Exam 6: Elasticities

A family friend is shopping for an exclusive Vera Wang wedding gown for $8,000 but feels that the price is excessive. She argues that the company should lower prices not only to benefit customers but also to increase the company's revenues and profits. What has she assumed about the price elasticity of demand for these gowns? Is her assumption likely to be correct or incorrect? Why?

The Shoe Emporium reduces the price of its shoes by 50% and finds that the quantity demanded for its shoes increases more than 80%. The demand for shoes from The Shoe Emporium appears to be:

Demand is relatively elastic when the price elasticity coefficient exceeds 1.0.

Elasticity of demand will ____ as the availability of substitutes ____.

When two goods have negative cross elasticities of demand and positive income elasticities, they are:

A jeweler cut prices in his store by 20%. As a result:

If the demand curve for X has twice the elasticity of the demand curve for Y, then for the same percentage decrease in price, the percentage increase in the quantity of X demanded would be twice that for Y.

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It lowered prices 10% and found that the number of customers rose by almost 50%. This means:

If you and your business partner are trying to increase your total revenue, and you want a lower price than she does, it could be because you think the relevant demand curve is more elastic than your partner does.

If the cross elasticity of demand coefficient for potato chips and pretzels equals 1.5:

When demand and income move in the same direction, a good is said to be:

The longer the time buyers have to respond to a decrease in price, the more likely it is that the total revenue for the good in question would increase as a result.

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:

​Exhibit 6-4 -Refer to Exhibit 6-4. Graph B represents a demand curve that is relatively ____in the range illustrated. Total revenue ____ as the price decreases from $10 to $5.

If a good has a perfectly inelastic short-run supply curve, an increase in demand will:

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

If the short run elasticity of supply for a product is 0.8, in the long run elasticity, supply:

An increase in demand will increase total revenue:

A tax is imposed on orange juice. Consumers will bear no burden from this tax if the:

A "war on drugs" is waged, and, as a result, a larger quantity of drugs flowing into the United States is seized and more drug traffickers are arrested. If demand for drugs is relatively elastic, one would expect the total expenditure on drugs to: