Exam 6: Elasticity: the Responsiveness of Demand and Supply

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product,this product is

The cross-price elasticity of demand measures the

When Audrina raised the price of her homemade cookies,her total revenue increased.This suggests that the demand for Audrina's cookies is elastic.

Table 6-4 The publisher of a magazine gives his staff the following information: Current price \ 2.00 per issue Current sales 150,000 copies per month Current revenue \ 300,000 per month Current total costs \ 450,000 per month He tells the staff,"Our costs are currently $150,000 more than our revenues each month.I propose to eliminate this problem by raising the price of the magazine to $3.00 per issue.This will result in our revenue being exactly equal to our cost." -Refer to Table 6-4.Which of the following statements is correct?

Necessities tend to have more inelastic demands than luxuries.

Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Buy.com is 3.5.Based on this information,predict what happens when Amazon.com lowers its DVD prices by 10 percent.

Price elasticity of supply is used to gauge

Which of the following products comes closest to having a perfectly inelastic demand?

If a good has a negative income elasticity of demand,this indicates that the good is

Assume that the market for barley is in equilibrium and the demand for barley is inelastic.Predict what happens to the revenue of barley farmers if a prolonged drought reduces the supply of barley.The drought will cause farm revenue to

Suppose at the going wage rate of $20 per hour,firms can hire as many hours of janitorial services as they desire.If any firm tries to lower the wage rate to $19,it will not be able to hire any janitor.What does this indicate about the supply curve for janitorial services?

If the quantity of walkie-talkies supplied increases by 5 percent when price increases by 12 percent,then

If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the quantity of lobster supplied,then the supply of lobster is

Figure 6-8 -Refer to Figure 6-8.Identify the two goods which are complements.

Figure 6-9 -Refer to Figure 6-9.The data in the diagram indicates that DVDs are

If the demand for a life-saving drug was perfectly inelastic and the price doubled,the quantity demanded would

Figure 6-2 -Refer to Figure 6-2.The absolute value of the price elasticity of demand at points a and b is 1.What is the value of Pb?

According to an article in the Wall Street Journal,unlike airlines,even elite hotels don't have sophisticated systems that can react quickly to changes in demand.Even if they could,many hoteliers say people don't respond that much to lower rates."We've tested this,cutting our rates by $50 [per night],and we didn't see an appreciable response in occupancy," says Jim Schultenover,a vice president for Ritz-Carlton. Source: Jesse Drucker,"In Times of Belt-Tightening,We Seek Reasonable Rates," Wall Street Journal,April 6,2001. Based on the information above,the demand for hotel rooms is

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterize the product.