Exam 5: Elasticity and Its Application

Scenario 5-6 Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000. -Refer to Scenario 5-6. Considering the income elasticity, what type of good is mobile telephone service?

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

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

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

If we observe that when a consumer's income rises by 10%, the quantity demanded of chocolate candy bars increases by 15%, then chocolate candy bars are are a normal good for that consumer.

Normal goods have positive income elasticities of demand, while inferior goods have negative income elasticities of demand.

Scenario 5-4 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 5-4. Total consumer spending on milk will

The value of the price elasticity of demand for a good will be relatively large when

Figure 5-12 -Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Price elasticity of demand along a linear, downward-sloping demand curve decreases as price falls.

Table 5-5 -Refer to Table 5-5. When price is between $5 and $9, demand is

Tyler purchases 5 pounds of hot dogs per month when his monthly income is $2,000 and 4 pounds of hot dogs per month when his monthly income is $2,200. Tyler's income elasticity of demand for hot dogs is

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

An increase in price causes an increase in total revenue when demand is

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

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, when income equals $5,000, what is the price elasticity of demand between $8 and $12?

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

Suppose the point (Q = 3,400, P = $20) is the midpoint on a certain downward-sloping, linear demand curve. Then

When a supply curve is relatively flat, the