Exam 5: Elasticity and Its Application

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

Scenario 5-4 The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. -Refer to Scenario 5-4. The change in equilibrium quantity will be

For which pairs of goods is the cross-price elasticity most likely to be negative?

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

When demand is elastic, an increase in price will cause

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

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

If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would

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

Figure 5-5 -Refer to Figure 5-5. Using the midpoint method, between prices of $20 and $30, price elasticity of demand is about

The demand for Rice Krispies is more elastic than the demand for cereal in general.

For a good that is a luxury, demand

Figure 5-10 -Refer to Figure 5-10. Total revenue when the price is P1 is represented by the areas)

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

Figure 5-21 -Refer to Figure 5-21. Using the midpoint method, what is the price elasticity of supply between $5 and $15?

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

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, the cross price elasticity of demand is

Along the elastic portion of a linear demand curve, total revenue rises as price rises.

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