Exam 5: Elasticity and Its Application

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

For a good that is a necessity, demand

Demand is said to be inelastic if

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?

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be

Figure 5-8 -Refer to Figure 5-8. When the price is $15, total revenue is

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

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

In which of the following situations will total revenue increase?

If the price elasticity of demand is equal to 0, then demand is unit elastic.

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Which of the following statements is correct?

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

For a vertical demand curve,

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?

Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. The equilibrium price will

Necessities such as food and clothing tend to have

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Scenario 5-6 Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar. -Refer to Scenario 5-6. What would we expect to observe in the caviar market?