Exam 4: Elasticity

What effect does a price increase have on producers' total revenue?

A 10 percent increase in the quantity of spinach demanded results from a 20 percent decline in its price. The price elasticity of demand for spinach is

-The number of taxicabs in Motorville and the taxicab fares are regulated. The fare currently charged is $5 a ride. Motorville taxicab drivers want to obtain government's permission to raise the fare to increase their revenues and ask you to be their economic adviser. After studying the market, you come up with the following demand schedule for taxicab rides: a) Calculate the price elasticity of demand for taxicab rides as the fare rises from $5 to $6. (Use the midpoint method in your calculations.) Is the demand price elastic or inelastic for this fare rise? b) What happens to the taxicab drivers' total revenue if the fare rises from $5 to $6? How can you use your answers in part a to answer this question? Should the drivers try to obtain permission to raise the fare? c) Calculate the price elasticity of demand for taxicab rides as the fare falls from $5 to $4. (Use the midpoint method in your calculations.) Is the demand price elastic or inelastic for this fare decrease? d) What happens to the taxicab drivers' total revenue if the fare falls from $5 to $4? How can you use your answers in part c to answer this question? Should the drivers try to obtain permission to lower the fare? e) What fare will maximize the taxicab drivers' total revenue? Explain.

If the price elasticity of demand equals 1.0, then as the price falls, the

The price elasticity of demand can range between

Suppose Clem's Chemical Company wants to increase its total revenue. If there are few substitutes for Clem's Chemicals

California is the sole producer of almonds in the United States. Suppose the price for a pound of almonds has increased during the past year. It is also predicted that almond prices will remain high. Over time, we predict that the

-The above figure shows the demand curve for movie rentals from Redbox. At which of the following prices is the demand unit elastic?

Duke increased his spending on steak from $7 to $11 per week because of a 12 percent salary increase, so his

Can electric utility companies always raise their total revenue by raising their rates?

Suppose the price elasticity of demand for bouquets of flowers is 4.0. You are charging $8 per bouquet. If you want to increase the quantity of bouquets you sell by 20 percent, what price should you charge?

For which of the following pairs of goods is the cross elasticity of demand positive?

To say that turnips are inferior goods means that the income elasticity

If the price elasticity is between 0 and 1, demand is

The elasticity of demand for Dell computers is probably

The demand for a good is elastic if

The price elasticity of supply is calculated as the

A 10 percent increase in income increases the quantity of apple juice demanded from 18,800 to 21,200 gallons. The income elasticity of demand for apple juice is

Demand is price inelastic if a relatively ________ price increase leads to a relatively ________ in the quantity demanded.

In the summer 2012 the lobster catch in Maine was especially large, but instead of celebrating the fisherman were suffering from a lower total revenue. (Source: New York Times, July 28, 2012) We learn from the article that despite the larger quantity of lobster caught, the total revenue of the fisherman decreased. This fact means that the demand for lobster is