Exam 5: Elasticity and Its Applications

A new per unit subsidy for almond production in the United States increases the world supply of almonds. If almonds are inelastically demanded, what will happen to total revenues from almond production?

Figure: Price Decrease and Elasticity Refer to the figure. If price decreases from $20 to $10, total revenue will:

The demand for cigarettes tends to be very elastic given the addictive nature of cigarettes.

Consumers today spend less on food than they did in 1950 because demand for food is highly elastic.

Explain the change in tactics Nobel Prize-winning economist Gary Becker suggests concerning the method of fighting the war on drugs. What is so attractive about this alternative?

Consistent with economic logic, gun buyback programs have been very effective in reducing the number of guns in a city.

Use the following to answer questions: Figure: Slave Redemption -(Figure: Slave Redemption) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. When slave redeemers enter the market, the total number of freed slaves is ________ and the net number of freed slaves is ________.

Operating along the inelastic portion of a linear demand curve, revenue rises with price.

The elasticity of supply measures:

A perfectly inelastic supply curve is a:

When the supply curve in the Sudanese slave trade is perfectly ________, every slave bought by the redeemers results in/is ________ held in captivity.

When production of a good can be expanded without significantly increasing the overall demand for its inputs:

The price elasticity of demand concept applies only when the price of a good increases.

Figure: Slave Redemption with Perfectly Elastic Supply Refer to the figure. Assume the graph illustrates the Sudanese slave trade. If the supply curve is perfectly elastic as it is in the graph, a rise in the demand for slaves (from D₁ to D₂) causes:

Use the following to answer questions: Figure: Slave Redemption and Elasticity -(Figure: Slave Redemption and Elasticity) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. How many new slaves are captured after the redemption program is installed?

If the price of a good increases from $100 to $110 and quantity supplied increases from 500 units to 530 units, the supply would be classified as elastic.

Elasticity of demand is the percent change in quantity demanded divided by the percent change in price.

Which of the following statements about the price elasticity of supply in the Sudanese slave trade is correct?

The demand curve is inelastic if the absolute value of the elasticity is:

Use the following to answer questions: Figure: Gun Market -(Figure: Gun Market) In the gun market shown, the buyback program purchases ______ guns.