Exam 5: Elasticity and Its Application

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

Suppose a market has the demand function Qd=20-0.5P. Using the midpoint method, what is the price elasticity of demand between $30 and $40?

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

Figure 5-14 -Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between $16 and $40?

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Demand is said to be price elastic if

For a horizontal demand curve,

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Scenario 5-8 Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000. -Refer to Scenario 5-8. Using the midpoint method, what is the income elasticity of demand for mobile service?

Figure 5-5 -Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equals

How did the farm population in the United States change between 1950 and today?

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

Figure 5-10 -Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

In general, demand curves for luxuries tend to be price elastic.

Table 5-6 -Refer to Table 5-6. Using the midpoint method, demand is unit elastic when quantity demanded changes from

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

Which of the following is not possible?

Table 5-5 -Refer to Table 5-5. As price rises from $7 to $8, the price elasticity of demand using the midpoint method is approximately

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is