Exam 6: Demand and Elasticity

Figure 6-9 In 1983, government price supports raised the price of sugar above its equilibrium value. Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?

Define the following terms and explain their importance to the study of economics. a. price elasticity b. complements c. substitutes d. cross elasticity e. supply elasticity

When the price of a sweet roll is $2, the bakery sells 300 rolls per week. If it raises the price to $3, then it sells 150 rolls per week. Based on this, the price elasticity of a sweet roll between these prices is

How might a court use cross elasticity in an antitrust case?

If there are many close substitutes available for a good, its elasticity of demand will be higher.

Perfectly inelastic demand curves are vertical.

A 10 percent increase in the cost of restaurant meals, which are a luxury, will most likely

Price elasticity of demand can be written as percentage change in Q divided by percentage change in P.

A price increase will always increase a firm's revenue.

A seller who wishes to increase the revenues should always increase the price of the product.

The elasticity measure that has been employed by the courts to assess the degree of market competition is

A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to

Price elasticity of demand is defined as

The price elasticity of demand for widgets at any particular price is determined by

A study of New York City (NYC)tax rates concluded that taxes on the nonmanufacturing sector should be higher since that sector has fewer alternatives. Manufacturers are more mobile and may move to avoid higher taxes. This means that

Figure 6-3 -In Figure 6-3(b), as price falls from $15 to $6, total expenditure

What does cross elasticity of demand between goods reveal about the nature of relationship between them?

Suppose that elasticity has been reliably measured as 1.55 and the unit price decreases from $20 to $17.50. How much will quantity demanded increase?

If demand is unit elastic, then a 10 percent increase in the price will lead to a 10 percent increase in quantity demanded.

Using the general concept of elasticity, would you expect the elasticity of demand for advertising to be positive or negative? Explain.