Exam 4: Using Supply and Demand

Figure 4-E -If the price of Good A increases and the demand for Good B increases as well, Goods A and B are most likely complements.

Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased.What is the elasticity of demand facing Bailey's Barber Shop?

Which of the following is associated with relatively elastic demand?

Exhibit 4-C -Refer to Exhibit 4-C.With reference to Graph A, at a price of $5, total revenue equals:

If 400 apple pies are sold at $4 per pie, but 600 apple pies are sold at $3 per pie, we know from the total revenue rule:

Figure 4-E -If the price of pizza falls, the demand for pizza will rise.

If demand is unit elastic:

Based on the table below, what is the producer surplus of the 1^st unit sold assuming this market reaches equilibrium? \ 1.00 7 1 \ 2.00 6 2 \ 3.00 5 3 \ 4.00 4 4 \ 5.00 3 5 \6 .00 2 6 \ 7.00 1 7

Table 4-A Use the following information about demand and supply schedules to answer the question. Price \ 12 5 9 19 14 \ 10 8 12 17 12 \ 8 11 15 15 10 \ 6 13 18 13 8 \ 4 16 21 11 6 \ 2 18 24 9 4 -Refer to Table 4-A.Suppose that D₁ and S₂ are the demand and supply schedules for Product A.If the government imposes a price ceiling of $4:

Figure 4-E -For the price in a market to remain the same, while the quantity traded fell, both supply and demand would have to shift to the left.

Table 4-B Price per gallon Quantity Demanded Quantity Supplied of (thousands of gallons) gasoline (thousands of gallons) \ 4.50 600 2,000 \ 4.25 700 1,900 \ 4.00 800 1,800 \ 3.75 950 1,700 \ 3.50 1,200 1,600 \ 3.25 1,500 1,500 \ 3.00 1,800 1,400 \ 2.75 2,100 1,300 \ 2.50 2,400 1,200 -Refer to Table 4-C.If the government were to remove a price ceiling of $2.00 per gallon in the milk market, the result would be:

Table 4-B Price per gallon Quantity Demanded Quantity Supplied of (thousands of gallons) gasoline (thousands of gallons) \ 4.50 600 2,000 \ 4.25 700 1,900 \ 4.00 800 1,800 \ 3.75 950 1,700 \ 3.50 1,200 1,600 \ 3.25 1,500 1,500 \ 3.00 1,800 1,400 \ 2.75 2,100 1,300 \ 2.50 2,400 1,200 -Refer to Table 4-B.The government imposes a $3.25 price ceiling at the same time there is a substantial decrease in the price of sport utility vehicles.(Assume that sport utility vehicles get very low mileage per gallon.) As a result, the:

Figure 4-E -If watermelons are normal goods, the demand for them will rise as the income of consumers rises.

Figure 4-E -When a demand curve shifts, both the equilibrium price and quantity traded will change in the same direction as a result.

When the price of ulcer medication increased by $20 per 100 tablets, a drug company's revenue increased by $10 million.Its elasticity of demand coefficient (in absolute terms) must be:

The elasticity of supply is defined as the ____ change in quantity supplied divided by the ____ change in price.

If the elasticity of demand for bangles is equal to 1, moving along the demand curve for bangles, an increase in price will:

Based on the table below, what is the total amount of consumer surplus assuming this market reaches equilibrium? \ 1.00 7 1 \ 2.00 6 2 \ 3.00 5 3 \ 4.00 4 4 \ 5.00 3 5 \6 .00 2 6 \ 7.00 1 7

Which of the following is associated with elastic demand?

Figure 4-E -Ceteris paribus, if the price of lumber increases, we would expect an increase in the supply of lumber.