Exam 5: Elasticity and Its Application

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Suppose the price of natural gas, a typical fuel for heating homes, rises in January in Alaska. Would you expect the price elasticity of demand for natural gas to more inelastic immediately after the price increase or at some point in the future?

If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

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 price will

Why was OPEC unable to maintain high oil prices in the long run?

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.

Table 5-5 -Refer to Table 5-5. When price is between $5 and $9, demand is

Demand is said to be unit elastic if quantity demanded

An advantage of using the midpoint method to calculate the price elasticity of demand is that it uses the metric system.

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

There are fewer farmers in the United States today than 200 years ago because of

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 change in equilibrium price will be

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

When demand is perfectly inelastic, the price elasticity of demand

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

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