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Exam 6: Elasticity

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Question 51

Multiple Choice

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Refer to the data. Suppose quantity demanded increased by 12 units at each price, changing the equilibrium price in a direction and an amount for you to determine. Over that price range, supply is

A) perfectly elastic.
B) perfectly inelastic.
C) elastic.
D) inelastic.

E) None of the above
F) B) and C)

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Question 52

Multiple Choice

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The law of supply suggests that the price-elasticity of supply is

A) positive.
B) negative.
C) always greater than 1.
D) always less than 1.

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

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Question 53

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If changes in demand cause significant changes in equilibrium price, then supply must be relatively inelastic.

If the coefficient of cross elasticity of demand is positive, the two products are complementary goods.

At a price of $10 per unit, Gadgets Inc. is willing to supply 14,000 gadgets, while United Gadgets is willing to supply 11,000 gadgets. If the price were to rise to $14 per unit, their respective quantities supplied would rise to 16,000 and 15,000. If these are the only two firms supplying gadgets, what is the elasticity of supply in the market for gadgets?

Refer to the above graph. If the price decreases from P₃ to P₂, then the total revenue will lose area

Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities.

The price of season tickets to a performing arts theater decreases by 4 percent. As a result, the quantity demanded increases by 6 percent. The price elasticity of demand for season tickets is

The price elasticity of demand of a straight-line demand curve is

The cross elasticity of demand for product X with respect to the price of product Y is −1.2. It can be inferred that X and Y are

Ford Motor Company announced a major rebate program for its cars and trucks. The rebate program amounts to a simple reduction in price. The company executives hope to increase revenue as a result of this rebate program. What economic explanation would justify this decision?

A study of mass-transit systems in American cities revealed that in the long run, revenues generally decline after substantial fare increases. This would suggest that

Cross elasticity of demand is

Income elasticity measures the effect of a change in income on the purchases of some good or service.

A positive cross-elasticity of demand between two goods indicates that the two goods are both normal goods.

The formula for cross elasticity of demand is percentage change in

Answer the question based on the following data. What is the price elasticity of demand over the range of $18 to $20?

If a firm can sell3,000 units of product A at $10 per unit and5,000 at $8, then

If a firm finds that it can sell $13,000 worth of a product when its price is $5 per unit and $11,000 worth of it when its price is $6, then

When demand is price-elastic, an increase in price will lead to increased total consumer spending for the product.