Econ 201 Ch. 6 Elasticity of Demand Essay Example For Students

Econ 201 Ch. 6: Elasticity of Demand Essay The formula for cross elasticity of demand is percentage change in: quantity demanded of X/percentage change in price of Y. Refer to the diagrams. In which case would the coefficient of income elasticity be positive? A The price elasticity of demand coefficient measures: buyer responsiveness to price changes. The state legislature has cut Gigantic State Universitys appropriations. GSUs Board of Regents decides to increase tuition and fees to compensate for the loss of revenue. The board is assuming that the: demand for education at GSU is inelastic. The demand for autos is likely to be: less price elastic than the demand for Honda Accords. Refer to the information and assume the stadium capacity is 5,000. If the Mudhens management charges $7 per ticket: there will be 1,000 empty seats. Refer to the data. Suppose quantity supplied declined by 23 units at each price, changing the equilibrium price in a direction and amount for you to determine. Over that price range, demand is: inelastic. Studies show that the demand for gasoline is: price inelastic in both the short and long run. Refer to the diagram and assume a single good. If the price of the good increased from $5.70 to $6.30 along D1, the price elasticity of demand along this portion of the demand curve would be: 1.2. The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range: is elastic. The supply of product X is perfectly inelastic if the price of X rises by: 10 percent and quantity supplied stays the same. The greater the ease of shifting resources from product X to product Y in the production process, the greater is the elasticity of supply of product Y. True We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be positive. False If the coefficient of income elasticity of demand is positive, the product is an inferior good. False In which of the following instances will total revenue decline? Price rises and demand is elastic. Suppose the price of a product rises and the total revenue of sellers increases. No conclusion can be reached with respect to the elasticity of supply. Answer the question on the basis of the following demand and supply data: Refer to the data. The supply of this product is inelastic in the $6-$5 price range. False Which type of goods is most adversely affected by recessions? Goods for which the income elasticity coefficient is relatively high and positive. We would expect: the demand for Coca-Cola to be more price elastic than the demand for soft drinks in general. A perfectly inelastic demand curve: A perfectly inelastic demand curve: For a linear demand curve: demand is elastic at high prices. Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is: relatively inelastic. Compared to coffee, we would expect the cross elasticity of demand for: Compared to coffee, we would expect the cross elasticity of demand for: Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of: W and Y. Refer to the table. Over the $10-$8 price range, the elasticity coefficient of supply is: less than 1. If demand for a product is elastic, the value of the price elasticity coefficient is: greater than one. If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will: increase the amount demanded by more than 10 percent. increase the amount demanded by more than 10 percent. the greater will be the price elasticity of demand. In which of the following cases will total revenue increase? Price rises and demand is inelastic. The price elasticity of demand is generally: negative, but the minus sign is ignored. It takes a considerable amount of time to increase the production of pork. This implies that: the short-run supply curve for pork is less elastic than the long-run supply curve for pork. A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes. True Antiques tend to have highly inelastic supply curves. True A perfectly inelastic demand schedule: can be represented by a line parallel to the vertical axis. Refer to the diagrams. In which case would the coefficient of cross elasticity of demand be negative? C Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession? Plasma screen and LCD TVs (+4.2) The narrower the definition of a product: the larger the number of substitutes and the greater the price elasticity of demand. A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus, the demand for pizza is elastic above $5 and inelastic below $5. The supply of known Monet paintings is: perfectly inelastic. Refer to the diagram. If price falls from P1 to P2, total revenue will become area(s): B + D. The larger the positive cross elasticity coefficient of demand between products X and Y, the: greater their substitutability. A linear demand curve has a constant elasticity over the full range of the curve. False (Consider This) The supply of higher education in the United States is: highly price inelastic. Most demand curves are relatively elastic in the upper-left portion because the original price: from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small. Refer to the table. Over the $6-$4 price range, supply is: inelastic. Refer to the diagram. Between prices of $5.70 and $6.30: D1 is more elastic than D2. The demand for a necessity whose cost is a small portion of ones total income is: relatively price inelastic. Suppose Aiyannas Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week: demand will become less price elastic. If the elasticity coefficient of supply is 0.7, supply is elastic. False The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a: 20 percent reduction in price. Assume that a 6 percent increase in income in the economy produces a 3 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is: positive and therefore X is a normal good. If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is: inelastic. The demand for a product is inelastic with respect to price if: consumers are largely unresponsive to a per unit price change. Refer to the diagram. In the P3P4 price range, demand is: relatively inelastic. The demand schedules for such products as eggs, bread, and electricity tend to be: relatively price inelastic. 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The demand for this product is elastic in the $8-$7 price range. True We would expect the cross elasticity of demand between dress shirts and ties to be: negative, indicating complementary goods. Refer to the diagrams. The case of complementary goods is represented by figure: C. Which of the following generalizations is not correct? The price elasticity of demand is greater for necessities than it is for luxuries. Refer to the data. Suppose quantity demanded increased by 12 units at each price, changing the equilibrium price in a direction and an amount for you to determine. Over that price range, supply is: inelastic.