Exam 5: Elasticity and Its Application

Suppose the price elasticity of demand for good A is 1.25. If the price of good A increases by 20%, what will be the resulting percentage change in quantity demanded for good A?

The supply of oil is likely to be

Which of the following could be the cross-price elasticity of demand for two goods that are complements?

Scenario 5-3 The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. -Refer to Scenario 5-3. Total consumer spending on aged cheddar cheese will

Figure 5-20 -Refer to Figure 5-20. Which supply curve is most likely relevant over a very long period of time?

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true?

For a horizontal demand curve,

Suppose that good X has few close substitutes and that good Y has many close substitutes. Which good would you expect to have more price elastic demand?

In general, elasticity is a measure of

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the

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

Table 5-12 -Refer to Table 5-12. Using the midpoint method, what is the price elasticity of demand between $2 and $4?

Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?

When a university bookstore prices chemistry textbooks at $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about

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

Scenario 5-3 The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. -Refer to Scenario 5-3. The equilibrium price will

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

Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the most elastic?

Scenario 5-4 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-4. The equilibrium price will

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?