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

Goods with many close substitutes tend to have

For which of the following goods is the income elasticity of demand likely highest?

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

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 X is constant at $10 and the price of good Y decreases from $10 to $8,the cross price elasticity of demand is about

Danita rescues dogs from her local animal shelter.When Danita's income rises by 7 percent,her quantity demanded of dog biscuits increases by 12 percent.For Danita,the income elasticity of demand for dog biscuits is

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day.Although she enjoys gourmet cheese,she consumes it sporadically.If the price of Diet Coke rises,Jane decreases her consumption by only a very small amount.But if the price of gourmet cheese rises,Jane decreases her consumption by a lot.These examples illustrate the importance of

Suppose the income elasticity of demand is -0.5 for good X.This implies that a 5% decrease in income will cause the quantity demanded of good X to

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue?

Which of the following is likely to have the most price elastic demand?

For a good that is a necessity,

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and,as a result,the quantity of tortilla chips demanded increases from 200 bags to 300 bags.Using the midpoint method,the price elasticity of demand for tortilla chips in the given price range is

A city wants to raise revenues to build a new municipal swimming pool next year.The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues.The city manager suggests that the city lower the price of admission to raise revenues.Who is correct?

You are in charge of the local city-owned aquatic center.You need to increase the revenue generated by the aquatic center to meet expenses.The mayor advises you to increase the price of a day pass.The city manager recommends reducing the price of a day pass.You realize that

For a good that is a necessity,demand

A city wants to raise revenues to build a new municipal swimming pool next year.The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues.The city manager suggests that the city lower the price of admission to raise revenues.Who is correct?

Scenario 5-1 Suppose that when the average college student's income is $10,000 per year,the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80.Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie,the quantity demanded of Sue's Subs increases from 80 to 100.Suppose also that when the average student's income increases to $12,000 per year,the annual quantity demanded of Patty's Pizza increases from 50 to 60. -Refer to Scenario 5-1.Using the midpoint method,what is the income elasticity of demand for pizza and what does the value indicate about the demand for pizza?

Demand is said to have unit elasticity if the price elasticity of demand is

The price elasticity of demand measures the

When small changes in price lead to infinite changes in quantity demanded,demand is perfectly

Figure 5-9 -Refer to Figure 5-9.If the price falls from point A to point B,total revenue