Exam 5: Elasticity and Its Application

Suppose that gasoline prices increase dramatically this month.Lola commutes 100 miles to work each weekday.Over the next few months,Lola drives less on the weekends to try to save money.Within the year,she sells her home and purchases one only 10 miles from her place of employment.These examples illustrate the importance of

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Figure 5-4 -Refer to Figure 5-4.The section of the demand curve from B to C represents the

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Figure 5-4 -Refer to Figure 5-4.Assume,for the good in question,two specific points on the demand curve are (Q = 2,000,P = $15)and (Q = 2,400,P = $12).Then which of the following scenarios is possible?

The demand for Hubba Bubba bubble gum is likely

Price elasticity of demand along a linear,downward-sloping demand curve decreases as price falls.

Because the demand for wheat tends to be inelastic,the development of a new,more productive hybrid wheat would tend to

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50.This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

Suppose goods A and B are substitutes for each other.We would expect the cross-price elasticity between these two goods to be

Figure 5-14 -Refer to Figure 5-14.Using the midpoint method,what is the price elasticity of supply between points A and B?

The smaller the price elasticity of demand,the

In general,demand curves for luxuries tend to be price elastic.

A decrease in supply will cause the smallest increase in price when

When quantity moves proportionately the same amount as price,demand is

On a downward-sloping linear demand curve,total revenue reaches its maximum value at the

For a particular good,a 10 percent increase in price causes a 3 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Figure 5-9 -Refer to Figure 5-9.If price increases from $10 to $15,total revenue will

The midpoint method is used to compute elasticity because it

Suppose the price elasticity of demand for good A is 1.25.If the price of good A increases by 20%,what will be the resulting percentage change in quantity demanded for good A?