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Exam 5: Elasticity and Its Application

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Question 221

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Which of the following should be held constant when calculating an income elasticity of demand?

A) the price of the good
B) prices of related goods
C) tastes
D) All of the above should be held constant.

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

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Question 222

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If the price elasticity of supply is zero, then

A) supply is more elastic than it is in any other case.
B) the supply curve is horizontal.
C) the quantity supplied is the same, regardless of price.
D) a change in demand will cause a relatively small change in the equilibrium price.

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

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Question 223

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The smaller the price elasticity of demand, the

Demand is said to have unit elasticity if the price elasticity of demand is

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Scenario 5-8 Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000. -Refer to Scenario 5-8. Using the midpoint method, what is the income elasticity of demand for mobile service?

Which of the following expressions represents a cross-price elasticity of demand?

Table 5-2 -Refer to Table 5-2. Using the midpoint method, if the price falls from $100 to $50, the price elasticity of demand is

Figure 5-1 -Refer to Figure 5-1. Between point A and point B on the graph, demand is

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1.

Scenario 5-5 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-5. The equilibrium price will

If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.

If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a result, then the price elasticity of demand is 3.

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Figure 5-7 -Refer to Figure 5-7. For prices below $5, demand is price