Exam 6: Elasticity: the Responsiveness of Demand and Supply

Ali's Gyros operates near a college campus.Ali has been selling 120 gyros a day at $4.50 each and is considering a price cut.He estimates that he would be able to sell 200 gyros per day at $3.50 each. a.Calculate the price elasticity of demand using the midpoint formula. b.Calculate the change in revenue as a result of the price cut.

Which of the following items is likely to have the highest income elasticity of demand?

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

If the demand for cell phone service is inelastic,then

The most important determinant of the price elasticity of demand for a good is

Economists estimated that the cross-price elasticity of demand for beer and wine is 0.31 and the income elasticity of wine is 5.03.This means that

Inelastic supply occurs whenever the elasticity of supply value is

Which of the following is a key determinant of the price elasticity of supply?

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

Economists use the concept of ________ to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price.

Carrie Bradshaw claims that when it comes to buying shoes,"price is no object." If this is true,then her demand for shoes is

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

The larger the share of a good in a consumer's budget,holding everything else constant,the

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

Suppose the governor of California has proposed increasing toll rates on California's toll roads,and has presented two possible scenarios to implement these increases.Following are projected data for the two scenarios for the California toll roads: Scenario 1: Toll rate in 2012: $10.00.Toll rate in 2016: $22.50 For every 100 cars using the toll roads in 2012,only 81.6 cars will use the toll roads in 2016. Scenario 2: Toll rate in 2012: $10.00.Toll rate in 2016: $17.50 For every 100 cars using the toll roads in 2012,only 96.2 cars will use the toll roads in 2016. a.Using the midpoint formula,calculate the price elasticity of demand for Scenario 1 and Scenario 2. b.Assume 10,000 cars use California toll roads every day in 2012.What would be the daily total revenue received for each scenario in 2012 and in 2016? c.Is demand under Scenario 1 and under Scenario 2 price elastic,inelastic,or unit elastic.Briefly explain. (For above questions,assume that nothing other than the toll change occurs during the time frame listed that would affect consumer demand.)

Suppose the price elasticity of demand for methamphetamine is -0.35.If decriminalization caused the price of methamphetamine to fall by 75 percent,what will be the percentage increase in the quantity of methamphetamine demanded? If the price elasticity is -3.5,what will be the percentage increase in quantity demanded?

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 ________ between gasoline and public transportation is positive.

The demand for heating oil in the short run is more elastic than the long run demand for heating oil.

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

To calculate the price elasticity of demand we divide