Exam 6: Describing Supply and Demand: Elasticities

Consider the following demand curve: What is the price elasticity at point A? At point B?

Under which of the following two scenarios would demand be more elastic? Explain. (a) Demand for a new car. (b) Demand for a tank of gas for your current car.

Under which of the following two scenarios would demand be more elastic? Explain. (a) Demand for blood pressure medicine by those with high blood pressure. (b) Demand for chemical-free hair coloring.

Demonstrate graphically and explain verbally the impact on price and quantity when supply decreases and demand is highly elastic.

Define the price elasticity of demand.

Define the price elasticity of supply.

Bill's Homemade Pizza recently increased the price of its super jumbo size pepperoni pizza by 12%. As a result of this price increase the quantity demanded for this type of pizza decreased by 3%. What is the price elasticity of demand for Bill's super jumbo size pepperoni pizza?

What are substitute goods? Give an example.

How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?

What happens to total revenue if a firm raises its price and its demand is elastic?

The elasticity of demand for sunscreen is 0.8 and the elasticity of supply is 2.2. Suppose that the demand for sunscreen increased by 10% during an unseasonably hot month. Calculate the percentage change in the equilibrium price of sunscreen.

Suppose that the price elasticity of demand is 6. If price rises by 10% how much will quantity demanded fall?

What is the cross-price elasticity of demand?

Consider the following three diagrams: (a) Which of the diagrams above demonstrates a unit elastic supply curve? How can you tell? (b) Which of the diagrams above demonstrates an inelastic supply curve? How can you tell?

Demonstrate graphically and explain verbally the impact of an increase in income on the demand of a normal good.

Consider the following demand curve: (a) Calculate the elasticity of demand between points A and B. (b) Calculate the elasticity of demand between points B and C.

Demonstrate graphically and explain verbally a perfectly elastic demand curve.

What is the income elasticity of demand?

Suppose that the price elasticity of supply is 0.5. If price falls by 10% how much will quantity supplied fall?

Under which of the following two scenarios would demand be more elastic? Explain. (a) Demand for a camera. (b) Demand for a 35 mm SLR camera with auto rewind, advance, zoom, and flash.