Exam 5: Elasticity and Its Application

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition­education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program

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

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

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t- shirt maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t- shirts is about

Figure 5-4 -Refer to Figure 5-4. Assume the section of the demand curve from A to B corresponds to prices between $6 and $12. Then, when the price increases from $8 to $10,

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

Scenario 5-3 Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. -Refer to Scenario 5-3. The price elasticity of supply for aged cheddar cheese could be

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

Figure 5-19 -Refer to Figure 5-19. Which of the following statements is not correct?

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied= 250, price = $2.50). Using the midpoint method, the price elasticity of supply is about

Suppose the price elasticity of demand for a product is 0.5. If a supplier wants to increase revenue, what change should it make to price, if any?

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's

Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why? a. water or diamonds b. insulin or nasal decongestant spray c. food in general or breakfast cereal d. gasoline over the course of a week or gasoline over the course of a year e. personal computers or IBM personal computers

When quantity demanded responds strongly to changes in price, demand is said to be

Scenario 5-1 Suppose that when the average college student's income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60. -Refer to Scenario 5-1. Using the midpoint method, the cross price elasticity of demand is

A linear, upward-sloping supply curve has