Exam 5: Elasticity and Its Application

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. Total consumer spending on milk will

Income elasticity of demand measures how

If the demand for bananas is elastic, then an increase in the price of bananas will

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

If the price elasticity of demand is equal to 0, then demand is unit elastic.

Figure 5-18 -Refer to Figure 5-18. Using the midpoint method, what is the price elasticity of supply between $4 and $5?

Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

For which of the following goods is the price elasticity of demand most inelastic?

Suppose you manage a baseball stadium. To pay the salary for a star player, you would like to increase the total revenue from ticket sales. Should you increase or decrease the price of a ticket to increase revenue? Explain.

If demand is price inelastic, then when price rises, total revenue

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about

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

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

Figure 5-12 -Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point Y and point Z is

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.

Figure 5-11 -Refer to Figure 5-11. If price increases from $10 to $20, total revenue will

Figure 5-4 -Refer to Figure 5-4. The section of the demand curve at point B represents the

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?