Exam 5: Elasticity

FIGURE 5-3 -Refer to Figure 5-3. Elasticity varies along a linear demand curve. What does Graph A represent?

If the demand curve is perfectly elastic, what will an increase in supply result in?

What tends to happen to the elasticity of supply as the time period considered grows longer?

When a 5 percent increase in price leads to an 8 percent increase in quantity supplied, supply is inelastic.

The elasticity of supply coefficient for lobster is estimated to be equal to 0.6. What would a 10 percent decrease in price lead to?

After a drought in Alberta, the availability of water (the supply curve) declines by 30 percent. If the elasticity of demand for water equals 0.75, by how much would the price of water have to rise in order for quantity demanded to equal the quantity of water available? (Assume that the supply curve for water is perfectly inelastic.)

The following schedule represents a portion of Tim's demand for video rentals each month. TABLE 5-2 -Refer to Table 5-2. Along this portion of Tim's demand curve for video rentals, what is the price elasticity of demand?

What tends to happen to the price elasticity of demand as the time period considered grows longer?

When will a price cut increase the total revenue a firm receives?

When the Blue Ocean Surfboard Company lowered the price of surfboards by 20 percent, it sold 10 percent more surfboards. What is the price elasticity coefficient for surfboards?

If the demand curve for a life-saving medicine is perfectly inelastic, what result will a reduction in supply have on the equilibrium price and equilibrium quantity?

If the supply curve for housing is perfectly inelastic, how will a reduction in demand affect the equilibrium price and quantity?

If makers of snake anti-venom implement significant price increases, it is unlikely to significantly affect the use of anti-venom for treating poisonous snakebites. What term accurately describes the demand for anti-venom among users?

FIGURE 5-2 -Refer to Figure 5-2. Compared to Graph B, what type of demand curve does Graph A represent?

A tax is imposed on orange juice. Under what circumstance will consumers bear the full burden of this tax?

If the price elasticity of demand coefficient for herbal tea is estimated to be 0.5, what would a 10 percent decrease in price likely lead to?

A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. What can we conclude from this information?

A jeweller cut prices in his store by 20 percent and the dollar value of his sales fell by 20 percent. What is this indicative of?

In order to raise more tax revenue, what type of goods should the government tax?

What is the direction of a perfectly elastic supply curve?