Exam 6: Demand and Elasticity

After a number of acquisitions, Air American controls 75 percent of the U.S. market. It has been charged with "monopolizing" the U.S. air markets by the Justice Department. In its defense, the airline would want to introduce evidence that

The unit-elastic demand curve bends in the middle toward the origin of the graph and at either end moves closer to the axes.

If the price of potatoes is reduced, consumers likely buy

The quantity demanded in a market depends on many things, but the concept of elasticity focuses on the effect of changes in the price of the good.

Two goods are substitutes if a decrease in the price of one raises the quantity demanded of the other.

Regarding demand elasticity, which of the following statements is correct?

A good will tend to be more price elastic if it

A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.

The difference between slope and elasticity is that slope measures absolute change and elasticity measures percentage change.

Figure 6-2 In Figure 6-2, the price elasticity of demand (dropping all minus signs)is ____ between P = 4 and P = 6 than between P = 10 and P = 12 because between the lower set of prices the percentage change in price is ____.

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

Figure 6-1 In Figure 6-1,

Demand elasticity equals quantity times price.

Regarding the price elasticities of demand, which of the following statements is true?

If, as price increases by 10 percent, total revenue decreases by 10 percent, demand is

Elasticity of demand is another way to measure slope.

The demand curve depicts quantities demanded that have been gathered as prices have changed over time.

Computations of the price elasticity focus on the calculated magnitude due to of the law of demand.

What is an optimal decision?

If demand is elastic, a rise in price will decrease total expenditure.