Exam 4: Elasticity: The Responsiveness of Demand and Supply

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

If the demand for mobile phone service is inelastic, then

Which of the following statements is true?

Necessities tend to have more inelastic demands than luxuries.

-Refer to Figure 4-3. Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.

If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.

Consider a demand curve that has a constant elasticity value of 0. What happens to quantity demanded and total revenue when price increases?

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

Suppose a 4 per cent increase in price results in a 2 per cent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterise the product.

The price elasticity of the supply of teenage labour services is approximately 1.36. Suppose the minimum wage rises from $7.25 per hour to $8.75. Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, then an increase in tolls will result in

Cross-price elasticity of demand is calculated as the

The process involved in bringing oil to world markets can take years. Substitutes for oil-based products such as petrol are limited. As a result

-Refer to Figure 4-9. Suppose the diagram shows the supply curves for a product in the short run and in the long run. Which supply curve represents supply in the short run and which curve represents supply in the long run?

If the percentage increase in price is 15 per cent and the value of the price elasticity of demand is -3, then quantity demanded

If the slope of a demand curve is equal to -0.1, then

For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars. So, for these people, the cross-price elasticity of demand between petrol and public transportation is

Suppose that at a price of $55, 100 units were sold while at a price of $33, 153 units were sold. Without calculating the price elasticity value, can you determine whether demand is elastic, unit-elastic, or inelastic? Explain your answer.

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that

The price elasticity of supply is usually a positive number because