Exam 4: Elasticity: A Measure of Responsiveness

Recall the Application about choosing a price for drones based on a linear demand curve to answer the following question(s). -Recall the Application. Suppose a firm that produces drones has a linear demand curve for its product, with a vertical intercept of $1,500. If the firm initially charged a price of $500 and then raised its price to $750, the firm's total revenue would ________ and total cost would ________.

If demand is elastic, then when price rises, total revenue will decrease.

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 buns (using the initial value formula) is

If the price elasticity of supply is 3, supply is

If, regardless of price, the quantity demanded is a constant amount, then the demand curve is

Figure 4.2 -In Figure 4.2 at quantities larger than Q₁

For most goods and services, income elasticity of demand tends to be smaller in the short run than in the long run. However, a recent study shows that the demand for a durable good such as automobiles tends to be more income-elastic in the short run than in the long run. Explain why.

Table 4.3 -Refer to Table 4.3. After calculating the price elasticity of demand for computers, we can say the demand for computers is

If the slope of a demand curve is constant, then so is the elasticity on that demand curve.

Explain why the demand for a particular brand of fast food tends to be more elastic than demand for all fast food.

If the price elasticity of supply is equal to zero and the price was to rise, the quantity supplied would

If the price elasticity of demand is 1, demand is

The Department of Justice could use the cross-price elasticity between products sold at Staples and Office Max to show that the firms are very similar.

Recall the Application regarding the elasticity of demand for gasoline varying over time to answer the following question(s). -The price elasticity of demand measures the responsiveness of changes in price to the quantity demanded.

If the elasticity of demand for cigarettes by teenagers is 1.5, then to reduce teen smoking by 60 percent, tobacco companies would need to raise their prices by

Figure 4.4 -In Figure 4.4 supply is perfectly inelastic in graph

If the price elasticity of demand is infinite, demand is

The midpoint formula for elasticity of demand solves the problem of

A good synonym for elasticity would be

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