Exam 5: Elasticity and Its Application

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

You are in charge of the local city-owned golf course.You need to increase the revenue generated by the golf course in order to meet expenses.The mayor advises you to increase the price of a round of golf.The city golf course manager recommends reducing the price of a round of golf.What is the reason for their disagreement

When demand is unit elastic,what is the price elasticity and what is the effect on total revenue of a price change

If a 8 percent increase in income results in a 10 percent increase in the quantity demanded of lattes,what is the income elasticity of demand for lattes,and what type of good is lattes

Figure 5-3 -Refer to Figure 5-3.What does the point on the demand curve labelled B represent

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

What does inelastic demand mean

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price,and elastic if the quantity supplied responds only slightly to price.

How do economists compute the price elasticity of demand

Suppose that good X has a negative income elasticity of demand.What does this imply about the good

The federal government is proposing legalization of marijuana.If it becomes legal,it is likely that there would be an increase in the supply of marijuana.Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana.What do these advocates believe about marijuana

Figure 5-4 -Refer to Figure 5-4.If price falls in the C range of the demand curve,what can we expect total revenue to do as one moves down the curve

When the price of kittens was $20 each,the pet shop sold 20 per month.When they raised the price to $30 each,they sold 14 per month.What is the elasticity of demand for kittens

Figure 5-4 -Refer to Figure 5-4.If price falls in the A range of the demand curve,what can we expect total revenue to do as one moves down the curve

Figure 5-3 -Refer to Figure 5-3.What does the section of the demand curve labelled C represent

If two goods are substitutes,what will their cross-price elasticity of demand be

Consider the following pairs of goods.In each case,which would you expect to have the more elastic demand Why a.water or diamonds b.insulin or nasal decongestant spray c.food in general or breakfast cereal d.gasoline over the course of a week or gasoline over the course of a year e.personal computers or IBM personal computers

Figure 5-1 -Refer to Figure 5-1.What is the elasticity of demand from point B to point C,using the midpoint method

When is demand said to be unit elastic

The demand for a well-known brand of cereal is more elastic than the demand for other cereal.