Exam 6: Elasticity: the Responsiveness of Demand and Supply

The price elasticity of demand for Stork ice cream is -4.Suppose you're told that following a price increase, quantity demanded fell by 10 percent.What was the percentage change in price that brought about this change in quantity demanded?

If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.

What factors would make you more sensitive or less sensitive to price when purchasing gasoline?

According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45.Which of the following could explain why the price elasticity of demand for toothpaste is so low?

Suppose the value of the price elasticity of supply is 4.What does this mean?

With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services?

Price elasticity of supply is used to gauge

Which of the following statements about price elasticity of demand is false?

Seth is a competitive body builder.He says he has to have his 12-oz package of protein powder to "feed his muscles" every day.On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?

At a price of $100, Beachside Canoe Rentals rented 11 canoes.When it increased its rental price to $125, 9 canoes were rented.Calculate the absolute value of the price elasticity of demand for canoe rentals, using the midpoint formula.

Figure 6.5 -Refer to Figure 6.5.Identify the two goods which are substitutes.

If the market for a product is narrowly defined, then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.

Figure 6.2 -Refer to Figure 6.2.Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.

Suppose the current price of oil is $90 a barrel and the quantity supplied is 800 million barrels per day.If the price elasticity of supply for oil in the short run is estimated at 0.5, use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $98 a barrel.

Jaycee Jeans sold 40 pairs of jeans at a price of $40.When it lowered its price to $20, the quantity sold increased to 60 pairs.Calculate the absolute value of the price elasticity of demand.Use the midpoint formula.

In the alcohol industry, both wine and spirits are considered to be substitutes for beer.

When demand is unit-elastic, a change in price causes total revenue to stay the same because

According to an article in the Wall Street Journal, unlike airlines, even elite hotels don't have sophisticated systems that can react quickly to changes in demand.Even if they could, many hoteliers say people don't respond that much to lower rates."We've tested this, cutting our rates by $50 [per night], and we didn't see an appreciable response in occupancy," says Jim Schultenover, a vice president for Ritz-Carlton. Source: Jesse Drucker, "In Times of Belt-Tightening, We Seek Reasonable Rates," Wall Street Journal, April 6, 2001. Based on the information above, the demand for hotel rooms is

An increase in the demand for green tea raises the price of apples from $16 a pound to $20 a pound.As a result, quantity supplied increases by 30 percent.Using the midpoint formula, calculate the value of the price elasticity of supply?

Suppose a decrease in the supply of bottled water results in a decrease in revenue.This indicates that