Exam 4: Elasticity: A Measure of Responsiveness

Gloria works for a museum in a large city with many other museums. Her boss proposes that the museum should raise the price of admission to increase revenues. Gloria was a good student in her economics principles course. How should she advise her boss?

Figure 4.1 -In Figure 4.1 the demand curve that has a zero elasticity is show in graph

Figure 4.1 -In Figure 4.1 the demand curve along which price elasticity of demand changes as you move along it is on graph

How do you interpret the value of income elasticity?

If the quantity supplied is infinitely responsive to any change in price, the supply curve is

If the price elasticity of supply is 0.3, supply is

The income elasticity of demand is

Firms like to know the price elasticity of demand because it determines how price changes affect

Suppose that in a month the price of a cup of coffee increases from $1 to $1.50. At the same time, the quantity of cups of coffee demanded decreases from 200 to 190. The price elasticity of demand for cups of coffee (calculated using the midpoint formula) is approximately

If consumers have a long time to respond to an increase in electricity prices their demand is likely to be ________ than if they are only given a short time.

Suppose that the income elasticity of demand for good X is greater than 1. Other things being equal, which of the following statements is INCORRECT?

If a product is a necessity and has no substitutes at all, demand for the product is most likely to be

Suppose that in a month the price of a liter of soda increases from $1 to $1.50. At the same time, the quantity of liters of soda supplied increases from 200 to 210. The price elasticity of supply for liters of soda (calculated using the initial value formula) is

Which of the following products has the least elastic demand?

Suppose that in a month the price of a liter of soda increases from $1 to $1.50. At the same time, the quantity of liters of soda supplied increases from 200 to 210. The price elasticity of supply for liters of soda (calculated using the initial value formula) is

As we move upward along a linear demand curve, the price elasticity of the demand

Figure 4.4 -In Figure 4.4 supply elasticity is infinite in graph

Suppose that an Italian ice cream firm is facing a linear demand curve and that the current price for the Italian ice cream is set at a point where the price elasticity is 0.7. If the firm decreases the product price

Figure 4.1 -In Figure 4.1 the demand curve that is perfectly inelastic is on graph

Suppose that the price elasticity of supply of cheese is 0.80. If the price of cheese rises by 20%, the quantity supplied will increase by 16%.