Exam 5: Elasticity and Its Application

List the following goods in order of increasing price elasticity of demand: cameras, digital cameras, digital SLR cameras, Sony digital SLR cameras.

The main determinant of the price elasticity of supply is:

Which of the following was NOT a reason why OPEC failed to keep the price of oil high?

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to:

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

At the midpoint of a downward-sloping linear demand curve, elasticity would be:

The supply of farmland is more elastic than is the supply of wheat.

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

If an increase in income results in a decrease in the quantity demanded of a good, then the good is:

Some Asian medicines have become very expensive as the wildlife used for ingredients has become endangered. The persistence of demand by some consumers for these medicines indicates that these customers have inelastic demand.

What is the price elasticity of supply?

What are the determinants of the price elasticity of supply and how does each affect elasticity? Price elasticity of supply depends on the flexibility of sellers to changes in price. For resources like land of a specific type and location, there is practically no flexibility. For manufactured products, there is greater flexibility. In most markets, the time period over which supply is measured is a key determinant. Over short time periods, supply curves tend to be less elastic and over longer periods, supply curves tend to be more elastic.

Graph 5-3 -In Graph 5-3, as price falls from P_A to P_B, which demand curve is least elastic?

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

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. From this we can conclude that the demand for X in this price range:

Suppose the price of product X is reduced from $16.00 to $12.00 and, as a result, the quantity of X demanded increases from 300 to 450. Using the midpoint method, the price elasticity of demand for X in the given price range is:

Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer's objective is to increase total revenue, she should:

Economists compute the price elasticity of demand as the:

If the elasticity of supply of a product is greater than one, then supply is:

Alice says that she would buy one banana split a day regardless of the price. If this is the case: