Exam 4: Elasticity

FIGURE 4-3 -Consider an excise tax imposed on daily parking charges in the downtown of a small city. Before the imposition of the tax, equilibrium price and quantity are $15 and 100 cars parked. P = $15, Q = 100). The city government imposes a tax of $3 per car parked per day. Market equilibrium adjusts to P = $16 and Q = 95. After imposition of the tax, what is the daily after -tax price received by the seller per car parked?

Suppose empirical analysis concludes that the income elasticity of demand for Kraft Dinner KD) is -0.2. The interpretation of this result is that

If the total expenditure on cars increases when the price of cars rises, the price elasticity of demand for cars is

There have been proposals that a tax be imposed on sugar-laden soft drinks in an attempt to reduce their consumption. Assume for simplicity that all bottled soft drinks are the same size. Suppose the initial market equilibrium is P = $2.00 and Q = 1000. FIGURE 4-4 -Refer to Figure 4-4. Suppose the government imposes a tax of $0.60 per soft drink purchased. The price paid by the consumer becomes

Consider the following demand and supply schedules for some agricultural commodity. TABLE 5-2 -The price elasticity of demand measures the responsiveness of

FIGURE 4-2 -Refer to Figure 4-2. In diagram 1, the elasticity of demand over the price range $14 to $16 is

The price of apples at a local market rises from $2.95 to $3.05 per kilogram, and as a result the quantity of oranges that households purchase increases from 3950 to 4050 kilograms per week. The cross -price elasticity is

What does the following statement imply about price elasticity of demand? ʺGovernment tries to reduce cigarette consumption with an extra 50 cent tax per pack. Policy raises government revenue but fails to curb smoking.ʺ

Suppose you are advising the government on changes in the gasoline market. The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day. Long-run price elasticity of demand is constant at 0.8. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

FIGURE 4-2 -Refer to Figure 4-2. As price decreases, total expenditure remains constant in diagrams)

Suppose the supply curve for breakfast cereals is upward sloping. Suppose also that as average household income increases we observe a fall in the price of breakfast cereal. We can conclude that breakfast cereal is an)

Which of the following illustrates elastic demand?

FIGURE 4-3 -Refer to Figure 4-3, which shows a demand shift and the short-run and long-run supply curves for some good. The diagram illustrates the general principle that

Consider an excise tax imposed on daily parking charges in the downtown of a small city. Before the imposition of the tax, equilibrium price and quantity are $15 and 100 cars parked per day. P = $15, Q = 100). The city government then imposes a tax of $3 per car parked per day. Market equilibrium adjusts to P = $16 and Q = 95. Which of the following statements about the burden of the tax is correct?

If a producer knew his product to be an inferior good and he also knew average household income was falling, he might

FIGURE 4-2 -Refer to Figure 4-2. In diagram 3, the elasticity of demand between prices $10 and $20 is

Suppose that the quantity of a good demanded rises from 90 units to 110 units when the price falls from $1.20 to 80 cents per unit. The price elasticity of demand for this product is

FIGURE 4-3 -The imposition of an excise tax will cause the least burden on consumers when demand is

Demand Schedule for Ski Tickets TABLE 4-2 -Refer to Table 4-2. Using the data provided to plot the demand curve for ski tickets results in a Demand curve. Price elasticity along this demand curve is therefore as price is falling.

Which of the following statements about price elasticity of demand is true?