Exam 5: Elasticity and Its Application

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, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000?

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

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The demand for desserts tends to be more inelastic than the demand for red velvet cake.

For which of the following goods would demand be most price elastic: a car, a sedan, a Honda sedan, a Honda Accord, a black Honda Accord?

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Figure 5-5 -Refer to Figure 5-5. At a price of $50 per unit, sellers' total revenue equals

Scenario 5-7 Suppose the demand function for good X is given by: where is the quantity demanded of good X, is the price of good X, and is the price of good Y, which is related to good X. -Refer to Scenario 5-7. Using the midpoint method, if the price of good X is $10 and the price of good Y increases from $8 to $10, the cross price elasticity of demand is about

When a supply curve is relatively flat, the

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

Figure 5-21 -If a supply curve is perfectly vertical, what is the value of the price elasticity of supply?

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

Suppose that Juan Carlos is filling out a survey that he received in the mail. The survey asks him what he would do if the price of his favorite toothpaste increased. Juan Carlos reports that he would switch to a different brand. The survey asks what he would do if the price of all toothpastes increased. Juan Carlos reports that he must use toothpaste, so he would have to adjust his spending elsewhere. These examples illustrate the importance of

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

Figure 5-16 -Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between $6 and $8?

The income elasticity of demand for caviar tends to be

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is