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50 Cards in this Set
- Front
- Back
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Elasticity is
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a measure of how much buyers and sellers respond to changes in market conditions
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The price elasticity of demand measures how much
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quantity demanded responds to a change in price
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Suppose there is a 6% increase in the price of good X and a resulting 6% decrease in the quantity of X demanded. Price Elasticity of demand for X is
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1
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If the price elasticity of demand for a good is 4.0, then a 10% increase in price results in a
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40% decrease in quantity demanded
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For a particular good, a 5% increase in price causes a 15% decrease in quantity demanded. What is a good explanation for this?
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there are many close substitutes for this good
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Goods with many close substitutes tend to have
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more elastic demands
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For a good that is a luxury, demand
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tends to be elastic
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Suppose that quantity demanded rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is
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inelastic, and equal to 0.67
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Demand is said to be inelastic if
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the quantity demanded changes only slightly when the price of the good changes
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Suppose the price of potato chips decreases from $1.45 to $1.25 and, as a result, the quantity of potato chips demanded increases from 2,000 to 2,000. Using the midpoint method, the price of elasticity of demand for potato chips in the given range is
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0.64
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Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. What event is consistent with a 10% decrease in the quantity of the good demanded
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a 13.33% increase in the price of the good
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Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. What event is consistent with a 0.1% increase in the price of a good?
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the quantity of the good demanded decreases by 0.2%
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Refer to Table 5-2.
Using the mid-point method, if the price falls from $80 to $60, the absolute value of the price elasticity of demand is |
2.33
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Refer to Table 5-2.
Using the mid-point method, if the price falls from $60 to $40, the absolute value of the price elasticity of demand is |
1
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Refer to Table 5-2.
Using the mid-point method, if the price falls from $40 to $20, the absolute value of the price elasticity of demand is |
0.43
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Refer to Table 5-2.
Using the mid-point method, if the price falls from $60 to $40, the price elasticity of demand is |
unit elastic
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Refer to Table 5-2.
Using the mid-point method, if the price falls from $80 to $60, the price elasticity of demand is |
elastic
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Refer to Table 5-2.
Using the mid-point method, if the price falls from $40 to $20, the price elasticity of demand is |
inelastic
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Refer to the figure above.
Between point A and B, price elasticity of demand is equal to |
1.5
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Refer to the figure above.
Between point A and B, the slope is equal to |
-1/4 and the price elasticity of demand is equal to 3/2
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Refer to the figure above.
Between point A and B, demand is |
elastic, but not perfectly elastic
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Ryan says that he would buy one cup of coffee everyday regardless of the price. If he is telling the truth, Ryan's
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demand for coffee is perfectly inelastic
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Fiona's Fish Emporium increased its total monthly revenue from $1,500 to $1,800 when it raised the price of fish from $5 to $9. The price elasticity of demand for Fiona's Fish Emporium is
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0.70
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A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?
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the answer depends on the price elasticity of demand
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A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?
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The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic
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Refer to the figure above.
Using the midpoint method, the price elasticity of demand between Point A and Point B is about |
3.0
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Refer to the figure above.
Using the midpoint method, the price elasticity of demand between Point C and Point D is about |
0.54
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Refer to the figure above.
If the price falls from point A to Point B, total revenue |
increases, and demand is price elastic
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Refer to the figure above.
If the price falls from point D to Point C, total revenue |
increases, and demand is price inelastic
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Suppose good X has a negative income elasticity of demand. This implies that good X is
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an inferior good
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suppose good X has a positive income elasticity of demand. This implies that good X could be
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a normal good, a necessity, or a luxury
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What type of good would have a positive and relatively large income elasticity of demand?
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luxuries
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Assume that a 4% increase in income results in a 2% increase in the quantity demanded of a good. The income elasticity of demand for the good is
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positive and the good is a normal good
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Assume that a 4% decrease in income results in a 6% increase in the quantity demanded of a good. The income elasticity of demand for the good is
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negative, and the good is an inferior good
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Reta's income elasticity of demand for steak is 1.50. All else equal, this means that if her income increases by 20% she will buy
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30% more steak dinners
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When her income increased from $10,000 to $20,000. Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni
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is an inferior good with an income elasticity of -1 and soy burgers are normal goods with an income elasticity of 1
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Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method the cross price elasticity of demand is
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-1.0 and X and Y are complementst
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The cross-price elasticity of demand can tell us whether goods are
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complements or substitutes
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If the cross-price elasticity of demand is negative, then the two goods are
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complements
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If the cross-price elasticity of demand is positive, then the two goods are
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substitutes
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Suppose the cross-price elasticity of demand between hotdogs and mustard is -2.00. This implies that a 20% increase in the price of hotdogs will cause the quantity of mustard purchased to
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fall by 40%
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Sandra purchases 5 pounds of coffee and 10 pounds of milk per month when the price of coffee is $10 per pound. She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound. Sandra's cross-price elasticity of demand for coffee and milk is
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-0.82 and they are complements
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If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase is about
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2%
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If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about
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4.2%
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Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melonds that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?
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0.89
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Refer to the figure above.
Using the midpoint method, what is the price elasticity of supply between $4 and $6? |
1.25
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Refer to the figure above.
Using the midpoint method, what is the price elasticity of supply between $6 and $8? |
1.17
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If sellers do not adjust their quantities supplied at all in response to a change in price.
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supply is perfectly inelastic
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Refer to the figure above.
Which of the following statements is not correct? a. Supply Curve A is perfectly inelastic b. Supply Curve B is perfectly elastic c. Supply Curve C is unit elastic d. Supply Curve D is more elastic than supply curve C |
Supply Curve C is unit elastic
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Refer to the figure above.
Which of the following statements is correct? a. Supply Curve A is perfectly elastic b. Supply Curve B is perfectly inelastic c. Supply Curve D is unit elastic d. Supply Curve C is more inelastic than supply curve D |
Supply Curve C is more inelastic than supply curve D
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