Exam 5: Elasticity

Related to the Economics in Practice on p. 105: Researchers found that after a few years of a tax relief policy for foreigners, the fraction of foreigners in the top 0.5 percent of income earners in Denmark almost doubled. The researchers concluded that for this group of workers, labor supply seems to be

A positive cross-price elasticity between two goods implies that the two goods are substitutes.

The income elasticity of demand

If the quantity of peanut butter demanded increases by 4% when the price of jelly decreases by 2%, the cross-price elasticity of demand between peanut butter and jelly is

Slope is the best measure of responsiveness of the quantity demanded to a price change.

Refer to the information provided in Figure 5.2 below to answer the question(s) that follow. Figure 5.2 -Refer to Figure 5.2. At Point C the price elasticity of demand is -1. Along line segment ________ of the demand curve, the demand is elastic.

At a price of $4, quantity supplied is 100, and at a price of $6, quantity supplied is 120. Using the midpoint formula, the price elasticity of supply is ________ and supply is ________.

Refer to the information provided in Figure 5.5 below to answer the question that follows. Figure 5.5 -Refer to Figure 5.5. As the price of good W decreased, the demand for good Y shifted from D₁ to D₂. The cross-price elasticity of demand between W and Y is

Price and total revenue are directly related when demand is

If the cross-price elasticity of demand between shrimp and oysters is 4, then a 2% decrease in the price of shrimp will result in a(n) ________ in the quantity of oysters demanded.

Refer to the information provided in Figure 5.4 below to answer the question(s) that follow. Figure 5.4 -Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the milkshake price falls from P₁ to P₂, total revenue will

Suppose a decrease of 7% in the price of lobster increases the consumption of lobster by 18%. Such a price decrease will induce households to spend

The income elasticity of demand for low-quality beef is -2. Thus, a 5% increase in the quantity of low-quality beef demanded

Refer to the information provided in Figure 5.7 below to answer the question(s) that follow. Figure 5.7 The above figure represents the market for pumpkins both before and after the imposition of an excise tax, which is represented by the shift of the supply curve. -Refer to Figure 5.7. The total revenue the government will receive from the imposition of this tax is

The cross-price elasticity of demand between good X and good Y is 2.75. Given this information, which of the following statements is true?

The income elasticity of demand is calculated as the

A government wants to reduce electricity consumption by 5%. The price elasticity of demand for electricity is -0.5. The government must ________ the price of electricity by ________.

The price elasticity of demand for kale in Texas is -2, and the price elasticity of demand for kale in California is -0.5. In other words, demand in Texas is ________, and demand in California is ________.

A mass transit authority charges bus fares of $1.25 during morning rush hours but only $1.00 during late morning non-rush hours. Economists explain the fare difference by the fact that the demand for bus rides during the morning rush hours is ________, but during the late morning it is ________.

If a firm wants to increase revenue, it should increase the selling price of its product if it is currently producing in the ________ portion of its demand curve.