Exam 5: Elasticities of Demand and Supply

Income (dollars) Quantity demanded pounds per year) 18,000 60 22,000 140 -The table above gives Sharon's demand for ground beef at two different income levels. Use the midpoint method in this problem. a. What is the percentage change in Sharon's income? b. What is the percentage change in the quantity demanded? c. What is Sharon's income elasticity of demand for ground beef? d. Is ground beef a normal or an inferior good for Sharon?

For which of the following would the supply likely be most inelastic?

Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is

The income elasticity of demand for skiing trips to Vermont is greater than one. Thus a trip to Vermont for skiing is ________ good.

Moving downward along a linear (straight-line)downward-sloping demand curve, the

KFC raises the price of its grilled chicken. The price elasticity of demand for KFC grilled chicken is 0.8. What happens to the KFC's total revenue?

The figure above shows the demand curve for Starbucks latte. -Suppose Starbucks currently charges $3.25 per cup for its latte. If Starbucks lowers the price to $3.00 per cup, based on the demand curve in the figure above, its total revenue will ________ because the demand for Starbucks latte is ________ over this price range.

Suppose the price of flour increases from $0.80 to $1.00 a pound and the quantity demanded decreases from 100 pounds to 95 pounds. Using the midpoint method, what is the price elasticity of demand for flour? Is the demand for flour elastic or inelastic?

List factors that increase the price elasticity of supply.

People eat at restaurants less often when their incomes fall because of a recession. Eating at restaurants must be

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

A 10 percent increase in price leads to a 20 percent decrease in the quantity demanded. The price elasticity of demand is equal to

If the cross elasticity of demand between car insurance and new cars is -0.41, then car insurance and new cars are

The total revenue test says i) Demand is elastic if a decrease in price results in an increase in total revenue. Ii) Total revenue is maximized when demand is elastic. Iii) Total revenue is minimized when demand is unit elastic.

-In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $6 to $5 is equal to

All of the following statements are true EXCEPT

For a good such as food, the income elasticity is likely

Which of the following is true? I. The demand for a good is elastic if when its price changes, the percentage change in the quantity demanded exceeds the percentage change in price. Ii. Price elasticity of demand equals the percentage change in price divided by the percentage change in the quantity demanded. Iii. If demand is price inelastic, a rise in price leads to a decrease in total revenue.

What is the formula for the cross elasticity of demand? The percentage change in the

The price of furnace filters increased by 5 percent and the quantity demanded did not change. The price elasticity of demand for furnace filters is