Exam 6: Elasticity

The cross-price elasticity of demand of substitute goods is: A.between -1 and 0. B.less than 0. C.equal to 0. D.greater than 0.

Figure: The Demand Curve (Figure: The Demand Curve) If the price is $3, total revenue is _ .If the price is $4, total revenue is _. A.$21; $24 B.$21; $18 C.$12; 28 D.$7; $13

Which of the following goods is likely to have the largest price elasticity of demand?

Determining the price elasticity of demand involves all of the following factors except: A.the slope of the supply curve. B.the proportion of the budget spent on the item. C.the time period involved. D.the number of available substitutes.

The demand for textbooks is price inelastic.Which of the following would explain this? A.Many alternative textbooks can be used as substitutes. B.Students have a lot of time to adjust to price changes. C.Textbook purchases consume a large portion of most students' income. D.Textbooks are a necessity.

A men's tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie.The price elasticity of demand, using the midpoint method, is: A.greater than zero but less than 1. B.equal to 1. C.greater than 1 but less than 3. D.greater than 3.

Figure: Estimating Price Elasticity (Figure: Estimating Price Elasticity) Look again at the figure Estimating Price Elasticity.Between the two prices, P₁ and P₂, which demand curve has the highest price elasticity? A.D1 B.D2 C.D3 D.D4

The pair of items that is most likely to have a negative cross-price elasticity of demand is: A.cashews and peanuts. B.hamburgers and ketchup. C.coffee and tea. D.mustard and aspirin.

If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered: A.inferior goods. B.luxury goods. C.substitute goods. D.complementary goods.

When the percentage change in quantity demanded is larger than the percentage change in price, demand is said to be: A.price-inelastic. B.price unit-elastic. C.price-elastic. D.perfectly inelastic.

You have hired a student intern to calculate some elasticity measures so that you can present the findings at a prestigious economics conference.For the measures that follow, provide a quick interpretation, and then determine whether you should trust the intern's work or not.After all, it will be you in front of that critical audience of professionals, not the intern.a) "The income elasticity of demand for movie theatre tickets is -1.5." b) "The price elasticity of demand for milk is 0.4 in the short run and 0.9 in the long run." c) "The cross-price elasticity of demand for Cheerios cereal with respect to the price of Wheaties cereal is -2."

Figure: The Linear Demand Curve (Figure: The Linear Demand Curve) Look again at the figure The Linear Demand Curve.As a producer, you are interested in maximizing your total revenues in this market.What is the price at which you should sell your good? What is the corresponding total revenue? A.$10; $100 B.$20; $200 C.$0; $100 D.$5; $100

The university president believes that increasing student tuition by 5% will increase revenues.If the president is correct that revenues will increase, then the tuition increase will: A.reduce the number of students enrolling by less than 5%. B.reduce the number of students enrolling by more than 5%. C.reduce the number of students enrolling by exactly 5%. D.increase the number of students enrolling by 5%.

Figure: The Demand for Shirts (Figure: The Demand for Shirts) Look at the figure.Total revenue is maximized if the price is A.$30 B.$40 C.$50 D.$60

Which of the following best describes the price elasticity of demand? A.The price elasticity of demand measures the responsiveness of the change in the quantity demanded to a change in the price. B.The price elasticity of demand measures the change in the price versus a change in the quantity demanded. C.The price elasticity of demand measures the responsiveness of the change in the slope of the demand curve to a change in the price. D.The price elasticity of demand measures the change in the slope of the demand curve versus a change in the quantity demanded.

The price elasticity of supply measures: A.the response of a supply shift to changes in technology. B.how much supply changes when the prices of inputs change. C.the responsiveness of the quantity supplied to changes in prices. D.the response of a supply shift to changes in technology and to changes in prices.

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, then the price elasticity of demand (using the midpoint method) is:

If two goods are substitutes, their cross-price elasticity of demand should be:

Kayla and Jada are roommates in New York City.Both Kayla and Jada recently received raises.Kayla now buys more CDs than before, but Jada buys fewer.Kayla behaves as if CDs are ________ goods, and Jada's income elasticity of demand for CDs is _. A.normal; positive B.normal; negative C.inferior; positive D.inferior; negative

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags.In this price range, the demand for chocolate covered peanuts is _________ and total revenue will when price decreases.