Exam 5: Elasticity and Its Application

Melvin's Magnets earned $200 in total revenue last month when it sold 100 souvenir magnets. This month it earned $300 in total revenue when it sold 60 souvenir magnets. The price elasticity of demand for Marvin's Magnets is

Figure 5-12 -Refer to Figure 5-12. If rectangle D is larger than rectangle A, then

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

Which of the following is likely to have the most price inelastic demand?

Demand is elastic if the price elasticity of demand is

If two goods are substitutes, their cross-price elasticity will be

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

For which of the following goods is the income elasticity of demand likely highest?

If we observe that when consumers' incomes rise by 10%, the quantity demanded of ice cream increases by 5%, then ice cream is an inferior good.

If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0.

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from B to C represents the

Table 5-5 The following table shows a portion of the demand schedule for a particular good at various levels of income. Price Quantity Demanded (Income =\ ) Quantity Demanded (Income =) Quantity Demanded ( Income =) \ 24 2 3 4 \ 20 4 6 8 \ 16 6 9 12 \ 12 8 12 16 \ 8 10 15 20 \ 4 12 18 24 -Refer to Table 5-5. Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

A 10 percent increase in gasoline prices reduces gasoline consumption by about

Which of the following statements is not valid when the market supply curve is vertical?

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

If demand is price inelastic, then when price rises, total revenue

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points C and D?

In general, demand curves for necessities tend to be price elastic.

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Which of the following statements about the consumers' responses to rising gasoline prices is correct?