Exam 4: Market Efficiency and Market Failure

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 per cent increase in the price of beef,holding everything else constant,will cause the quantity of beef demanded to

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8000 units to 10 000 units.Use the midpoint formula to calculate the price elasticity of supply.

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Figure 4-6 -Refer to Figure 4-6.A perfectly inelastic supply curve is shown in

List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.

The larger the share of a good in a consumer's budget,holding everything else constant,the

Over longer periods of time,increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

The price elasticity of demand for Kellogg Corn Flakes is larger in absolute value than the price elasticity for all breakfast cereals.

Which of the following products comes closest to having a perfectly inelastic demand?

If the percentage change in the quantity of teapots demanded is greater than the percentage change in the price of teapots,then

Figure 4-1 -Refer to Figure 4-1.The demand curve on which elasticity changes at every point is given in

Suppose the value of the price elasticity of supply is 4.What does this mean?

The demand for petrol is perfectly inelastic because most people need petrol to drive their cars.

Suppose when Nablom's Bakery raised the price of its breads by 10 per cent,the quantity demanded fell by 15 per cent.What was the effect on sales revenue?

The demand for heating oil in the short run is more elastic than the long-run demand for heating oil.

Holding everything else constant,the demand for a good tends to be more elastic

The absolute value of the price elasticity of demand for telescopes is 1.5.Therefore,telescopes can be classified as a luxury.

You are the manager of a theatre.At present the theatre charges the same admission price of $8 to all customers,regardless of age.You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults.You tell your supervisor that your proposal is likely to increase revenues.What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.

If the demand for a product is elastic,the quantity demanded changes by a larger percentage than the percentage change in price.

The cross-price elasticity between Gillette razors and a related good is -3.4.What happens to demand for the related good if the price of Gillette razors falls by 10 per cent?