Exam 5: Elasticity and Its Application

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 5-8 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 income elasticity, what type of good is mobile telephone service?

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

Suppose good X has a negative income elasticity of demand. This implies that good X is

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

The price elasticity of supply measures how responsive

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

When demand is inelastic, the price elasticity of demand is

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is

The midpoint method is used to compute elasticity because it

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about

If we observe that when the price of chocolate increases by 10%, total revenue increases by 10%, then the demand for chocolate is unit price elastic.

As price elasticity of supply increases, the supply curve

A good will have a more elastic demand, the

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

Figure 5-15 -Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points C and D?

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

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should

Which of the following statements does not help to explain why government drug interdiction increases drug-related crime?

Which of the following statements is not valid when the market supply curve is vertical?