Exam 6: Demand and Elasticity

Elasticity of demand equals the ratio of the percentage change in the price of a good to the percentage change in the quantity demanded.

Big Alice Ice Cream Parlor reduced its price of an ice cream cone from $1 to 90 cents. Sales consequently increased from 1,000 cones per week to 1,050 cones per week. The approximate price elasticity is

A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami. The elasticity of demand for rice is

If demand is elastic, an increase in price will decrease total revenue.

The term "unit elasticity" is used to describe a situation in which a rise in price is accompanied by

Hot dogs and hot dog buns are found to be related by the cross elasticity of demand. If they are complementary goods, the cross elasticity will be

Figure 6-8 Libya sold more crude oil in 1985 than it sold five years earlier, but revenues were 17 percent less. Which graph in Figure 6-8 is consistent with this set of facts?

If Polaroid wanted damages against Kodak for infringing on its instant development film process, and the courts found a high positive cross elasticity between purchases of Polaroid instant film and 35 mm regular film, would that have strengthened or weakened Polaroid's claim against Kodak?

Figure 6-5 If the demand curve in Figure 6-5 is unit elastic, then total expenditure at A is ____ total expenditure at B.

The sign of the elasticity computation is important because the value of the price elasticity can be negative or positive.

A price cut will increase the revenue a firm receives if the demand for its product is

Figure 6-6 The purchase of premium cable channels is an "all-or-nothing" choice. Which graph in Figure 6-6 best illustrates the cable market demand curve?

Demand is said to be price elastic at a point on a demand curve if a

Demand is said to be elastic when percentage changes in quantity demanded are

A fall in the price of a competing product will produce an outward shift in the demand curve for most products.

When OPEC raises the price of petroleum, American expenditures on oil imports increase, suggesting that

If both matches and automobile prices increase by 10 percent, consumers will likely buy

Total expenditure equals price times quantity.

Sun City's public bus line has been operating at a deficit. The city decides to raise the fare from 50 cents to 75 cents, anticipating enough additional revenue to cover the deficit. What assumption is the city making about price elasticity?

Since housing generally represents a large part of most household budget, the elasticity of demand for housing is likely to be large.