Exam 4: Elasticity: The Responsiveness of Demand and Supply

Assume that a 50 per cent petrol tax led to a large increase in its price and only a small decrease in the quantity of petrol demanded.Economic analysis would lead one to conclude that________.

When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent,and the sale of dips (like salsa and bean dip)fell 8 per cent.This set of facts indicates that _________.

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. __________________________________________________________________________________________________________________________________________________________________________________________

Assume that you own a small boutique hotel.In an attempt to raise revenue you reduce your rates by 20 per cent.However,your revenue falls.What does this indicate about the demand for your boutique hotel rooms?

When the price of tortilla chips rose by 10 per cent,the quantity of tortilla chips sold fell 4 per cent.This indicates that the demand for tortilla chips is _______.

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

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

Consider the following types of demand curves: A.a vertical demand curve B.a horizontal demand curve C.a linear downward-sloping demand curve Which of the demand curves listed exhibits a price elasticity of demand coefficient that remains constant along the demand curve?

Which of the following statements is true?

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

If demand for a product is perfectly inelastic,a change in price will not change total revenue.

If the demand for iPods is price elastic,then________.

Studies show that the income elasticity of demand for wine is approximately five.What does this mean?

If a firm raised its price and discovered that its total revenue fell,then the demand for its product is _________.

Holding everything else constant,the demand for a good tends to be more elastic______.

Inelastic supply occurs whenever the elasticity of supply value 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?

The statement which is correct about the price elasticity of demand is:

Over longer periods of time,increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

Suppose you are considering buying stock in the stock market,and your objective is to maximise your net worth.Furthermore,your study of the market reveals that the economy will be slowing down over the next several months.Under these conditions,it would be best to purchase stock in companies that produce________.