Exam 6: Elasticity

Use the following to answer questions: Table: Price Elasticity -(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $2.25 and $2.00?

If your purchases of shoes remain constant at 9 pairs per year when the price of shirts increases from $8 to $12, for you, shoes and shirts are considered:

The price elasticity of demand along a demand curve with a constant slope:

If the price of chocolate-covered peanuts decreases from $1.10 to $0.95 and the quantity demanded increases from 190 bags to 215 bags, then the price elasticity of demand (by the midpoint method) is:

There is NO total revenue test for price elasticity of supply because:

The price elasticity of demand for gasoline in the short run has been estimated to be 0.4. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total revenue from gasoline in the short run, all other things unchanged?

If a good is a luxury item that looms large in the household budget, then demand will tend to:

Use the following to answer questions: Figure: The Linear Demand Curve -(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If the price is initially $10, then falls to $9, this will result in a(n) _____ in quantity demanded and a(n) _____ in total revenue.

Use the following to answer questions: Figure: The Linear Demand Curve II -(Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would:

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:

For a normal good, the income elasticity of demand will be:

Given a price increase for any good, the price effect on revenue is always larger than the quantity effect on revenue.

If an increase in income leads to a decrease in the demand for a good, then the good is said to be:

Use the following to answer questions: Figure: The Demand Curve -(Figure: The Demand Curve) Look at the figure The Demand Curve. Between prices $4 and $5, demand is _____, and total revenue will _____ if price increases.

The city government is losing millions of dollars on its buses and subways. The government proposes to increase the fare by 20% to raise revenue and has asked your advice. You know that the price elasticity of demand for mass transit in the city is approximately equal to 0.75. What do you think of the proposal to increase the fare to raise revenue for the city? Be as specific as possible.

Use the following to answer questions: Figure: The Demand Curve for Oil -(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. The price elasticity of demand between $20 and $21 is _____, since the price elasticity is _____.

Suppose the income elasticity for cross-country bus trips is -2 and the income elasticity for cross-country plane trips is +2. Does this make sense? Explain your answer.

If the price of a good increases by 15% and the quantity demanded falls by 20%, demand is:

Since the price of walnuts increases as the demand for cashews increases, we can assume that these two goods are:

You are the manager of a supermarket, and you know that the cross-price elasticity of peanut butter to jelly is exactly -2.0.Because of a bad grape harvest, grape jelly prices are expected to rise by 10% next year. To account for the change in demand, you should stock 10% more peanut butter.