Exam 6: Describing Supply and Demand: Elasticities

It is estimated that a 3 percent drop in the price of Asian and European cars will decrease the demand for American cars by 0.84 percent. From this information one can conclude that:

The demand for a good is elastic. Which of the following would be the most likely explanation for this?

If demand is highly inelastic and supply shifts to the right, the equilibrium price will rise significantly while quantity will increase only slightly.

Along a straight-line demand curve, elasticity:

Refer to the graph shown. When price rises from $30 to $40:

Compute the approximate elasticity of supply from the following data:

If pizzas and quesadillas are substitutes and the price of pizzas decreases, we would expect to see:

If demand is highly inelastic and supply shifts to the right, price:

Refer to the graph shown. Between points E and F demand is:

Income elasticity is defined as the:

For substitutes:

Refer to the following graph. Since the supply curve intersects the horizontal axis, all the points along the supply curve shown are inelastic.

Which of the following statements is true about a downward-sloping demand curve that is a straight line?

A newspaper recently lowered its price from 50 cents to 30 cents, causing the number of newspapers sold to increase from 240,000 to 280,000. Other things equal, the data imply that the elasticity of demand for this newspaper is about:

If quantity demanded falls by 25 percent when price rises by 50 percent, demand is said to be:

A sporting goods store observes that as they reduce the price of squash balls from $5 to $4, their quantity demanded rises from 200 to 220. Rounding to the nearest tenth, they correctly compute the elasticity of demand of squash balls to be:

Refer to the following graph. Which of the following curves demonstrates a unit elastic demand curve? (That is, a curve where elasticity is 1 at each point.)

When the demand curve is highly inelastic, there is a strong incentive for suppliers to find a way to collectively reduce the quantity sold in the market and raise the price of the product.

In California, the price elasticity for vanity license plates is .5 and their price is $78. California is:

Refer to the graph shown. Between points A and B, demand is: