Exam 5: Elasticity and Its Applications: Part B

If we observe that when consumers' incomes rise by 10%,the quantity demanded of ice cream increases by 5%,then ice cream is an inferior good.

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.

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

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

The demand for gasoline will respond more to a change in price over a period of five weeks than over a period of five years.

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%,then the price must have decreased by 3%.

Supply tends to be more elastic in the short run and more inelastic in the long run.

The demand for bread is likely to be more elastic than the demand for solid-gold bread plates.

If the cross-price elasticity of demand for two goods is negative,then the two goods are substitutes.

If we observe that when the price of chocolate increases by 10%,quantity demanded falls by 5%,then the demand for chocolate is price inelastic.

If the price elasticity of supply is 0.5 and the quantity supplied decreases by 6%,then the price must have decreased by 3%.

A government program that reduces land under cultivation hurts farmers but helps consumers.

Necessities tend to have elastic demands,whereas luxuries tend to have inelastic demands.

Suppose that when the price rises by 10% for a particular good,the quantity demanded of that good falls by 20%.The price elasticity of demand for this good is equal to 2.0.

The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price.

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

The cross-price elasticity of garlic salt and onion salt is -2,which indicates that garlic salt and onion salt are substitutes.

Helen's Honey Hut supplies 20 jars of honey per week when the price of honey is $6 per jar and supplies 30 jars per week when the price of is $8 per jar,so the price elasticity of supply over this price range is 1.4.