Exam 5: Elasticity and Its Application

Josh mows lawns. If the demand for lawn-mowing service is elastic and Josh wants to increase his total revenue, he should

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is

Figure 5-9 -Refer to Figure 5-9. Using the midpoint method, the price elasticity of demand between point C and point D is about

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

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

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

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

The price elasticity of supply measures how responsive

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 quantity will

The demand for Godiva mint chocolates is likely quite elastic because

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

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

Table 5-7 The following table shows a portion of the demand schedule for a particular good at various levels of income. -Refer to Table 5-7. Using the midpoint method, at a price of $8, what is the income elasticity of demand when income rises from $7,500 to $10,000?

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then

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

Table 5-8 -Refer to Table 5-8. Using the midpoint method, the income elasticity of demand for good Y is