Exam 6: Elasticity: the Responsiveness of Demand and Supply

When there are few substitutes available for a good, demand tends to be relatively inelastic.

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm products will also cause farm revenues to fall.

For a given demand curve, will there be a greater loss of economic efficiency from a binding price floor when supply is elastic or inelastic? Illustrate your answer with a demand and supply graph. In your graph you must show two supply curves, one elastic and the other inelastic.

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

Cross-price elasticity of demand is calculated as the

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots, then

Between 1950 and 2017 the productivity of wheat farmers in the United States more than doubled. This means that

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03. These elasticities mean that beer and spirits are ________, and spirits and wine are ________.

Suppose you are considering buying stock in the stock market, and your objective is to maximize your net worth. Furthermore, your study of the market reveals that the economy will be slowing down over the next several months. Under these conditions, it would be best to purchase stock in companies that produce

Figure 6-10 -Refer to Figure 6-10. A perfectly inelastic supply curve is shown in

A linear downward-sloping demand curve has price elasticities (in absolute values) that

If the cross-price elasticity of demand between beer and wine is 0.31, then beer and wine are

Assume that the demand curve for sunblock is linear and downward sloping. Which of the following statements about the slope of the demand curve for sunblock and the price elasticity of demand for sunblock are true?

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peet's coffee increased by 10 percent. Calculate the cross-price elasticity of demand between Starbucks coffee and Peet's coffee. What is the relationship between the two products?

In recent years, the prices of new domestically produced cars have been falling. Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel. This information suggests that the cross-price elasticity between new cars and used cars, and the cross-price elasticity between new cars and bus travel, are negative.

Which of the following statements is true?

Studies show that the income elasticity of demand for wine is approximately five. What does this mean?

The paradox of American farming is