Exam 5: Elasticity and Its Application

Sketch three demand curves. Curve A should be perfectly elastic, curve B should be perfectly inelastic and curve C should be unit elastic.

When the price of digital SLR cameras was $2000, consumers bought 4000. When the price fell to $1200, consumers bought 14 000. What was the price elasticity of demand between these two prices, calculated with the midpoint method? Is demand elastic or inelastic?

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -Referring to Table 5-1, comparing the sales at $1.00 and $3.00, which of the statements below is true?

Suppose that there are many substitutes for crocodile-leather handbags. This would mean that the:

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

If a person has very little concern for her health, her demand for healthcare would tend to be:

In the aftermath of the US decision to halt logging of Pacific North-West forests in 1990 to protect spotted owls, the global demand for Australian and New Zealand timber jumped. Predict how Australasian forestry companies responded to the increased demand in the short run and in the long run.

The president of the university is concerned about increasing operating costs and decides to raise tuition fees in an attempt to increase university revenue. Do you think the rise in tuition fees will accomplish the president's goal?

Suppose that the slope of the demand curve becomes flatter at a given price. This means that the price elasticity of demand at this point will:

Holding all other forces constant, if raising the price of a good results in less total revenue, the demand for the good must be:

If the quantity supplied responds only slightly to changes in price, then:

If the demand curve is linear and downward-sloping, which of the following would NOT be correct?

A perfectly inelastic demand curve:

In the case of a downward linear demand curve, total revenue is always maximised at

In which of the following cases will total revenue increase?

Graph 5-2 -If there is a 10 per cent increase in the price of a good and this leads to a four per cent decrease in the quantity demanded then the price elasticity is:

Table 5-1 Suppose a coffee shop faces the following demand schedule for coffee. -How does total revenue change as one moves down a linear demand curve?

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

The demand for a good tends to be more elastic:

If a good is a necessity, demand for the good would tend to be: