Exam 4: Elasticity: A Measure of Responsiveness

Recall the Application about the short-run and long-run elasticity of supply of coffee to answer the following question(s). -Recall the Application. If the price of coffee beans increases by 20 percent and stays there for a year, the quantity of coffee supplied will ________ by a relatively ________ amount.

If demand is perfectly elastic, the price elasticity of demand is equal to

On a linear demand curve, demand is ________ at the middle of the demand curve than it is at small quantities.

If a 10% increase in price decreases the quantity demanded by 12%, the price elasticity of demand is 1.2.

Demand is elastic along the upper half of a linear demand curve, which means that a decrease in price will increase the quantity sold by a larger percentage amount.

Suppose that income increases and the quantity demanded of guitars stays the same. This means that the income elasticity of guitars is unit elastic.

The quantity of TVs sold is 100 at the unit price $200. Suppose the price elasticity of demand for TVs by the initial value method is 2.0, and you would like to decrease the unit price for TVs to $150. Then the new quantity sold must be

Suppose that the percentage change in demand is 20%, the price elasticity of demand is 3, and the percentage change in the equilibrium price is 4%. What is the price elasticity of supply?

If supply is perfectly elastic, the price elasticity of supply is equal to

Suppose that the percentage change in demand is 20%, the price elasticity of demand is 3, and the price elasticity of supply is 2. What is the percentage change in the equilibrium price?

What is the relationship between price elasticity of demand and total revenue for the firm?

When the price of hamburger went from $3 to $4 a pound, the quantity demanded of buns changed from 30 to 25 packages a day. The cross-price elasticity of demand for hamburger (using the initial value formula) is

If the price elasticity of supply is 1, supply is

Suppose that the percentage change in demand is 10%, the price elasticity of demand is 1, and the percentage change in the equilibrium price is 3.33%. What is the price elasticity of supply?

Which of the following products has the least elastic demand?

Restaurants and retail stores often give 10% senior citizen discounts. Use the concept of elasticity to explain how this can be profit maximizing behavior.

Suppose that if poor households have a price elasticity of demand for medical care of 0.70 and wealthy households have a price elasticity of demand for medical care of 0.10, then a 10% increase in the price of medical care would lead to poor households reducing their quantity demanded for medical care by

If the cross-price elasticity of salt and pepper is positive the goods must be complements.

The price elasticity of supply is calculated by

If supply decreases, the increase in price will be smaller if demand and supply are highly elastic.