Exam 5: Elasticity and Its Application

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

If the cross-price elasticity of demand for two goods is negative,then the two goods are substitutes.

While in college,John and Bethany each buy five packages of mac-n-cheese per week.After they graduate and have full-time jobs,John buys six packages per week,but Bethany buys only two packages per week.When looking at income elasticity of demand for mac-n-cheese,John's

If the price elasticity of demand is equal to 1,then demand is unit elastic.

Suppose that when the price rises by 20% for a particular good,the quantity demanded of that good falls by 10%.The price elasticity of demand for this good is equal to 2.0.

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

Food and clothing tend to have

If a firm is facing inelastic demand,then the firm should decrease price to increase revenue.

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for minivans causes the price of minivans to increase by 5%,then the quantity supplied of minivans will increase by about

Which of the following statements is not valid when the market supply curve is vertical?

Figure 5-3 -Refer to Figure 5-3.Which demand curve is perfectly elastic?

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Figure 5-17 -Refer to Figure 5-17.Which of the following statements is not correct?

If we observe that when the price of chocolate increases by 10%,quantity demanded falls by 5%,then the demand for chocolate is price inelastic.

Economists compute the price elasticity of demand as the

Suppose a producer is able to separate customers into two groups,one having an inelastic demand and the other having an elastic demand.If the producer's objective is to increase total revenue,she should

Table 5-6 -Refer to Table 5-6.Which scenario describes the market for oil in the long run?

Figure 5-11 -Refer to Figure 5-11.If the price falls from point A to point B,total revenue

Suppose you manage a baseball stadium.To pay the salary for a star player,you would like to increase the total revenue from ticket sales.Should you increase or decrease the price of a ticket to increase revenue? Explain.