Exam 5: Elasticity and Its Application

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

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $15 and $25?

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

The price elasticity of demand measures

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $16 and $40?

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

Demand is elastic if the price elasticity of demand is

The supply of oil is likely to be

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) A normal good.(ii) A necessity. (iii) An inferior good.(iv) A luxury.

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

For a vertical demand curve,

Table 5-4 The following table shows the demand schedule for a particular good. -Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

Table 5-12 -Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $6 and $8?

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

The demand for soap is more elastic than the demand for Dove soap.

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Scenario 5-1 Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60. -Refer to Scenario 5-1. Using the midpoint method, the cross price elasticity of demand is

Which of the following is likely to have the most price inelastic demand?

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about