Exam 5: Elasticity and Its Application

At a price of $35, Brent rents out 80 sets of skis in one day. In peak season he can charge $45 per set and so he will rent out up to 150 sets of skis. What is Brent's price elasticity between the two ski prices, using the midpoint formula?

The demand for apples is generally more elastic than the demand for Australian apples.

The price of a hamburger increases by 25 per cent and the quantity of hamburgers demanded per week falls by 50 per cent. The price elasticity of demand is two.

Suppose a coffee plantation in Colombia increases the quantity of coffee beans it supplies by 5% when it learns that the price of a coffee at cafes in Melbourne has risen by 25%. The Colombian producer's price elasticity of supply of coffee beans is 0.2.

A perfectly inelastic demand curve:

If the measured elasticity is less than one it means that the demand for this good is inelastic.

Demand is said to be elastic if:

In general, elasticity is:

The price elasticity of demand measures how responsive:

The cross-price elasticity of demand will be positive for complement goods and negative for substitute goods.

Suppose you are the manager of a theatre. You currently charge the same admission price to all customers, regardless of age. You hire an economist to determine the price elasticity of demand for admissions by age and he tells you that at the current price, demand by adults is inelastic and demand by children is elastic. If you want to increase your total revenue by adjusting admission prices, how should they be adjusted?

In the aftermath of the US decision to halt logging of Pacific North-West forests in 1990 to protect spotted owls, the global demand for Australian and New Zealand timber jumped. Predict how Australasian forestry companies responded to the increased demand in the short run and in the long run.

If an increase in the demand for Monet paintings increases their equilibrium price but not the equilibrium quantity, this means that:

Graph 5-5 -In Graph 5-5, which supply curve is perfectly inelastic?

Get Smart University (GSU) is contemplating increasing tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue they are:

Price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price.

When demand is elastic in the current price range:

While an increase in total agricultural production may benefit farmers as a group, it will not benefit an individual farmer to increase his production.

Income elasticity of demand measures how:

Oliver makes guitars. There are four other guitar shops that also make good guitars on the same street. If Oliver wishes to increase his total revenue, he should: