Exam 5: Elasticity and Its Application

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 change in equilibrium quantity will be

A decrease in supply will cause the largest increase in price when

If the cross-price elasticity of demand between two goods is positive, what is the relationship between the two goods?

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using the midpoint method, the price elasticity of demand for tortilla chips in the given price range is

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

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

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20?

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

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Food and clothing tend to have

Which of the following expressions represents a cross-price elasticity of demand?

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

The difference between slope and elasticity is that slope

In general, demand curves for luxuries tend to be price elastic.

The price elasticity of demand for bread

The value of the price elasticity of demand for a good will be relatively large when

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a therapeutic massage spa. The first step you would take would be to

Demand is elastic if the price elasticity of demand is

Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is