Exam 6: Elasticity

The price elasticity of demand for cabbage has been estimated to be 0.25.If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply), how will that affect total expenditures on cabbage, all other things equal? A.Total expenditures will rise. B.Total expenditures will fall. C.Total expenditures will remain unchanged. D.There is not enough information is given to answer the question.

As you move down a linear demand curve, the price elasticity of demand will:

When the price goes down, the quantity demanded goes up.This price elasticity measures how: A.much the price goes down. B.much the equilibrium price goes up. C.responsive the price change is in relation to an income change. D.responsive the quantity change is in relation to the price change.

The income elasticity of demand for an inferior good, such as a macaroni and cheese dinner, is negative.

Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7.This implies that the two goods are: A.substitutes. B.complements. C.inferior. D.normal.

In the market for computers, if the demand curve is elastic and the price of a computer decreases, we would expect total revenue to _.If the demand curve is inelastic and the price of a computer decreases, we would expect total revenue to _. A.increase; decrease B.increase; increase C.decrease; increase D.decrease; decrease

A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price.If the demand for beef is perfectly elastic, this rancher's quantity demanded will: A.fall to 0. B.not change. C.fall slightly. D.increase slightly.

If a good has a price inelastic demand, then which of the following is not likely to be characteristic of this good? A.The good is a necessity and is relatively unimportant in the household budget. B.There are many substitutes for the good. C.Consumers spend a small percentage of their income on the good. D.Consumers do not have much time to adjust to market changes.

If the percentage change in the quantity demanded of a good is greater than the percentage change in income and in the same direction, then this good will have an income elasticity: A.greater than 1 and it is a normal good. B.less than 1 and it is a normal good. C.equal to 1 and it is a normal good. D.less than 1 and it is an inferior good.

On a linear demand curve, demand at lower prices will: A.be price-inelastic. B.be price-elastic. C.be price unit-elastic. D.have negative price elasticity.

The only producer of chocolate bunnies in the world, Choco's Bunny Company, recently expanded its production capacity from 1,000 to 2,000 bunnies per day.If the price elasticity of demand for bunnies is 3.33, by how much will the company need to reduce its price to sell the additional 1,000 bunnies (using the midpoint method)?

(Figure: The Market for Lattes) Look at the figure The Market for Lattes.What is the price elasticity of supply between the prices of $2 and $2.50 per cup, using the midpoint formula?

Figure: Demand Curves (Figure: Demand Curves) Look again at the figure Demand Curves.Gala apples are a type of apple that has many substitutes and is not very expensive.Which graph best represents the demand schedule for Gala apples? A.A B.B C.CD.D

You manage a popular nightclub and lately revenues have been disappointing.Your bouncer suggests that raising drink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues.You aren't sure who is right, but you do know that:

If a university decreases the price of tickets to football games to collect more revenue, it is assuming that the demand for tickets is: A.unstable. B.price-inelastic. C.price-elastic. D. price unit-elastic.

If total revenue goes down when the price falls, demand is said to: A.be price-inelastic. B.be price unit-elastic. C.be price-elastic. D.have positive price elasticity.

Table: Price Elasticity (Table: Price Elasticity) Look again at the table Price Elasticity.What is the price elasticity of demand between $2.25 and $2.00?

A price ceiling will cause a larger shortage when demand is and supply is ________. A.elastic; inelastic B.inelastic; inelastic C.elastic; elastic D.perfectly inelastic; elastic

If the cross-price elasticity of demand between rice and beans is -0.25, rice and beans are complements.

The price elasticity of a good will tend to be larger: A.the longer the relevant time period. B.the fewer the number of substitute goods available. C.if it is a staple or necessity with few substitutes. D.if the share of income spent on the good is small.