Exam 5: Elasticity and Its Application

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

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

Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of Ho- Ho's decreased from 120 to 100. What would be the appropriate elasticity to compute? Using the midpoint method, compute this elasticity. What does your answer tell you?

With regard to elasticity, if a firm has a longer time to adjust to a price increase, supply will be more

Suppose demand is given by the equation: At what point along this demand curve will total revenue be maximized?

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

Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 1.8. You should

Figure 5-12 -Refer to Figure 5-12. Sellers' total revenue would increase if the price

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve from A to B represents the

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Which of the following statements is valid when the market supply curve is vertical?

Figure 5-17 -Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

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

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

Figure 5-13 -Refer to Figure 5-13. Between point A and point B on the graph, demand is

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. Good X and Good Y are related as

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. Considering the cross price elasticity of demand for mobile and landline telephone service, is the cross price elasticity of demand positive or negative and do the consumers of Plainville regard these goods as substitutes or complements?

Figure 5-14 -Refer to Figure 5-14. Over which range is the supply curve in this figure the most elastic?