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Exam 6: Elasticity: The Responsiveness of Demand and Supply

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Question 111

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Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1.Increasing ticket prices will increase the total revenue from ticket sales.

A) True
B) False

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Question 112

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Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products.If you expect that the economy is headed for a long recession,you would advise people to look for jobs in an industry with

A) a high positive income elasticity coefficient such as 5.
B) a low positive income elasticity coefficient such as 0.8.
C) a "high" negative income elasticity coefficient such as -4.
D) a "low" negative income elasticity coefficient such as -0.2.

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

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Question 113

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Economists use the concept of ________ to measure how one economic variable,such as quantity,responds to a change in another economic variable,such as price.

The price elasticity of supply is usually a positive number because

The price elasticity of the supply of teenage labor services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximately change in the quantity supplied of teenage labor.

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Which of the following items is likely to have the highest income elasticity of demand?

Carrie Bradshaw claims that when it comes to buying shoes,"price is no object." If this is true,then her demand for shoes is

If the cross-price elasticity of demand for goods A and B is zero,this means the two goods are unrelated.

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?

Income elasticity measures

If a firm raised its price and discovered that its total revenue fell,then the demand for its product is

Figure 6-10 -Refer to Figure 6-10.A perfectly elastic supply curve is shown in

Ali's Gyros operates near a college campus.Ali has been selling 120 gyros a day at $4.50 each and is considering a price cut.He estimates that he would be able to sell 200 gyros per day at $3.50 each. a.Calculate the price elasticity of demand using the midpoint formula. b.Calculate the change in revenue as a result of the price cut.

Suppose the price elasticity of demand for methamphetamine is -0.35.If decriminalization caused the price of methamphetamine to fall by 75 percent,what will be the percentage increase in the quantity of methamphetamine demanded? If the price elasticity is -3.5,what will be the percentage increase in quantity demanded?

If a good has a negative income elasticity of demand,this indicates that the good is

A newspaper story on the effect of higher milk prices on the market for ice cream contained the following: "As a result [of the increase in milk prices],retail prices for ice cream are up 4 percent from last year....And ice cream consumption is down 3 percent." Source: John Curran,"Ice Cream,They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press,July 23,2001. Based on the information given,what is the price elasticity of demand for ice cream?

Between 1950 and 2013 the productivity of wheat farmers in the United States more than doubled.This means that

Economist Jerry Hausman estimated the price elasticity of demand for "Post Raisin Bran" and "All types of breakfast cereals." He found that the price elasticity of demand for Post Raisin Bran was -2.5 and the price elasticity of demand for "All types of breakfast cereals" was -0.9.Which of the following can be implied from Hausman's estimates?