Exam 5: Elasticity and Its Applications: Part A

Scenario 5-6 Consider the markets for mobile and landline telephone service.Suppose that when the average income of residents of Plainville is $55,000 per year,the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000.Suppose that when the price of mobile service rises from $100 to $120 per month,the quantity demanded of landline service decreases to 11,000.Suppose also that when the average income increases to $60,000,the quantity demanded of mobile service increases to 33,000. -Refer to Scenario 5-6.Considering the cross price elasticity of demand for mobile and landline telephone service,is the cross price elasticity of demand positive or negative and do the consumers of Plainville regard these goods as substitutes or complements?

Suppose a market has the demand function Q^d=20-0.5P.Using the midpoint method,what is the price elasticity of demand between $30 and $40?

Suppose demand is given by the equation: Using the midpoint method,what is the price elasticity of demand between $1 and $2?

Scenario 5-6 Consider the markets for mobile and landline telephone service.Suppose that when the average income of residents of Plainville is $55,000 per year,the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000.Suppose that when the price of mobile service rises from $100 to $120 per month,the quantity demanded of landline service decreases to 11,000.Suppose also that when the average income increases to $60,000,the quantity demanded of mobile service increases to 33,000. -Refer to Scenario 5-6.Using the midpoint method,what is the cross price elasticity of demand for landline and mobile service?

Figure 5-21 -Refer to Figure 5-21.Using the midpoint method,what is the price elasticity of supply between $5 and $15?

Suppose that good X has few close substitutes and that good Y has many close substitutes.Which good would you expect to have more price elastic demand?

With regard to elasticity,if a firm has a longer time to adjust to a price increase,supply will be more

If the cross-price elasticity of demand between two goods is positive,what is the relationship between the two goods?

Scenario 5-6 Consider the markets for mobile and landline telephone service.Suppose that when the average income of residents of Plainville is $55,000 per year,the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000.Suppose that when the price of mobile service rises from $100 to $120 per month,the quantity demanded of landline service decreases to 11,000.Suppose also that when the average income increases to $60,000,the quantity demanded of mobile service increases to 33,000. -Refer to Scenario 5-6.Considering the income elasticity,what type of good is mobile telephone service?

Suppose the price elasticity of demand for a product is 0.5.If a supplier wants to increase revenue,what change should it make to price,if any?

In the short run,as compared to the long run,both the price elasticity of demand and the price elasticity of supply tend to be more

Figure 5-21 -Refer to Figure 5-21.Using the midpoint method,what is the price elasticity of supply between $15 and $25?

Suppose a freeze in Florida significantly reduces the supply of oranges this year.As a result,would you expect the total revenue from the sale of orange juice to rise or fall? Explain.

If the income elasticity of demand for a good is 0.56,is the good a normal or inferior good?

Suppose demand is given by the equation: At what price will total revenue be maximized?

Adam and Barb go to the store to purchase some lottery tickets.Without looking at the price,Adam says "I'll take 10 lottery tickets," and Barb says "I'll take $10 worth of lottery tickets." What is each person's price elasticity of demand for lottery tickets?

With regard to elasticity,as a firm nears its production capacity,supply becomes more

Suppose that good X has few close substitutes and that good Y has many close substitutes.Which good would you expect to have more price inelastic demand?

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

If the cross-price elasticity of demand between two goods is negative,what is the relationship between the two goods?