Exam 5: Elasticity and Its Application

Suppose that Juan Carlos is filling out a survey that he received in the mail. The survey asks him what he would do if the price of his favorite toothpaste increased. Juan Carlos reports that he would switch to a different brand. The survey asks what he would do if the price of all toothpastes increased. Juan Carlos reports that he must use toothpaste, so he would have to adjust his spending elsewhere. These examples illustrate the importance of

Table 5-8 -Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point A and point B is

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

The price elasticity of demand changes as we move along a

Demand is elastic if the price elasticity of demand is greater than 1.

If the demand for donuts is elastic, then a decrease in the price of donuts will

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

If the cross-price elasticity of two goods is negative, then the two goods are

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

Which of the following should be held constant when calculating an income elasticity of demand?

If demand is price inelastic, then

To determine whether a good is considered normal or inferior, one could examine the value of the

Table 5-8 -Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X?

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?

Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

In the market for oil in the short run, demand