Question 1

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

Accepted Answer

A number of factors are likely to affect

Question 2

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to

Accepted Answer

A) decrease by 12 percent. 
B) decrease by 26 percent. 
C) decrease by 32 percent. 
D) decrease by 60 percent. 
A) decrease by 12 percent. 
B) decrease by 26 percent. 
C) decrease by 32 percent. 
D) decrease by 60 percent.

Question 3

Holding everything else constant, the demand for a good tends to be more elastic

Accepted Answer

A) the more substitutes there are for the good. 
B) the shorter the time period involved. 
C) the more consumers perceive the good to be a necessity. 
D) the less important the product is in consumers' budgets. 
A) the more substitutes there are for the good. 
B) the shorter the time period involved. 
C) the more consumers perceive the good to be a necessity. 
D) the less important the product is in consumers' budgets.

Question 4

Table 6-3
  
-Refer to Table 6-3.Over what range of prices is the demand elastic?

Accepted Answer

A) over the entire range of prices 
B) between $14 and $16 
C) between $8 and $16 
D) between $2 and $8 
A) over the entire range of prices 
B) between $14 and $16 
C) between $8 and $16 
D) between $2 and $8

Question 5

In recent years, the prices of new domestically produced cars have been falling.Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel.This information suggests that the cross-price elasticity between new cars and used cars, and the cross-price elasticity between new cars and bus travel, are negative.

Accepted Answer

A) True 
 B)False

Question 6

The demand for all carbonated beverages as a whole is likely to be ________ the demand for Dr.Pepper.

Accepted Answer

A) more elastic than 
B) perfectly elastic compared to 
C) less elastic than 
D) perfectly inelastic compared to 
A) more elastic than 
B) perfectly elastic compared to 
C) less elastic than 
D) perfectly inelastic compared to

Question 7

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

Accepted Answer

A) unit elastic. 
B) perfectly elastic. 
C) relatively inelastic. 
D) elastic. 
A) unit elastic. 
B) perfectly elastic. 
C) relatively inelastic. 
D) elastic.

Question 8

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that beer and spirits are ________, and spirits and wine are ________.

Accepted Answer

A) complements; luxuries 
B) normal goods; luxuries 
C) complements; substitutes 
D) substitutes; luxuries 
A) complements; luxuries 
B) normal goods; luxuries 
C) complements; substitutes 
D) substitutes; luxuries

Question 9

Consider the following pairs of items:
A.shampoo and conditioner
B.iPhones and earbuds
C.a laptop computer and a desktop computer
D.beef and pork
E.air-travel and weed killer
Which of the pairs listed will have a positive cross-price elasticity?

Accepted Answer

A) a and b only 
B) c and d only 
C) e only 
D) a, b, and c only 
A) a and b only 
B) c and d only 
C) e only 
D) a, b, and c only

Question 10

Table 6-7
  
-Refer to Table 6-7.
a.Using the information in the table, calculate the income elasticity of demand for good X and characterize the good.Use the midpoint formula.
b.Can you calculate the income elasticity of demand for good Y? If you can, show your calculation and characterize the good.If you cannot, explain why.

Accepted Answer

a.The income elasticity of demand for go

Question 11

The Mass Rapid Transit (MRT)System in Hong Kong has been running significant losses.Transport Ministry officials have argued over whether to raise fares to combat the losses.One argument against a fare increase is that it will aggravate traffic congestion on the streets during peak commuter hours.Suppose that the current fare is $4 and the government is considering raising it to $6.Officials estimate that this reduces the number of rides purchased from 10,000 to 8,000 per day.
a.What is the estimated elasticity of demand for MRT rides?
b.What does this elasticity of demand suggest to you about what will happen to total revenue earned by the transit system if the fare increase happens?
c.Last year, the MRT system incurred a loss of $50,000 per day.Do you think the fare increase will resolve the deficit problem as well as Ministry officials anticipate? Explain.

Accepted Answer

a.Price elasticity = -0.56.
b.

Question 12

Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon.What is the new equilibrium quantity of gasoline demanded after the tax is imposed?

Accepted Answer

A) 109.72 billion gallons per year 
B) 127.25 billion gallons per year 
C) 148.27 billion gallons per year 
D) 161.61 billion gallons per year 
A) 109.72 billion gallons per year 
B) 127.25 billion gallons per year 
C) 148.27 billion gallons per year 
D) 161.61 billion gallons per year

Question 13

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

Accepted Answer

A) the decrease in quantity sold is proportionately larger than the resulting change in price. 
B) the resulting increase in price is proportionately greater than decrease in quantity sold. 
C) the demand curve for wheat must be vertical. 
D) the supply curve for wheat must be vertical. 
A) the decrease in quantity sold is proportionately larger than the resulting change in price. 
B) the resulting increase in price is proportionately greater than decrease in quantity sold. 
C) the demand curve for wheat must be vertical. 
D) the supply curve for wheat must be vertical.

Question 14

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

Accepted Answer

A) unit elastic. 
B) perfectly elastic. 
C) relatively inelastic. 
D) relatively elastic. 
A) unit elastic. 
B) perfectly elastic. 
C) relatively inelastic. 
D) relatively elastic.

Question 15

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Accepted Answer

A) demand is elastic and supply is inelastic. 
B) demand is inelastic and supply is elastic. 
C) both demand and supply are inelastic. 
D) both demand and supply are elastic. 
A) demand is elastic and supply is inelastic. 
B) demand is inelastic and supply is elastic. 
C) both demand and supply are inelastic. 
D) both demand and supply are elastic.

Question 16

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Accepted Answer

Cross-price elasticity of demand measure

Question 17

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

Accepted Answer

A) The elasticity coefficient is likely to be higher in the long run than in the short run. 
B) The elasticity coefficient is likely to be lower in the long run than in the short run. 
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted. 
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted. 
A) The elasticity coefficient is likely to be higher in the long run than in the short run. 
B) The elasticity coefficient is likely to be lower in the long run than in the short run. 
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted. 
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted.

Question 18

Figure 6-2
  
-Refer to Figure 6-2.The absolute value of the price elasticity of demand at points a and b is 1.What is the value of Pb?

Accepted Answer

A) $50 
B) $40 
C) $30 
D) $20 
A) $50 
B) $40 
C) $30 
D) $20

Question 19

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

Accepted Answer

A) elastic. 
B) unit elastic. 
C) inelastic. 
D) perfectly elastic. 
A) elastic. 
B) unit elastic. 
C) inelastic. 
D) perfectly elastic.

Question 20

Price elasticity of demand measures

Accepted Answer

A) how responsive suppliers are to price changes. 
B) how responsive sales are to changes in the price of a related good. 
C) how responsive quantity demanded is to a change in price. 
D) how responsive sales are to a change in buyers' incomes. 
A) how responsive suppliers are to price changes. 
B) how responsive sales are to changes in the price of a related good. 
C) how responsive quantity demanded is to a change in price. 
D) how responsive sales are to a change in buyers' incomes.

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

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to

Holding everything else constant, the demand for a good tends to be more elastic

Table 6-3 -Refer to Table 6-3.Over what range of prices is the demand elastic?

The demand for all carbonated beverages as a whole is likely to be ________ the demand for Dr.Pepper.

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that beer and spirits are , and spirits and wine are .

Consider the following pairs of items: A.shampoo and conditioner B.iPhones and earbuds C.a laptop computer and a desktop computer D.beef and pork E.air-travel and weed killer Which of the pairs listed will have a positive cross-price elasticity?

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

Figure 6-2 -Refer to Figure 6-2.The absolute value of the price elasticity of demand at points a and b is 1.What is the value of Pb?

Price elasticity of demand measures

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 6: Elasticity: the Responsiveness of Demand and Supply

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

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to

Holding everything else constant, the demand for a good tends to be more elastic

Table 6-3 -Refer to Table 6-3.Over what range of prices is the demand elastic?

The demand for all carbonated beverages as a whole is likely to be ________ the demand for Dr.Pepper.

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that beer and spirits are ________, and spirits and wine are ________.

Consider the following pairs of items: A.shampoo and conditioner B.iPhones and earbuds C.a laptop computer and a desktop computer D.beef and pork E.air-travel and weed killer Which of the pairs listed will have a positive cross-price elasticity?

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is

Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

Figure 6-2 -Refer to Figure 6-2.The absolute value of the price elasticity of demand at points a and b is 1.What is the value of Pb?

Price elasticity of demand measures

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03.These elasticities mean that beer and spirits are , and spirits and wine are .