Question

1) Using the midpoint method, the price elasticity of demand is determined to be about 0.85. If there is a 10% decrease in the quantity demanded of the product then what effect would this have on the price of the product?

A decrease in the price of the product from $8.50 to $10 |

A 11.8% increase in the price of the product |

An increase in the price of the product from $8.50 to $10 |

2)The ________ is negative for complementary goods and positive for substitute goods.

income elasticity of demand |

cross-price elasticity of demand |

price elasticity of demand |

3)You read an article stating that HTC’s latest cell phone price has increased from $450 to $550. At the same time the quantity demanded for the Samsung Galaxy 7s increases from 1000 to 1850. Calculate the cross price elasticity of demand using the midpoint method. Are these two cell phones complements or substitutes?

The cross-price elasticity of demand is 2.98 and they are substitutes. |

The cross-price elasticity of demand is -2.98 and they are compliments. |

The cross-price elasticity of demand is .33 and they are substitutes. |

4)What is the price elasticity of demand for designer shoes if for every 20% price increase clothing demand decreases by 5%. The price elasticity of demand would be

-.5; inelastic |

-.25; inelastic |

-4; elastic |

5)Another name for calculating percentage changes is computing

the initial method. |

the arc approach. |

growth rates. |

6)The equation for calculating the price elasticity of demand

takes into account slope. |

does not use percent change in the numerator and denominator. |

uses percent change in both the numerator and denominator. |

7)If the change % in quantity and % change in price from a graph for gasoline is less than 1, it is considered

inelastic. |

unitary. |

elastic. |

Answer #1

Question 1

Price elasticity of demand = 0.85

% decrease in quantity demanded = 10

Quantity demanded decreases when price increases.

So,

% increase in price = % decrease in quantity demanded/Price elasticity of demand = 10/0.85 = 11.8

Thus,

The price of the product will increase by 11.8%

**Hence, the correct answer is
the option (2).**

Question 2

Elasticity with respect to complementary and substitute goods or related goods is referred to as cross price elasticity of demand.

So,

The **cross-price elasticity
of demand**
is negative for complementary goods and positive for substitute
goods.

**Hence, the correct answer is
the option (2).**

1. What is the numerical value for the price elasticity of
demand if a price change causes no change in quantity
demanded?________ What is the numerical value for elasticity of
demand if a price change causes no change in total revenue?________
What is the elasticity of demand for a horizontal demand
curve?________ What is the elasticity of demand if a price increase
leads to an increase in total revenue? elastic /
inelastic. What is the numerical value for the elasticity...

Determine the price elasticity of demand, the cross-price
elasticity of demand or the income elasticity in the following
scenarios.
a. Consider the market for coffee. Suppose the price rises from
$4 to $6 and quantity demanded falls from 120 to 80. What is price
elasticity of demand? Is coffee elastic or inelastic?
b. John’s income rises from $20,000 to $22,000 and the quantity
of hamburger he buys each week falls from 2 pounds to 1 pound. What
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a) Using the percentage change method, calculate the cross
elasticity if the price of margarine falls from $2 to $1.60 and the
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a product is 2, how much would income need to change for quantity
to increase by 20%? Is this a normal or inferior good?

Assume economists have determined that the price elasticity of
demand for housing in a given range of the demand curve is -1.75.
Suppose that the price of housing increases by 10 percent.
Given the value of price elasticity of demand, is
demand for housing elastic or inelastic in the given range of the
demand curve?
What happens to quantity demanded of housing (what is the
percentage change in the quantity demanded of housing) as
price of housing increases by 10%?...

Taking the absolute value of the cross-price elasticity of
demand is incorrect because it would:
remove the ability to tell whether the two products have
inelastic demand or elastic demand.
cause the value of the cross-price elasticity of demand to
become smaller.
remove the ability to tell whether the two products are
substitutes or complements.
cause the value of the cross-price elasticity of demand to
become zero.
The percent change in insulin demanded for any price change is
zero. The...

1) The income elasticity of demand for Good Z is –0.2, while the
cross-price elasticity of demand between Good Z and Good Y is 1.63.
Which of the following statements is correct regarding Good Z?
Group of answer choices
Good Z is a inferior good, and Goods Z and Y are
complements.
Good Z is an inferior good, and Goods Z and Y are
substitutes.
Good Z is a normal good, and Goods Z and Y are complements.
Good Z...

A life-saving medicine without any close substitutes will tend
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falls from 110 to 90 units. Calculated with the midpoint method,
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In each case below, what is the value of the price elasticity
of demand? Is demand perfectly inelastic, inelastic, unit elastic,
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Price rises by 3%, quantity demanded falls by 3%
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Price rises by 5%, quantity demanded collapses to zero
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3.Factors that affect a product’s price elasticity of demand
are
A. availability of close substitutes.
B. passage of time.
C. necessity versus luxury.
D. definition of the market.
E. All of the above are correct.
4. If a price increase causes a decrease in total revenues
(total expenditures), then the product is considered to be
A. price elastic.
B. price inelastic.
C. unitary elastic.
D. All of the above are correct.
E.None of the above are correct.
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1-As we move up the demand curve, the price elasticity of demand
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