Exam 5: Elasticity

A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:

When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _______.

A perfectly elastic supply curve is:

Demand is said to be _______ when the quantity demanded changes at the same proportion as the price.

If the supply curve for a product is horizontal, then the elasticity of supply is:

The price elasticity of demand measures the:

If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:

A 10 percent increase in income leads to a 15% decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume:

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?

How does the slope of a supply or demand curve differ from elasticity of supply or demand?

A 10% increase in the price of pizza causes a 10% drop in the quantity of both pizza and beer sold. Describe elasticities and the nature of the two products.

A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:

A demand or supply curve with _______ would be horizontal in appearance.

The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be _______.

If the demand curve is perfectly elastic, then an increase in supply will:

Supply is said to be _______ when the quantity supplied is very responsive to changes in price.

Suppose that a 20% increase in the price of gasoline causes a 5% decrease in the consumption of gasoline and a 30% drop in the sales of SUVs. What can you say about elasticities?

The elasticity of supply and demand determines whether a shift in supply or demand will have a larger effect on quantity or price. Discuss the four scenario outcomes and the various effects on price and quantity.

When demand is inelastic:

The elasticity of supply is defined as the _______ change in quantity supplied divided by the _______ Change in price.