Exam 6: Describing Supply and Demand: Elasticities

If average movie ticket prices rise by about 5 percent and attendance falls by about 2 percent, other things being equal, the elasticity of demand for movie tickets is about:

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

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

What is the cross-price elasticity of demand?

Demonstrate graphically and explain verbally a perfectly elastic demand curve.

An economist estimates that on average, for every 1 percent increase in income, the quantity of European cars demanded increases by 1.93 percent. From this information one can conclude that European cars are:

Repeated hurricanes in Florida have caused some retirees to choose to retire to Arizona instead. Based on this information, retirement housing in Florida and that in Arizona are what kinds of goods?

What is the key factor in determining how elastic or inelastic a demand curve will be? Explain.

Refer to the table shown to answer the question. Between $2.20 and $2.40, demand is: Price Qu.ntity Demanded \ 1.60 130 \ 1.80 120 \ 2.00 110 \ 2.20 100 \ 2.40 90 \ 2.60 80

Refer to the graph shown. Calculate the approximate average elasticity of demand as the price falls from $18 to $0:

How can the income elasticity of demand be used to determine whether a good is a normal good or an inferior good?

If the supply curve intersects the vertical (price)axis, the supply curve has an elasticity:

Suppose you own two Domino's Pizza franchises in your town.After reading the latest issue of Pizza Monthly,you have concluded that both of your locations are generating below average revenue.You hire a local economics professor to conduct a pricing experiment.Here is her report: Location 1: A 10% increase in price resulted in a 5% drop in the quantity demanded. Location 2: A 10% increase in the price resulted in a 20% drop in the quantity demanded. Using this information,how should you alter your pricing policy to increase your revenue at each location?

If quantity demanded changes infinitely when the price changes, the demand:

If the price of corn goes up by $1 a bushel and the quantity supplied rises by 100 bushels, the price elasticity of supply has to be 100.

George Davis and Michael Wohlgenant estimate that for every 1 percent increase in the price of Christmas trees, quantity demanded falls by 0.6 percent. The demand for Christmas trees is:

What will happen to total revenue of a firm if it raises its price and its demand is elastic (or inelastic)?

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.

Refer to the graph shown. At which point is elasticity zero?

If supply is highly elastic and demand shifts to the left: