Exam 5: Elasticity and Its Application

Graph 5-2 -In Graph 5-2, the elasticity of demand from point B to point C, using the midpoint method, would be:

The discovery of a new hybrid wheat would tend to increase the supply of wheat.Under what conditions would wheat farmers realise an increase in revenue?

If an increase in the price of a good results in an increase in total revenue for the firm, then:

At a price of $35, Brent rents out 80 sets of skis in one day.In peak season he can charge $45 per set and so he will rent out up to 150 sets of skis.What is Brent's price elasticity between the two ski prices, using the midpoint formula?

Table 5-2 Quantities urchased $\begin{array}{|c|c|c|}\hline \text { Income(\$) } & \text { Good X } & \text { Good Y } \\\hline 30000 & 2 & 20 \\\hline 50000 & 5 & 10 \\\hline\end{array}$ -Refer to Table 5-2.Using the midpoint method, what is the income elasticity of good Y?

You have just been hired by a forestry company as a consultant.The company wishes to know whether increasing or decreasing A-grade log prices will increase revenue.What information do you need? Suppose you have been given this information, what would you recommend?

Suppose there is a 10 per cent increase in the price of fish and a resulting five per cent decrease in the quantity of fish demanded.The price elasticity of demand for fish is:

The main determinant of the price elasticity of supply is:

If an increase in income results in a decrease in the quantity demanded of a good, then the good is:

Slope is the ratio of the changes in two variables, while elasticity is the ratio of the percentage changes in two variables.

Demand would be classed as elastic if the elasticity coefficient was:

Necessities tend to have price inelastic demands, whereas luxuries have price elastic demands.

What is the definition of the income elasticity of demand.What does it measure? How can it be used to determine whether a good is normal or inferior.What happens to the demand for an inferior good is income decreases?

Price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price.

The Conservation Reserve Program pays farmers to take out of production highly erodible land.How will this program affect farm income and the wellbeing of consumers?

Draw a linear, downward-sloping demand curve on a graph.Identify the part of the demand curve that is elastic, the part that is inelastic and the part that is unit elastic.At what price on a linear demand curve will total revenue be highest?

As price elasticity of demand increases, the demand curve gets steeper and steeper.

If the price elasticity of demand is equal to zero, demand is elastic.

In general, elasticity is:

When demand is elastic in the current price range: