Exam 5: Elasticity and Its Application

If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Suppose demand is given by the equation: Using the midpoint method, what is the price elasticity of demand between $1 and $2?

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from B to C represents the

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is

Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Table 5-12 -Refer to Table 5-12. Between which two quantities listed is demand unit elastic?

When demand is elastic, a decrease in price will cause

If sellers do not adjust their quantities supplied at all in response to a change in price,

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?

If a supply curve is perfectly vertical, what is the value of the price elasticity of supply?

A candle manufacturer produces 4,000 units when the market price is $11 per unit and produces 6,000 units when the market price is $13 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be

Suppose a market has the demand function Q^d=20-0.5P. Using the midpoint method, what is the price elasticity of demand between $30 and $40?

Figure 5-6 -Refer to Figure 5-6. For prices above $8, demand is price

For a good that is a luxury, demand

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

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

As price elasticity of supply increases, the supply curve

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, what is the income elasticity of demand for pizza and what does the value indicate about the demand for pizza?