Exam 6: Elasticity: The Responsiveness of Demand and Supply

Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Buy.com is 3.5.Based on this information,predict what happens when Amazon.com lowers its DVD prices by 10 percent.

Which of the following correctly comments on the following statement? "The only way to increase the revenue from selling a product is to increase the product's price."

Table 6-1 -Refer to Table 6-1.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.

Refer to the Article Summary.The idea that sports teams could charge more for tickets and still increase revenue indicates that tickets are being priced in the ________ portion of their demand curve.

There are a limited number of original Picasso paintings.This means that the supply of original Picasso paintings is perfectly inelastic.

The income elasticity of demand measures

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

The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing

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

Barbara,the consummate hostess,proudly announced as she served dessert,"A port is often the perfect end to a meal,sipped with a piece of my scrumptious chocolate cake." Evidently,Barbara views

Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million gallons a day were sold.In October 2004,the price averaged $2.15 a gallon and 14 million gallons were sold.If the demand for gasoline did not shift between these two months,use the midpoint formula to calculate the price elasticity of demand.Indicate whether demand was elastic or inelastic.

Suppose at the current price,the demand for copper is estimated at -3.14.What happens to sales revenue if the government imposes a price ceiling below the free market equilibrium price in the copper market?

Opera Estate Girls' School is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue

If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is a relatively large positive number,then it indicates that

A supply curve that is vertical

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peet's Coffee.

If the quantity supplied of walkie-talkies increases by 5 percent when prices increase by 12 percent,then

According to an article in the Wall Street Journal,unlike airlines,even elite hotels don't have sophisticated systems that can react quickly to changes in demand.Even if they could,many hoteliers say people don't respond that much to lower rates."We've tested this,cutting our rates by $50 [per night],and we didn't see an appreciable response in occupancy," says Jim Schultenover,a vice president for Ritz-Carlton. Source: Jesse Drucker,"In Times of Belt-Tightening,We Seek Reasonable Rates," Wall Street Journal,April 6,2001. Based on the information above,the demand for hotel rooms is

If the slope of a demand curve is equal to -0.1 then

The current price of canvas messenger bags is $36 each and sales of the bags equal 400 per week.If the price elasticity of demand is -2.5 and the price changes to $44,how many messenger bags will be sold per week? Use the midpoint formula.