Exam 5: Elasticity

The more of an individual's budget that is spent on a product, the higher the elasticity of demand for that product.

When the price of hamburgers increased from $1.50 to $2.75, the quantity demanded decreased from 375 units sold to 250 units sold. Using the midpoint method, hamburgers are said to be

If E_d = 4, then

The owner of a kayak tour business has been looking over the latest data from the Census, which reported that income in the area where she is based has increased by 20%. If the owner also observed that her sales increased by 10% during the same period, what is the income elasticity of demand and how would you interpret it?

The _____ is a period of time long enough for firms to alter their plant capacities and for the number of firms in the industry to change.

If price elasticity of demand is between 0 and 1, demand for that product is

Price elasticity of supply will always be a positive number.

If a product's price rises by 6% and its quantity demanded falls by 8%, then its elasticity is equal to

(Figure: Interpreting Price Changes) Based on the graph, if the price of shoes increases from $40 to $80 (from point d to point b), the absolute value of the price elasticity of demand (using the midpoint method) is

An excise tax of $2 is placed on a jar of honey. Honey producers end up bearing only $0.40 of the tax. The demand curve for honey is

Tax incidence is defined as the amount of revenue earned by the government from the imposition of taxes.

If demand is relatively inelastic and supply relatively elastic, the incidence of an excise tax

The loss in consumer and producer surplus due to inefficiency is called _____ loss.

Which of these is the MOST important determinant of the elasticity of supply?

In comparing the change in prices of different items, it is preferable to

If prices increase by the same percentage that quantity demanded decreases, then the demand curve is

(Figure) The figure shows two demand curves for two different periods for the same product. Based on the information in the graph, which statement is TRUE?

As the price of bananas fell from $0.60 to $0.40 a pound, the quantity demanded rose from 300 pounds of bananas consumed to 500 pounds of bananas consumed. In this example, demand for bananas is

If the price elasticity of demand for Rip's Punch is 1.5 and he increases the price for each bottle, total revenue will

Define income elasticity and use this concept to classify normal, inferior, and luxury goods.