Exam 4: Elasticity: A Measure of Responsiveness

Recall the Application about how changes in supply affect the price of gasoline to answer the following question(s). -Recall the Application. Suppose the price elasticity of demand for gasoline is 0.20 and the price elasticity of supply for gasoline is 0.55. If supply increases by 20 percent, the equilibrium price will decrease by

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

If the quantity demanded of peanut butter falls by 12% when income rises by 10%, then peanut butter is

If the demand curve is a vertical line, it means that

In the case of perfectly elastic demand, the demand curve is

In general, the demand for a product is more elastic in the long run than in the short run.

Suppose that you're the manager of a firm. You notice that when you raised your price from $10 to $11, sales fell from 500 to 400. Should you raise your price more?

The price elasticity of demand reflects the responsiveness of

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

Suppose that the price elasticity of supply is one and the quantity supplied increases by 5%. Other things being equal, the percentage change in the price should be

Suppose that last year the Tulane University men's basketball team, the Green Wave, won the NCAA tournament. As a result, attendance at Green Wave basketball games has increased dramatically. Explain the difference between the supply of seats for Green Wave games in the short term and in the long term. How would you describe the elasticity of supply of seats in the long term?

Recall the Application about the short-run and long-run elasticity of supply of coffee to answer the following question(s). -Recall the Application. In the long run, the supply curve for coffee is ________ and the elasticity of supply is ________ than in the short run.

If the price elasticity of demand for water is inelastic, which of the following could be a possible value of the elasticity?

Suppose that the elasticity of demand for hamburgers is 2.5 and price decreases by 14%. By what percentage will quantity demanded for hamburgers increase?

If a decrease in the price of good X results in a decrease in the quantity of Y demanded

Which of the following products has the most elastic demand?

On a straight line demand curve, total revenue is maximized where demand is unitary elastic.

Why do you think that the demand for coffee is less elastic than the demand for restaurant meals?

Suppose that the income elasticity of demand for new clothes is positive. Other things being equal, which of the following statements is CORRECT?

The cross-price elasticity of demand between spaghetti and spaghetti sauce is most likely