Exam 5: Elasticity and Its Applications: The Elasticity of Demand

For a vertical demand curve,

In the case of perfectly inelastic demand,

An increase in price causes an increase in total revenue when demand is

If a 10% decrease in price for a good results in a 20% increase in quantity demanded,the price elasticity of demand is

Suppose that gasoline prices increase dramatically this month.Lola commutes 100 miles to work each weekday.Over the next few months,Lola drives less on the weekends to try to save money.Within the year,she sells her home and purchases one only 10 miles from her place of employment.These examples illustrate the importance of

Figure 5-3 -Refer to Figure 5-3.Which demand curve is perfectly elastic?

Last year,Tess bought 5 handbags when her income was $54,000.This year,her income is $60,000,and she purchased 7 handbags.Holding other factors constant,it follows that Tess's income elasticity of demand is about

Holding all other forces constant,when the price of gasoline rises,the number of gallons of gasoline demanded would fall substantially over a ten-year period because

If the price elasticity of demand for a good is 0.4,then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

The price elasticity of demand changes as we move along a

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.Your roommate still enjoys Ramen noodles very much and buys even more,but you plan to buy fewer Ramen noodles in favor of foods you prefer more.When looking at income elasticity of demand for Ramen noodles,yours would

Whether a good is a luxury or necessity depends on the

Figure 5-11 -Refer to Figure 5-11.A decrease in price from $20 to $10 leads to a

Suppose good X has a positive income elasticity of demand.This implies that good X could be (i)A normal good. (ii)A necessity. (iii)An inferior good. (iv)A luxury.

The price elasticity of demand for bread

Figure 5-4 -Refer to Figure 5-4.If the price increases in the region of the demand curve between points B and C,we can expect total revenue to

For a particular good,a 5 percent increase in price causes a 2 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00.This implies that a 20 percent increase in the price of hot dogs will cause the quantity of mustard purchased to

Figure 5-5 -Refer to Figure 5-5.The maximum value of total revenue corresponds to a price of

When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,macaroni