Exam 5: Elasticity and Its Application

Holding all other forces constant, if raising the price of a good results in less total revenue, the demand for the good must be:

Economists use the concept of price elasticity of demand to measure how much:

The price of product X is reduced from $45 to $20 and, as a result, the quantity demanded increases from 20 to 25 units.From this we can conclude that the demand for X in this price range:

In the 1970s OPEC generated high prices for oil but could not sustain this in the mid-80s and 90s.The reason was that both the supply and demand elasticity for oil is less elastic in the short run than in the long run.

The concept of the slope is the best way to measure the responsiveness of demand to changes in its determinants.

A government program that reduces land under cultivation hurts farmers but helps consumers.

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.

The price elasticity of supply measures how responsive:

Graph 5-2 -Refer to Graph 5-2.If there is a four per cent decrease in the price of a good and this leads to a 12 per cent increase in the quantity demanded then the price elasticity is:

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand.If the producer's objective is to increase total revenue, she should:

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

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

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. $\begin{array}{|c|c|}\hline \text { Price per coffee (\$) } & \text { Quantity demanded } \\\hline 4.00 & 200 \\\hline 3.00 & 600 \\\hline 2.50 & 800 \\\hline 2.00 & 1000 \\\hline 1.50 & 1200 \\\hline 1.00 & 1400 \\\hline\end{array}$ -Referring to Table 5-1, if the shop increases the price from $3.00 to $4.00, the price elasticity of demand will (according to the mid-point method) be:

In which of the following cases will total revenue increase?

The concept of elasticity is used to:

A perfectly inelastic demand curve will be:

Supply curves tend to be:

Last year, Amy bought two lenses for her SLR camera.Her income was $30 000.This year her income is $40 000.She has bought four new lenses for her camera.All else being constant it is obvious: