Exam 6: Elasticity: the Responsiveness of Demand and Supply

Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie The Hangover should be

Total revenue equals

If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.

Perfectly inelastic demand is represented by a demand curve which is ________, and relatively inelastic demand is represented by a demand curve which is ________.

The demand for most farm products is relatively inelastic. All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity?

Suppose the price of gasoline in July 2017 averaged $2.35 a gallon and 15 million gallons a day were sold. In October 2017, the price averaged $3.05 a gallon and 14 million gallons were sold. If the demand for gasoline did not shift between these two months, use the midpoint formula to calculate the price elasticity of demand. Indicate whether demand was elastic or inelastic.

Explain why a local bottler of PepsiCo products would likely prefer a national soda tax to a local soda tax in its region.

If a firm lowered the price of the product it sells and found that total revenue did not change, then the demand for its product is

Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

Define the economic concept of elasticity.

Table 6-8 The town of Bloomfield is well known for its basketball team. The price of basketball game tickets is determined by market forces. Table 6-8 above shows the demand and supply schedules for basketball games tickets. -Refer to Table 6-8. What is the most distinctive feature of the supply curve?

There are a limited number of original Picasso paintings. This means that the supply of original Picasso paintings is perfectly elastic.

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce.

Which of the following products comes closest to having a perfectly inelastic demand?

Between 1950 and 2017, the number of acres devoted to wheat production in the United States ________ and the price of wheat ________.

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

Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good. Calculate the income elasticity of demand for the good and determine what type of good it is.

Shifts in the supply of oil have caused large changes in price since the 1970s because

If you expect the economy is going to experience a boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is