Exam 5: Elasticity and Its Application

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

Figure 5-4 -Refer to Figure 5-4. Assume, for the good in question, two specific points on the demand curve are (Q = 1,000, P = $40) and (Q = 1,500, P = $30). Then which of the following scenarios is possible?

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is

Suppose that when the price of good X falls from $6 to $4, the quantity demanded of good Y rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is

Food and clothing tend to have

For which of the following types of goods would the income elasticity of demand be positive and relatively large?

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P₂ is represented by the area(s)

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

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

-Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

Which of the following statements is correct?

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $8 and $16. Then, when the price changes between $9 and $10,

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Moving downward and to the right along a linear demand curve, we know that total revenue