Exam 5: Elasticity and Its Application

Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

To determine whether a good is considered normal or inferior, one could examine the value of the

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about

The cross-price elasticity of garlic salt and onion salt is -2, which indicates that garlic salt and onion salt are substitutes.

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

If the price elasticity of demand is equal to 1, then demand is unit elastic.

Table 5-6 Income Quantity of Good X Purchased Quantity of Good Y Purchased \ 30,000 2 20 \ 40,000 6 10 -Refer to Table 5-6. Using the midpoint method, what is the income elasticity of demand for good X?

When a supply curve is relatively flat, the

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Other things equal, the demand for a good tends to be more inelastic, the

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Kevin tunes pianos. If the demand for piano-tuning services is elastic, Kevin could increase his total revenue by

If a change in the price of a good results in no change in total revenue, then

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Scenario 5-2 The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. -Refer to Scenario 5-2. The change in equilibrium price will be

For which pairs of goods is the cross-price elasticity most likely to be negative?

Farm programs that pay farmers not to plant crops on all their land

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands.

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.