Exam 5: Elasticities of Demand and Supply

-Based on data in the table above, use the midpoint method to determine the cross elasticity of demand for ice cream and cake.

The price elasticity of demand measures the extent to which the quantity demanded changes when

When income increases from $30,000 a year to $40,000 a year, the quantity demanded of weekend vacations by Sara increases from 2 a year to 5 a year.For Sara, the income elasticity of demand of weekend vacations is ________ and weekend vacations are ________ good.

If a 5 percent increase in income brings about a 10 percent decrease in the demand for a good, then the

If a 10 percent price increase generates a 20 percent decrease in quantity demanded, then demand is

Water is considered a necessity.So, is the demand for water elastic or inelastic?

The demand for oil is inelastic.So, does an increase in the price of oil mean an increase in total revenue or a decrease in total revenue for oil producers?

Explain the total revenue test.

When the price of a product increases from $35 to $45, the quantity supplied increases from 30 units to 40 units per week.Using the midpoint method, the price elasticity of supply is

What effect does a price hike have on the total revenue of the producers?

Which is larger: The price elasticity of demand for food or the price elasticity of demand for oranges? Why?

If the price elasticity of demand for razors is 0.32, the demand for razors is

-In in the figure above, when the price rises from $3 to $4, the price elasticity of demand is

The price of lumber increased by 10 percent and the quantity supplied increased by 20 percent.The supply of lumber is

Recently the governor of Vermont proposed that cigarette taxes in Vermont should be increased substantially, from 44 cents a pack to 66 cents a pack.He estimates that Vermont can raise $20 million in revenue from this tax hike.He also pointed out that the neighboring state of New Hampshire was considering an increase in cigarette taxes. a∙How can it be that an increase in cigarette taxes will increase tax revenue, because, after all, a higher tax will increase cigarette prices and thereby decrease the quantity demanded? b∙If New Hampshire chooses not to increase cigarette taxes, is it likely that Vermont can still raise $20 million in tax revenue? Why or why not? Explain

-The table above gives the demand schedule for museum visits. a∙You, as the resident economist, have been given the task of maximizing the museum's total revenue.What admission price should you charge? b∙What is the elasticity of demand between $6 and $4? c∙Moving along the demand schedule from $10 to $8 to $6 and ultimately to $4, how does the price elasticity of demand change in size?

When the price of tacos rise 4 percent, the quantity demanded decreases 10 percent.What is the price elasticity of demand for tacos?

-In the mid-1970s, Newsweek magazine reported that the city of Atlanta lowered its city bus fares from 40 cents to 15 cents a passenger.The number of bus riders increased by 15 percent after the fare cut.This set of results indicates that the demand for bus rides in Atlanta at that time was

The income elasticity of demand is the percentage change in the ________ divided by the percentage change in ________.

Which of the following is correct? I∙All linear demand curves have a constant slope and a constant price elasticity of demand. Ii∙The price elasticity of demand changes while moving along a downward-sloping linear demand curve. Iii∙The magnitude of the slope of all linear demand curves is equal to the price elasticity of demand.