Exam 5: Elasticity and Its Application

With regard to elasticity, as a firm nears its production capacity, supply becomes more

Suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. The price elasticity of demand for this good is equal to 2.0.

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Figure 5-8 ​ -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

The measure of how willing consumers are to buy less of a good as its price rises is called

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

Even the demand for a necessity such as gasoline will respond to a change in price, especially over a longer time horizon.

The demand for Rice Krispies is more elastic than the demand for cereal in general.

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

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

The midpoint method is used to calculate elasticity between two points because it gives the same answer regardless of the direction of the change.

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

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

Which of the following statements is valid when the market supply curve is vertical?

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.