Exam 4: Elasticity: the Responsiveness of Demand and Supply

Figure 4-9 -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 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.

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?

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

Table 4-1 -Refer to Table 4-1.Suppose you own a bookstore.You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35.You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day.Compute the price elasticity of demand using the mid-point formula and these data.Select the correct implication from your work.

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

Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products.If you expect that the economy is headed for a long recession,you would advise people to look for jobs in an industry with

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

When demand is elastic,a fall in price causes total revenue to rise because

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.

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

Along a downward-sloping,linear demand curve,total revenue is the greatest

Demand for a luxury item,such as a yacht,is likely to be

The slope of a demand curve is not used to measure the price elasticity of demand because

The price elasticity of supply is equal to

Briefly explain the economic concept of elasticity.

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.

A perfectly elastic demand curve is

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

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