Exam 6: Elasticity: The Responsiveness of Demand and Supply

An article in the Wall Street Journal noted the following: Instead of relying on a full-coach,round-trip unrestricted fare of about $2,000 between Cleveland and Los Angeles ...Continental [Airlines] since June has offered a $716 unrestricted fare in that market ....Through October,the test resulted in about the same revenue that Continental thinks it would have collected with its higher fare. Source: Scott McCartney,"Airlines Try Cutting Business Fares,Find They Don't Lose Revenue," Wall Street Journal,November 22,2002. What is the absolute value of the price elasticity of demand on this airline route?

Figure 6-7 -Refer to Figure 6-7.Between points a and b on the demand curve,demand is

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because

To calculate the price elasticity of demand we divide

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.

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

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

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

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?

Figure 6-10 -Refer to Figure 6-10.A unit-elastic supply curve is shown in

Table 6-3 -Refer to Table 6-3.Over what range of prices is the demand inelastic?

Of the following,which is the best example of good with a perfectly inelastic demand?

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?

To calculate the price elasticity of supply we divide

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

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?

If firms do not increase their quantity supplied when price changes,then supply is

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.

Figure 6-1 -Refer to Figure 6-1.The demand curve on which elasticity changes at every point is given in

A service station owner in Staten Island,New York,was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price.If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline,the demand for gasoline is