Exam 5: Elasticities of Demand and Supply

Is supply more elastic or less elastic as more time passes after a price change? Explain your answer.

-In the figure above, at which point (a, b, or c)along the linear demand curve illustrated would demand be a. most elastic? b. most inelastic?

The price elasticity of supply is always a positive value because i. there is a direct relationship between the price and the quantity supplied. Ii. as the equilibrium price increases, the equilibrium quantity also always increases. Iii. buyers are willing to pay a higher price for larger quantities.

Recently the governor of Vermont proposed that cigarette taxes in Vermont should be increased substantially, from 44 cents a pack to 66 cents a pack. He estimates that Vermont can raise $20 million in revenue from this tax hike. He also pointed out that the neighboring state of New Hampshire was considering an increase in cigarette taxes. a. How can it be that an increase in cigarette taxes will increase tax revenue, because, after all, a higher tax will increase cigarette prices and thereby decrease the quantity demanded? b. If New Hampshire chooses not to increase cigarette taxes, is it likely that Vermont can still raise $20 million in tax revenue? Why or why not? Explain

The cross elasticity of demand for butter and margarine is likely to be

Because the price elasticity of supply for jumbo jets is 0.35, the supply of jumbo jets is

Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are grown by a Colorado farmer. If the price of barley rises to $8 and quantity supplied increases to 130,000 bushels, then using the midpoint method, the price elasticity of supply for barley equals

If the supply of a good decreases and it causes total revenue to increase, this shows that the good has an

Price (dollars per skirt) Quantity demanded (skirts per year) 20 30 35 25 -Using the data in the table above, when the price of a skirt rises from $20 to $35, what is the price elasticity of demand? (Use the midpoint method.)

Suppose the price elasticity of demand for bouquets of flowers is 4.0. You are charging $8 per bouquet. If you want to increase the quantity of bouquets you sell by 20 percent, what price should you charge?

Price (dollars) Quantity demanded (units per week) A 100 40 B 80 60 C 60 80 D 40 100 E 20 120 -The table above gives the demand schedule for a good. Using the midpoint method, find the price elasticity of demand between points A and B, between B and C, between C and D, and between D and E.

The income elasticity of demand for store brands of soda (that is, non-name brands)is negative. What does this fact indicate about consumers' perceptions about the store brands?

The price of the good multiplied by the quantity sold is its

The cross elasticity of demand

If, when the price falls, total revenue increases, demand is

If the price elasticity of demand for opera tickets in Orlando is 1.00, then the demand for opera tickets in Orlando is

If two goods are ________, then an increase in the price of one leads to ________ in the quantity demanded of the other.

If the price elasticity of demand for moose hunting lessons is 4.23, then the demand for moose hunting lessons is

Goods that can be produced at a constant or very gently rising opportunity cost have

The lower the level of income in a country, the