Exam 5: Elasticity and Its Applications: Part A

Suppose the price elasticity of demand for good A is 1.25.If the price of good A increases by 20%,what will be the resulting percentage change in quantity demanded for good A?

Figure 5-21 -Refer to Figure 5-21.Using the midpoint method,what is the price elasticity of supply between $25 and $35?

When the Shaffers had a monthly income of $4,000,they usually ate out 8 times a month.Now that the couple makes $4,500 a month,they eat out 10 times a month.Compute the couple's income elasticity of demand using the midpoint method.Explain your answer.Is a restaurant meal a normal or inferior good to the couple?

Suppose the price of gas increases by 20%.Will demand be more elastic if consumers have 3 weeks or 3 years to adjust to this price change?

Suppose demand is given by the equation: Using the midpoint method,what is the price elasticity of demand between $2 and $4?

Consider the following pairs of goods.For which of the two goods would you expect the demand to be more price elastic? Why? a.water or diamonds b.insulin or nasal decongestant spray c.food in general or breakfast cereal d.gasoline over the course of a week or gasoline over the course of a year e.personal computers or IBM personal computers

What is the price elasticity of demand at any point on a perfectly elastic demand curve?

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

Suppose the price elasticity of demand for a product is 1.If a supplier wants to increase revenue,what change should it make to price,if any?

Suppose demand is given by the equation: Using the midpoint method,what is the price elasticity of demand between $7 and $8?

Suppose a farmer knows that he will be able to harvest and sell 3,000 bushels of wheat.Would he prefer a market in which conditions are favorable and most farmers harvest large crops or a market in which conditions are unfavorable and many farmers harvest small crops? Why?

Suppose the price elasticity of demand for a product is 1.3.If a supplier wants to increase revenue,what change should it make to price,if any?

If the quantity supplied is exactly the same regardless of the price,supply is

Suppose that good X is a luxury and that good Y is a necessity.Which good would you expect to have more price elastic demand?

The measure of how willing consumers are to buy less of a good as its price rises is called

Suppose the price of natural gas,a typical fuel for heating homes,rises in January in Alaska.Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

If the income elasticity of demand for a good is -1.40,is the good a normal or inferior good?

Scenario 5-2 Suppose the demand function for good X is given by: where is the quantity demanded of good X, is the price of good X,and is the price of good Y,which is related to good X. -Refer to Scenario 5-2.Using the midpoint method,if the price of good Y is $10 and the price of good X decreases from $5 to $3,what is the price elasticity of demand for good X? Is the demand elastic,unitary elastic,or inelastic?

Suppose a market has the demand function Q^d=20-0.5P.At what price will total revenue be maximized?

Scenario 5-2 Suppose the demand function for good X is given by: where is the quantity demanded of good X, is the price of good X,and is the price of good Y,which is related to good X. -Refer to Scenario 5-2.Good X and Good Y are related as