Exam 6: Demand and Elasticity

In a past fare war,U.S.Air reduced the price of its Charlotte,North Carolina,to New York City round-trip fare from $198 to $138 to match American Airlines.U.S.Air did so reluctantly,saying it would cost the company millions of dollars in revenue.American,on the other hand,believed the fare cut would increase its revenue.What different assumptions about the underlying price elasticity of demand did each airline believe true?

Elasticity computations related to demand carry a minus sign to show that the demand curve is negatively sloped.

Figure 6-9 -In 1983,government price supports raised the price of sugar above its equilibrium value.Which graph in Figure 6-9 illustrates the impact of sugar price supports on the sugar substitute fructose?

The demand curve depicts quantities demanded that have been gathered as prices have changed over time.

A horizontal demand curve is perfectly elastic because a change in price will not induce a change in quantity demanded.

Figure 6-6 -The purchase of premium cable channels is an "all or nothing" choice.Which graph in Figure 6-6 best illustrates the cable market demand curve?

The law of demand states that a lower price increases the amount of a commodity that people are willing to buy.

The price elasticity of demand for widgets at any particular price is determined by

A 10 percent increase in the cost of restaurant meals,which are a luxury,will most likely

If a demand curve is unit elastic,then P times Q will remain constant when P changes.

In 1975,New York City increased regulated taxi fares by 17.5 percent and expected taxi revenue to increase a like amount.The taxi commission believed taxi demand was

The elasticity of demand is determined partly by whether the good is a necessity or a luxury.

In the DuPont cellophane case,rivals accused DuPont of monopolizing cellophane.DuPont claimed that the relevant market was flexible wrapping material,such as wax paper and aluminum foil,rather than just cellophane.DuPont won the case.What type of evidence constituted DuPont's defense?

The price elasticity of demand measure is generally stated as an absolute value.

The current price of concert t-shirts is $20 each,and the company has been selling 400 per week.If price elasticity is 2.5 and the price changes to $21,how many t-shirts will be sold per week?

Figure 6-3 -In Figure 6-3(b),as price falls from $15 to $6,total expenditure

When Johanna cut prices in her jewelry store by 20 percent,the dollar value of her sales fell by 20 percent.This indicates that

For each pair of goods,explain which is more elastic: toothpicks vs.cars; electricity vs.yachts; IBM computers vs.Apple computers.

Demand curves often do not remain stationary; they shift because of changes in other variables.

The slope of the demand curve conveys all the useful information about elasticity.