the percentage change in quantity demanded of Good B is 2 percent and the percentage change in the price of Good A is -10 percent,what is the cross-price elasticity of demand?

The makers of academic books find that when they raise the price of the average book from $50 to $75,quantity demanded among students drops from 100 to 90.Among casual readers,quantity demanded drops from 80 to 40. a.Calculate the price elasticity of demand for each group. b.Is demand price elastic or price inelastic for each group? c.Using the determinants of demand,explain why there is a difference in elasticity for each group.

Suppose that the supply curve for televisions is linear and has a slope of 1.Graph the effect of the following on the supply curve and explain each: a.the availability of inputs (LED screens and wires)for increases for televisions. b.the time period of supply under consideration shortens to the upcoming week.

The measure of the responsiveness of the demand for one good to the percentage change in the price of the other good is

If the cross-price elasticity of demand between Good A and Good B is 2,the price of Good B increases,and the price elasticity of demand for Good B is elastic,we can expect to see a ________ change in the quantity demanded for Good A.

Income elasticity of demand for professional haircuts is found to be 1.7.This service is a

If the cross-price elasticity of demand is -5,Good A and Good B are

For each of the following situations,explain whether the demand for Gatorade would become more elastic or less elastic and why. a.Competitors introduce new brands of sports drinks into the market. b.A study finds that Gatorade consumption improves player performance. c.Consumer spending studies show that people spend a small proportion of their budgets on Gatorade.