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Exam 5: Elasticity and Its Application

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Question 171

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

A) increase by 4%.
B) increase by 6.25%.
C) decrease by 4%.
D) decrease by 6.25%.

E) All of the above
F) B) and C)

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Question 172

Multiple Choice

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For a vertical demand curve,

A) the slope is undefined,and the price elasticity of demand is equal to 0.
B) the slope is equal to 0,and the price elasticity of demand is undefined.
C) both the slope and price elasticity of demand are undefined.
D) both the slope and price elasticity of demand are equal to 0.

E) A) and C)
F) B) and C)

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Question 173

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Suppose that two supply curves pass through the same point.One is steep,and the other is flat.Which of the following statements is correct?

Table 5-1 -Refer to Table 5-1.Which of the following is consistent with the elasticities given in Table 5-2?

Elasticity measures how responsive quantity is to changes in price.

Suppose that good X is a luxury and that good Y is a necessity.Which good would you expect to have more price inelastic demand?

For a particular good,a 10 percent increase in price causes a 5 percent decrease in quantity demanded.Which of the following statements is most likely applicable to this good?

Suppose that good X has few close substitutes and that good Y has many close substitutes.Which good would you expect to have more price inelastic demand?

At a price of $1.20,a local coffee shop is willing to supply 100 cinnamon rolls per day.At a price of $1.40,the coffee shop would be willing to supply 150 cinnamon rolls per day.Using the midpoint method,the price elasticity of supply is about

Table 5-2 -Refer to Table 5-2.Using the midpoint method,if the price falls from $40 to $20,the price elasticity of demand is

If the demand for donuts is elastic,then a decrease in the price of donuts will

Table 5-3 -Refer to Table 5-3.Using the midpoint method,what is the price elasticity of demand between $6 and $8?

If the price elasticity of demand for aluminum foil is 1.45,then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

If the price elasticity of demand is equal to 0,then demand is unit elastic.

Measures of elasticity enhance our ability to study the magnitudes of changes in quantities in response to changes in prices or income.

When demand is inelastic,a decrease in price increases total revenue.

You and your college roommate eat three packages of Ramen noodles each week.After graduation last month,both of you were hired at several times your college income.You still enjoy Ramen noodles very much and buy even more,but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more.When looking at income elasticity of demand for Ramen noodles,yours would

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and,as a result,the quantity of tortilla chips demanded increases from 200 bags to 300 bags.Using the midpoint method,the price elasticity of demand for tortilla chips in the given price range is

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

If we observe that when the price of chocolate decreases by 10%,quantity demanded increases by 25%,then the demand for chocolate is price elastic.