Exam 4: Elasticity

When the price of bananas rises 2 percent, the quantity demanded of peanut butter falls 4 percent. a) What is the cross elasticity of demand between these two goods? b) How are these goods related? c) If the price of bananas rises, how will that affect the demand curve for peanut butter?

If addiction makes cigarettes such a necessity, is it correct to think that cigarettes are perfectly inelastic in both supply and demand.

Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPad tablet. Suppose when the price of an iPad decreases by 20 percent, the number of songs downloaded on iTunes increases by 30 percent. Based on this information iTunes are

The air route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines for that route is probably

-The increase in the demand for widgets, shown in the figure above, is the result of an increase in people's incomes from $28,500 per year to $31,500 per year. Therefore, the income elasticity of demand for widgets is

If the cross elasticity of demand between goods A and B is positive

The price elasticity of demand for adults for cigarettes is 0.4. If government wants to reduce smoking among adults by 15 percent, by what percentage should it raise the price of cigarettes? Teenagers have a higher price elasticity of demand for cigarettes than do adults. Suppose the price elasticity of teenagers' demand for cigarettes is 0.8. If the government imposes a tax on cigarettes that raises the price to reduce overall smoking by 15 percent, by what percentage will the government reduce teenage smoking?

The price elasticity of supply of laptop computers equals 1.5 if

If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand for flowers is price elastic, she should

If Pepsi decided to raise its price, you would expect the price of Coca Cola

-The increase in the demand for widgets, shown in the figure above, is the result of an increase in the price of McBoover devices. Therefore

The elasticity of supply equals ________ if the supply curve is vertical.

Using the average price and average quantity, what is the elasticity of demand for oranges when the price of oranges changes from $200 to $160 per bushel and so the quantity demanded changes from 1000 to 1400 bushels?

-The above figure shows the demand curve for movie rentals from Redbox. At which of the following prices is the demand unit elastic?

Specialty chocolate bars with a high cocoa content have been drawing a lot of attention in gourmet circles in 2008 but the price of cocoa beans has increased more than 44 percent in this time period. In response to the increase in the price of cocoa beans, Rogue Chocolatier has increased the price of their gourmet chocolate bars by 20 percent. Rogue notices their firm's total revenue increased after the price increase. We can determine that the demand for Rogue's bars is

The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20 percent, there will be

Elasticity measures the

The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________ decrease in the quantity demanded.

Joe's monthly income increases from $1,000 to $2,000. As a result, he decreases the number of his fast food meals from 20 to 5 per month. To Joe, are fast-food meals a normal or an inferior good? What kind of elasticity can tell the answer? Explain.

The demand for corn increases. As a result, the price of corn will ________, and the less elastic the supply of corn, the ________ will be the effect on the price.