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Exam 6: Elasticity: the Responsiveness of Demand and Supply

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Question 71

Multiple Choice

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Suppose Pump-U-Up lowers the price of its gym membership by 10 percent and as a result, Sweat-It-Out experienced a 16 percent decline in its gym membership.What is the value of the cross-price elasticity between the two gym memberships?

A) -1.6
B) -0.625
C) 0.625
D) 1.6

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Question 72

Multiple Choice

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In general, a "big ticket item" such as a house or new car will

A) tend to have a more elastic demand than a lower-priced good.
B) tend to have an inelastic demand because spending on the item takes up a large share of the average consumer's budget.
C) tend to have an inelastic demand because it has many substitutes.
D) tend to have a more inelastic demand the more time that passes.

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Question 73

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Most food products have low income and price elasticities of demand.

If the price elasticity of demand for canned soup is estimated at -1.62.What happens to sales revenue if the price of canned soup rises?

The estimated price elasticities of demand for the products listed in the table as "Product A" are from Table 6-2 in the text.Indicate whether the products listed as "Product B" will have a more elastic or less elastic demand than the corresponding Product A.

Total revenue is equal to

Figure 6-4 -Refer to Figure 6-4.The inelastic segment of the demand curve

Seth is a competitive body builder.He says he has to have his 12-oz package of protein powder to "feed his muscles" every day.On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?

Between 1950 and 2017, the number of acres devoted to wheat production in the United States ________ and the price of wheat ________.

In 2016, Philadelphia imposed a tax of 1.5 cents per ounce on sweetened beverages, and PepsiCo indicated that its sales in Philadelphia fell by 40 percent after the tax took effect.If the demand for sweetened beverages in Philadelphia is unit elastic, then the price of Pepsico's sweetened beverages in Philadelphia would have increased by ________ percent following the implementation of the tax.

In September 2006, the Food and Drug Administration recommended that Americans avoid eating bagged raw spinach in the wake of an outbreak of E.coli bacteria.Following this recommendation, the food industry looked at alternatives and many turned to arugula.One Chicago distributor claimed, "The sale of the stuff has gone through the roof." Based on this information

Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic.She argues "I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor.If I wanted to buy a mystery novel I would have many authors to choose from.Therefore, the demand for mystery novels is more elastic than the demand for my textbook." Is Jill correct?

Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day.Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

If the demand for a product is perfectly inelastic, a decrease in the price of the product

Between 1950 and 2017 the productivity of wheat farmers in the United States more than doubled.This means that

Figure 6-3 -Refer to Figure 6-3.Using the midpoint formula, calculate the absolute value of the price elasticity of demand between e and f.

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterize the product.

If at a price of $50, Ghani sells 20 hand-made leather cell-phone covers but at a price of $60, zero units are sold.Based on this information, the demand for his cell-phone covers is

Which of the following goods would have the most inelastic demand?