Exam 5: Elasticity and Its Application

How does total revenue change as one moves down a linear demand curve?

If sellers do NOT respond at all to a change in price:

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

If price changes and total revenue changes in the opposite direction, we can conclude that demand is relatively elastic.

The development of a new, more productive hybrid wheat would tend to decrease the total revenue of wheat farmers because:

What is the price elasticity of supply?

The demand curve for a market may be different depending on how widely the market is defined.

A policy reducing the supply of drugs will be less effective for reducing drug-use and drug-related crime than a policy which reduces the quantity demanded of drugs.

The president of the university is concerned about increasing operating costs and decides to raise tuition fees in an attempt to increase university revenue.Do you think the rise in tuition fees will accomplish the president's goal?

List the following goods in order of increasing price elasticity of demand and explain why they are ranked that way: a first class ticket to your dream holiday destination, a two-day ferry cruise, a local bus ticket to work, hiring a sports car for a day.

Assume that a four per cent decrease in income results in a two per cent increase in the quantity demanded of a good.The income elasticity of demand for the good is:

If the cross-price elasticity of demand is 1.25, then the two goods are:

A person who likes to be on the sea in a boat would tend to have what type of demand for boats?

The elasticity of demand for toasted muesli would increase if:

Coffee and tea are likely to have:

Demand is said to be inelastic if:

Graph 5-1 -In Graph 5-1, the point on the demand curve labelled B represents the:

Which of the following would you expect to have the lowest income elasticity of demand?

Suppose that an increase in the price of jumping castles from $650 to $850 prompts party shops to increase the quantity of these jumping castles that they offer from 80 to 320.Using the midpoint method, what would be the elasticity of supply?

While an increase in total agricultural production may benefit farmers as a group, it will not benefit an individual farmer to increase his production.