Exam 5: Elasticity and Its Application

Figure 5-9 -Refer to Figure 5-9.Suppose this demand curve is a straight,downward-sloping line all the way from the horizontal intercept to the vertical intercept.We choose two prices,P₁ and P₂,and the corresponding quantities demanded,Q₁ and Q₂,for the purpose of calculating the price elasticity of demand.Also suppose P₂ > P_1.In which of the following cases could we possibly find that (i)demand is elastic and (ii)an increase in price from P₁ to P₂ causes an increase in total revenue?

Suppose the point (Q = 2,000,P = $60)is the midpoint on a certain downward-sloping,linear demand curve.Then

Figure 5-10 -Refer to Figure 5-10.Total revenue when the price is P₁ is represented by the area(s)

Table 5-2 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-2.Using the midpoint method,at a price of $8,what is the income elasticity of demand when income rises from $7,500 to $10,000?

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount.

The flatter the demand curve through a given point,the

Table 5-5 -Refer to Table 5-5.Using the midpoint method,what is the income elasticity of demand for good X?

A perfectly inelastic demand implies that buyers

Figure 5-5 -Refer to Figure 5-5.Demand is unit elastic between prices of

A linear,downward-sloping demand curve has a constant elasticity but a changing slope.

Table 5-3 The following table shows the demand schedule for a particular good. -Refer to Table 5-3.Using the midpoint method,when price falls from $6 to $3,the price elasticity of demand is

Suppose that when the price of beer is $2 per bottle,firms can sell 4 million bottles.When the price of beer is $3 per bottle,firms can sell 2 million bottles.Which of the following statements is true?

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

The price elasticity of supply measures how much

Figure 5-13 -Refer to Figure 5-13.Along which of these segments of the supply curve is supply least elastic?

Table 5-5 -Refer to Table 5-5.Using the midpoint method,the income elasticity of demand for good Y is

A good will have a more elastic demand,

Table 5-1 -If a 6% decrease in price for a good results in a 2% increase in quantity demanded,the price elasticity of demand is

If demand is price inelastic,then

When the local used bookstore prices economics books at $15.00 each,it generally sells 70 books per month.If it lowers the price to $7.00,sales increase to 90 books per month.Given this information,we know that the price elasticity of demand for economics books is about