Exam 5: Elasticity and Its Application

Table 5-1 -Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

An increase in price causes an increase in total revenue when demand is

Figure 5-3 -Refer to Figure 5-3. The demand curve representing the demand for a luxury good with several close substitutes is

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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 equilibrium quantity will

Table 5-13 Consider the following demand schedule. -Refer to Table 5-13. Using the midpoint method, demand is unit elastic when price changes from

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of

A key determinant of the price elasticity of supply is

For which of the following goods is the income elasticity of demand likely lowest?

Which of the following is likely to have the most price elastic demand?

Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t- shirts is about

For which of the following goods is the income elasticity of demand likely highest?

Figure 5-3 -Refer to Figure 5-3. Which demand curve is perfectly elastic?

If the price elasticity of demand for a good is 0.3, then a 20 percent decrease in price results in a

Scenario 5-7 Suppose the demand function for good X is given by: where is the quantity demanded of good X, is the price of good X, and is the price of good Y, which is related to good X. -Refer to Scenario 5-7. Using the midpoint method, if the price of good Y is $10 and the price of good X decreases from $5 to $3, what is the price elasticity of demand for good X? Is the demand elastic, unitary elastic, or inelastic?

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to