Exam 4: Elasticity: The Responsiveness of Demand and Supply

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is -0.75. Suppose that the government is considering raising the minimum wage from $7.25 per hour to $7.75 per hour. Based on this information, calculate the percentage change in the employment of low skilled workers. Use the midpoint formula.

-Refer to Figure 4-7. A perfectly elastic supply curve is shown in

The absolute value of the price elasticity of demand for telescopes is 1.5. Therefore, telescopes can be classified as a luxury.

If a 5 per cent increase in income leads to a 10 per cent decrease in quantity demanded for a product this product is

If a good has a negative income elasticity of demand, this indicates that the good is

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?

Suppose the value of the price elasticity of supply is 4. What does this mean?

If the market for a product is narrowly defined, then there are likely to be many substitutes for the product and the demand for the product is relatively elastic.

You are the manager of a theatre. At present the theatre charges the same admission price of $8 to all customers, regardless of age. You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults. You tell your supervisor that your proposal is likely to increase revenues. What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.

Which of the following is not a determinant of a good's price elasticity of demand?

Which of the following explains why a firm would be interested in the knowing the price elasticity of demand for a good it sells?

If an 8 per cent decrease in the price of lobster leads to a 15 per cent decrease in the quantity supplied of lobster, then the supply of lobster is

Suppose when the price of jean-jackets increased by 10 per cent, the quantity supplied increased by 16 percent. Based on this information the price elasticity of supply of jean-jackets is

If demand is perfectly inelastic, the absolute value of the price elasticity coefficient is

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product increases. Which of the following statements accurately predicts the resulting increase in price?

Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets. Based on this information, the demand for Yoshi's jazz performance is elastic.

Suppose a decrease in the supply of wheat results in an increase in revenue. This indicates that

-Refer to Figure 4-9. The diagram shows two supply curves, S_A and S_B. As price rises from P₀ to P₁, which supply curve is more elastic?

Suppose the supply of bicycles is price elastic. This means that

Suppose a 4 per cent increase in income results in a 2 per cent decrease in the quantity demanded of a good. Calculate the income elasticity of demand for the good and determine what type of good it is.