Exam 5: Price Elasticity of Demand and Supply

When the price of bread increases by 3 percent, the quantity demanded of crackers increases by 2 percent. The cross elasticity of demand between crackers and bread is:

If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand is:

There are three goods you are interested in purchasing, X, Y and Z. You notice that the price of Z has fallen. Given that the cross price elasticity between Z and Y is −1.5; the cross price elasticity between Y and X is 3.0, and the cross price elasticity between Z and X is 0.50. It would make sense that:

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a:

Exhibit 5-2 Price and quantity demanded data Price Quantity Demanded 5 20 4 25 3 30 2 35 1 40 -The data in Exhibit 5-2 shows that price elasticity of demand is:

If bus travel is an inferior good, then its income elasticity of demand will be:

If an excise tax is placed on a product that has a perfectly inelastic demand, then:​

Along the elastic range of a demand curve, a decrease in price causes:

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:

If the quantity of rental units increases by 10 percent when the monthly rental price doubles, the supply of rental units, other factors held constant, is:

The fewer the substitutes for a good the greater will be the value of the price elasticity of demand coefficient. ​ ​

The number of satellite dishes increased by 50 percent when the average monthly price of cable TV increased by 10 percent. Assuming that other factors are held constant, satellite dishes and cable TV are classified as:

If the price elasticity of supply equals zero, this implies that:

The cross elasticity between Rolaids and Tums is expected to be:

If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is:

Supply-demand analysis shows that a tax collected from sellers is always fully shifted to buyers. ​ ​

The more elastic the supply of a product, the more the actual burden of a tax on the product will:

Other factors held constant, if there are few close substitutes for a good, demand is more elastic for it. ​

The number of CDs purchased increased by 50 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as:

Exhibit 5-3 Demand curves for gallons of orange juice Price Albert Betty Carl Dana Edward 10 0 1 2 0 0 9 0 1.5 2 0.5 0 8 0 2 2 2 4 7 0 2.5 2 3.5 8 6 1 3 3 5 12 5 3 3.5 3 6.5 16 4 5 4 3 8 20 3 7 4.5 3 9.5 24 2 9 5 3 11 28 1 11 5.5 3 12.5 32 -Using Exhibit 5-3, in general, whose demand for orange juice is the most elastic?