Exam 4: Elasticity

About six months ago, Pat lost the job as vice president of a local bank. Since losing the job, Pat still has the Sunday newspaper delivered every week. For Pat, the Sunday newspaper is

A fall in the price of X from $12 to $8 causes an increase in the quantity of Y demanded from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?

Along a straight-line demand curve, as the price falls the

If the cross elasticity of demand is -5 between french fries and orange drink, then french fries

Bus rides and canned soup are inferior goods, so the ________ elasticity of demand is ________.

A necessity (such as food and shelter) generally has an inelastic demand.

A university conducts a survey of students, which shows that a 10 percent tuition hike would lead to a 7 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 ________.

The demand for food in poor countries is

When the price of a Caesar salad is $5.00, the demand for Caesar salads is elastic, and when the price is $4.00, the demand is inelastic. If Mike's Roadside Restaurant cuts the price from $5.00 to $4.00, its total revenue from Caesar salads

Suppose that the price elasticity of supply for oil is 0.1. Then, if the price of oil rises by 20 percent, the quantity of oil supplied will increase

Supply is elastic if

-The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $4.00 to $3.50, then total revenue would ________ because demand is ________.

The marketing people at Ben and Jerry's Ice Cream Company believe that if they lower the price of their Cherry Garcia flavor ice cream by 25 percent, the quantity demanded will increase by 5 percent. If they are correct in their belief, then

When the price of a hot dog rises 10 percent, your expenditure on hot dogs increases. Hence, it is certain that

You are the new vice president in charge of advertising at Taco Bell. In your upcoming advertising campaign, you plan to degrade the fast food competitor whose product is the closest substitute for Taco Bell's tacos. That would be the fast food chain whose cross elasticity of demand with your tacos is equal to

-Cory enjoys listening to all types of music. His demand schedules for CDs in 2009 and 2010 are shown in the table above. Cory's income was $30,000 in 2009 and $35,000 in 2010. In 2010, he bought an iPad so he started to download music files from the Internet. a) Draw Cory's demand curves for CDs in 2009 and 2010. How did Cory's demand for CDs change? Why? b) For each year, calculate Cory's price elasticity of demand as the price of CDs decreases from $16 to $12. (Use the midpoint method in your calculations.) c) Why might the price elasticity of Cory's demand for CDs in 2010 be different from that in 2009? d) If all CD buyers have the same demand as does Cory, what price should the record companies charge in 2010 to maximize their total revenue from CD sales?

Suppose that the demand for corn is price inelastic. If a technological advance makes corn farms more productive, the equilibrium price of corn will ________ and the farmers' total revenue will ________.

A hot dog vendor on a street corner could increase the quantity of hot dogs her customers demand by 12 percent if she lowers the price of a hot dog 10 percent. The demand for the hot dogs is

As Mary's income increases by 20 percent, her demand for tickets to National Hockey League games increases by 10 percent. Mary's demand for tickets is income ________; for Mary, hockey tickets are ________ good.

-The figure above illustrates a linear demand curve. By comparing the price elasticity in the $2 to $4 price range with the elasticity in the $8 to $10 range, you can conclude that the elasticity is