Exam 6: Demand and Elasticity

After a $5 million ad campaign, Coca-Cola measured its effectiveness by calculating the cross elasticity of demand between Coke and Pepsi.A successful campaign would be indicated if the cross elasticity went from

If a product constitutes a large portion of a consumer's income, demand will be more inelastic.

A study of New York City (NYC) tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives.Manufacturers are more mobile and may move to avoid higher taxes.This means that

Figure 6-3 -Using Figure 6-3(b), as price falls from $15 to $6, the elasticity of demand is (dropping all minus signs)

Elasticity is a measure of the responsiveness of change in quantity demanded to a change in price.

Julia knows that the price elasticity of movie rentals is 3.She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately

If demand is unit elastic, then a 10 percent increase in price will lead to a 10 percent drop in quantity demanded.

Why do economists measure responsiveness of demand to price in percentage changes rather than in absolute changes?

A rightward shift in the demand curve for a product will ordinarily result from

Suppose that elasticity has been reliably measured as 1.55 and the unit price decreases from $20 to $17.50.How much will quantity demanded increase?

Cross elasticity of demand could be used to measure the responsiveness of the quantity demanded of swimming pools to a change in the price of picnic tables.

Using the general concept of elasticity, would you expect the elasticity of demand for advertising to be positive or negative? Explain.

Big Al's Burger Emporium lowered the price of its burgers from $8 to $6.The firm saw sales of burger increase from 1,200 per week to 2,000 per week.This implies that the price elasticity (dropping any negative signs) is

Explain what happens to the magnitude of price elasticity of demand as price increases along a straight-line demand curve.

When the price of a sweet roll is $2, the bakery sells 300 rolls per week.If it raises the price to $3, then it sells 150 rolls per week.Based on this, the price elasticity of a sweet roll between these prices is

If the demand curve is perfectly elastic, and if the price of the good is increased by 10 percent by the seller, then revenue from the sale of the good would

The elasticity measure that has been employed by the courts to assess the degree of market competition is

What is an optimal decision?

Elasticity of demand is another way to measure slope.

The price of an airline ticket rises as the amount of time between purchase and flight departure gets smaller.The airlines base the policy on the assumption that