Exam 4: Elasticity

If demand is inelastic, an increase in the price will

The price elasticity of demand equals the slope of the demand curve.

The demand for ________ is more elastic than the demand for ________.

-The figure above illustrates a linear demand curve. In the price range from $8 to $6, demand is ________ and in the price range $4 to $2, demand is ________.

The cost of basics like milk, bread, potatoes and bananas has jumped in the past year, forcing families to nix luxuries, steer away from organic goods and buy more house brands. What does customer Elize Joseph mean when she said, "You can cut back on buying clothes and shoes, but you can't do that with food; you have to eat"?

What effect does a price increase have on producers' total revenue?

Explain the total revenue test.

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is

Because Product X has a large positive income elasticity, it is likely that the product

A negative value for the cross elasticity of demand between two goods indicates that

Producers' total revenue will increase if

-The number of taxicabs in Motorville and the taxicab fares are regulated. The fare currently charged is $5 a ride. Motorville taxicab drivers want to obtain government's permission to raise the fare to increase their revenues and ask you to be their economic adviser. After studying the market, you come up with the following demand schedule for taxicab rides: a) Calculate the price elasticity of demand for taxicab rides as the fare rises from $5 to $6. (Use the midpoint method in your calculations.) Is the demand price elastic or inelastic for this fare rise? b) What happens to the taxicab drivers' total revenue if the fare rises from $5 to $6? How can you use your answers in part a to answer this question? Should the drivers try to obtain permission to raise the fare? c) Calculate the price elasticity of demand for taxicab rides as the fare falls from $5 to $4. (Use the midpoint method in your calculations.) Is the demand price elastic or inelastic for this fare decrease? d) What happens to the taxicab drivers' total revenue if the fare falls from $5 to $4? How can you use your answers in part c to answer this question? Should the drivers try to obtain permission to lower the fare? e) What fare will maximize the taxicab drivers' total revenue? Explain.

A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 12 percent decrease in the enrollment. If the university wants to increase its total revenue, it should ________ tuition because the demand for education at this university is ________.

If the price increases by 20 percent and the quantity supplied increases by 40 percent, what does the elasticity of supply equal?

A straight-line demand curve with negative slope intersects the horizontal axis at 100 tons per week. At the midpoint on the demand curve (corresponding to 50 tons per week) the price elasticity of demand is

Demand is perfectly inelastic when

-Steve sells hotdogs from a vending cart downtown. The table above shows his total revenue per day at four different prices. Between which two prices is the demand for hotdogs a) elastic? b) unit elastic? c) inelastic?

When consumers' incomes increased 6 percent, the quantity of wine bought increased 12 percent. This result means

In the nation of Transporta, the income elasticity of demand for used cars is -2.66. So when incomes in this nation increase by 10 percent

If income increases from $50,000 to $60,000 while the demand for a good increases from 100 units to 125 units, what is the income elasticity of demand? Is the good a normal good or an inferior good?