Question

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 product at the current price is 1.4, what would you advise the company to do?

a. | keep the price the same | |

b. | raise the price | |

c. | lower the price |

10 points

QUESTION 3

Using the midpoints method, calculate the price elasticity of demand of Good Z using the following information: When the price of good Z is $10, the quantity demanded of good Z is 85 units. When the price of good Z rises to $15, the quantity demanded of good Z falls to 60 units.

a. | The price elasticity of demand for good Z = 1.90. | |

b. | The price elasticity of demand for good Z = 0.98. | |

c. | The price elasticity of demand for good Z = 0.52. |

10 points

QUESTION 4

Determining the price elasticity of demand involves all of the following factors, but NOT

a. | slope of the supply curve. | |

b. | luxuries versus necessities. | |

c. | availability of substitutes. |

10 points

QUESTION 5

You are the manager of a restaurant and would like to increase revenue. The host staff suggests that you should increase the price of drinks and food, but the servers suggest decreasing the price of drinks and food. You are unsure if you should increase or decrease price, but you know that

a. | the servers thinks demand for drinks and food is elastic. | |

b. | the servers think demand for drinks and food is inelastic. | |

c. | the host staff thinks demand for drinks and food is elastic. |

10 points

QUESTION 6

Suppose the price of apples increase by 20%, resulting in consumers to purchase 15% more pears. Given this information, it appears that

a. | price elasticity of demand of pears is 0.75. | |

b. | price elasticity of demand of apples is 1.33. | |

c. | cross-price elasticity of pears is 0.75. |

Answer #1

Solution:

1. Elastic supply occurs if the change in quantity supplied is
__**RELATIVELY RESPONSIVE_**_____ to a change in
price.

We say supply is elastic only if the change in quantity supply is more than the change in price.

2.Since the elasticity is greater than 1 ,this means that the demand is elastic. So a decrease in price will definetely increase the demand and increase the total revenue.

3.Solution : Mid point elasticity = ( Xnew - Xold / X average )/ (Pnew -Pold / Paverage)

Average X = (85 +60 )/ 2 = 145 /2 =72.5

Average P =(10+25) / 2= 12.5

Numerator =( 60-85)/72.5 = -0.34

denominator = (15-10) / 12.5= 0.4

Now using the formula = - 0.34 / 0.4 = - 0.86.

4. Slope of the supply curve .

5.the servers thinks demand for drinks and food is elastic.

6.

cross-price elasticity of pears is 0.75. |

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...

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...

1. Occurs when quantity supplied > quantity demanded at a
given price
Excess supply (is this correct)
Result in elasticity
Result in equilibrium price
Excess demand
2. Which of the following statements is true
The supply curve shows the relationship between quantity
demanded and price of the good or service
The Law of Demand helps to explain social behavior
In the law of supply, an increase in price results in an
increase in quantity supplied. (Is this correct)
When consumer...

Suppose we have the following price & quantity data for
Huffy Bikes:
A B
Price $65 $100
Quantity Demanded 500,000 bikes 450,000 bikes
a. Please plot points A and B. Then draw a simple demand curve
for bikes.
b. When price rises from $65 to $100, what is the price
elasticity of demand for bikes?
c. Would you classify this good as relatively elastic or
relatively inelastic?

Suppose we have the following price and quantity data for movie
theater popcorn:
A B
Price $5.00 $7.00
Quantity Demanded 5,000 bags of popcorn 2,500 bags
of popcorn
a. Please plot points A and B. Then draw a simple demand curve
for bags of popcorn.
b. When price rises from $5 to $7, what is the price elasticity
of demand for popcorn?
c. Would you classify this good as relatively elastic or
relatively inelastic

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

If the percentage change in
price is 10 percent and the demand is elastic, how would the
quantity demanded percentage change?
If a decrease in price
increases total revenue, what can you determine about the
elasticity of demand for the good?

CLASS: Elastic or Inelastic?
A price change causes the quantity demanded of a good to drop by
20 percent, yet total revenue still increases by 10 percent. Is
demand elastic or inelastic? How can you tell?

When the price of good "X" increases 20 percent (+20%), Harry
decreases his quantity demanded of "X" by 25 percent while Meghan
decreases her quantity demanded of "X" by 15 percent. Harry's
demand for good "X" is (relatively inelastic / unitary elastic /
relatively elastic) and Meghan's demand for good "X" is (relatively
inelastic / unitary elastic / relatively elastic).
A. Relatively inelastic; relatively
inelastic.
B. Relatively inelastic; relatively
elastic.
C. Unitary elastic; relatively
elastic.
D. Relatively elastic; relatively
elastic.

For each of the following products, indicate whether you believe
demand will be relatively price elastic or relatively price
inelastic. Give economic reasons for each reply. Remember that high
demand does NOT imply high elasticity. High
elasticity occurs if a change in quantity demanded
is relatively large compared to the associated
change in price regardless of how high the
quantity demanded is to begin with.
a. Mayonnaise in general
b. A specific brand of mayonnaise
c. Chevrolet automobiles
d. Tesla...

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