Question

1.If price rises by 20% and quantity demanded of rice falls by 100 pounds, the elasticity of demand is : (1 point)

a. greater than 1

b. equal to -5

c. equal to -20

d. cannot be determined without additional information.

2.If quantity supplied responds only slightly to a change in price, then: (1 point)

a. Supply is elastic

b. An increase in price will shift the supply curve to a large extent

c. Supply is inelastic

d. Supply is perfectly elastic

3.Demand is said to be inelastic if: (2 points)

a. Percentage change in quantity demanded is less than the percentage change in price (in terms of their absolute values )

b. There are only a few substitutes for the particular good in question

c. The opportunity cost of producing the good increases at a very fast rate

4.A frost kills a significant amount of the apple trees in country X. We can expect which of the following events to occur? (2 points)

a. The price of apples to rise.

b. The price of oranges to rise, if apples and oranges are substitutes

c. The supply of apples to decrease

d. All of the above

d. All of the above

e. Only a and b

5. The apple growers (in relation the above problem) want to increase their Total Revenue by increasing the price of apples. In which of the following cases will the total revenue actually increase as a result of the price rise? (Hint: Is the demand elastic or inelastic in each of the following cases?) (2 points)

a. Elasticity of demand is 0.6

b. Elasticity of demand is 4.6

c. Elasticity of demand is 100

d. There is not enough information to answer.

Answer #1

1. Option d

Price elasticity of demand = % change in quantity demanded/% change in price

= -100/20%

Change in quantity demanded is needed in percentage change

2. Option c

As supply doesn't respond to changes in price

3. Option a

As quantity demanded doesn't respond much for changes in price

4. Option d

All of the reasons would contribute to reduced supply and increase in price

5. Option a

Total Revenue would increase when the demand is inelastic as quantity demanded doesn't change much for the increase in price.

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
is his income...

5a)The price of car batteries increases by 10 percent and the
quantity demanded decreases by 10 percent. What is the price
elasticity of car batteries?
Unit elastic, and revenue will not change
Elastic, and revenue will increase
Elastic, and revenue will decrease
Inelastic, and revenue will increase
b)Good A and Good B have negative income elasticities, but Good
A is more negative than Good B. If the economy’s income increases,
which of the following is true?
Good A’s demand will...

1. When elasticity of demand is equal to one and the change in
the quantity demanded and the change in price are exactly
proportional. This type of elasticity is described as ________.
A. elastic
B. inelastic
C. unitary elastic
2. What happens to total revenue (TR) if the price rises on a
product with demand that is price elastic?
A. Total revenue will rise.
B. Total revenue will remain the same.
C. Total revenue will fall.

QUESTION 21
If the percentage change in quantity demanded is greater than
the percentage change in price for good A, then the demand for good
A is
a.
inelastic.
b.
unit elastic.
c.
elastic.
d.
perfectly inelastic.
QUESTION 22
If the percentage change in quantity demanded is less than the
percentage change in price for good B, then the demand for good B
is
a.
inelastic.
b.
unit elastic.
c.
elastic.
d.
perfectly elastic.
QUESTION 23
If the percentage change...

16. At a price of $4, quantity demanded is 100; and at a price
of $6, quantity demanded is 120. Using the midpoint formula, the
price elasticity of demand is ________ and demand is ________.
A) 0.1; inelastic
B) 0.45; inelastic
C) -2.2; elastic
D) -10; elastic

A price change causes the quantity demanded for a good to
increase by 20 percent and the total revenue of that good decreases
by 15 percent. What can you say about the price elasticity of
demand at this point.
It's elastic
It's inelastic
It's unitary elastic
It's perfectly elastic

8.
When the price increases by 30 percent and the quantity demanded
drops by 30 percent, the price elasticity of demand is
unitary elastic.
elastic.
perfectly inelastic.
inelastic.
perfectly inelastic.
9.
If the cross-price elasticity of demand between Good A and Good
B is 2 and the percentage change in price of Good A is 5 percent,
what is the percentage change in quantity demanded of Good B?
-3 percent
1.50 percent
10 percent
3 percent
-1.25 percent

QUESTION 1
Elastic supply occurs if the change in quantity supplied is
________ to a change in price.
a.
relatively responsive
b.
the same
c.
relatively unresponsive
10 points
QUESTION 2
Suppose you are in charge of sales at a pharmaceutical company,
and your firm has a new drug that causes bald men to grow hair.
Assume that the company wants to earn as much revenue as possible
from this drug. If the elasticity of demand for your company’s...

Suppose that when the price of good A rises from $18 to $20, the
quantity demanded of good B falls from 30 units to 20 units.
Using the midpoint method, the cross-price elasticity of demand
is
Select one: a. -0.26, where goods A and B are complements.
b. -0.26, where goods A and B are substitutes.
c. -3.8, where goods A and B are complements.
d. -3.8, where goods A and B are substitutes.

A price change causes the quantity demanded of a good to
increase by 20 percent, while the total revenue of that good
increases by 15 percent. Is the demand curve elastic or inelastic?
Explain.

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