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If a large percentage increase in the price of a good results in a small percentage reduction in the quantity demanded of the good, demand is said to be
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relatively inelastic
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When economists say the demand for a good is highly inelastic, they mean that
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a large (percentage) change in the price of a good will result in only a small (percentage) change in the quantity demanded.
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The price elasticity of demand for gasoline measures the
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responsiveness of customers to changes in the price of gasoline
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Why do economists use the concept of elasticity in addition to measurement of the slope of the demand curve?
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Elasticities are independent of the units of measure.
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The greater the price elasticity of demand, the
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greater the responsiveness of quantity demanded to a change in price.
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Along the inelastic portion of a demand curve,
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the percentage change in price will be more than the percentage change in quantity demanded.
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A successful advertising campaign would likely
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reduce price elasticity of demand by informing consumers of the availability of substitutes.
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If consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would
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be a vertical line,Êindicating thatÊdemand is perfectly inelastic.
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The demand curve for a good is very unlikely to be perfectly vertical because
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scarcity and limited income restrict the ability of consumers to afford goods as they become very expensive. and as the price of a good rises to high enough levels, the incentive for other suppliers to invent new substitutes for the good increases.
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The figure above depicts a demand curve with a price elasticity that is Quantity v price, demand straight line up
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perfectly inelastic, implying that the same amount will be purchased regardless of the price of the good.
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Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because
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buyers tend to be much more sensitive to a change in price when given more time to react.
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The price elasticity of demand for a commodity is determined primarily by the
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attractiveness of the substitutes for the good.
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Demand will be more inelastic,
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the higher the price of the good.
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Compared to the long run, consumers typically ___ to price changes in the short run.
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are less demand sensitive
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Demand will be more elastic,
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the larger the number of good substitutes.
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The price elasticity of demand for a product tends to be large (more elastic) when
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people spend a large share of their income on the product.
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If you compared the short-run demand and long-run demand for education at your WVU, you would almost certainly find that
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a tuition increase would reduce enrollment more in the long run than in the short run.
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A good that takes up a very large percentage of the consumer's budget will tend to have
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an elastic demand.
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The more broadly a good is defined,
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the fewer substitutes it has so the less elastic is its demand.
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Which of the following is true regarding the price elasticity of demand?
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Demand is generally more elastic in the long run than in the short run.,, Along a single demand curve, demand elasticity decreases as you move down the curve (to lower prices).,, A demand curve that is flatter (has a less steep slope) is relatively more elastic than a demand curve that has a steeper slope.
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Which one of the following goods would likely have the most inelastic demand?
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salt
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The demand for which one of the following goods is most likely to be quite inelastic?
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a defense lawyer
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The demand for which one of the following is most likely to be highly elastic?
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fresh green spinach
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The demand for which one of the following will be most inelastic?
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food products
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The demand for which one of the following is most likely to be highly inelastic?
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health care services
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Of the following goods, which is most likely to have the lowest (most inelastic) elasticity of demand?
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coffee
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For which one of the following goods would you expect the demand to be most elastic?
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Chevy automobiles
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For which one of the following goods would you expect the demand to be most inelastic?
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tacos
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For which one of the following goods would you expect the demand to be most elastic?
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sheetz gasoline and BP gasoline
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In heavily Catholic cities like Cincinnati, which of the following goods is likely to have more inelastic demand compared to cities with few Catholics
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fish
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Suppose the Pleasant Corporation cuts the price of its American Girl dolls by 10 percent, and as a result, the quantity of the dolls sold increases by 25 percent. This indicates that the price elasticity of demand for the dolls over this range is
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2.5
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When the price of Nike tennis shoes goes from $100 to $80, the quantity demanded increases from 20 to 30 million. Over this price range, the absolute value of the price elasticity of demand is
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1.80
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Suppose that Starbucks reduces the price of its premium coffee from $2.20 to $1.80 per cup, and as a result, the quantity sold per day increased from 350 to 450. Over this price range, the absolute value of the price elasticity of demand for Starbucks coffee is
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1.25
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If admission to a Beyonce concert in a football stadium is lowered from $60 to $40, and attendance increases from 25,000 to 35,000, the price elasticity of demand for attending the concert is approximately
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-0.83
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A recent increase in the supply of oranges caused the price to drop from $5 to $3 per bushel, and quantity demanded to rise from 10,000 bushels to 25,000 bushels. This indicates that the price elasticity of demand for oranges in this price range is
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-1.71
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If a 20 percent reduction in the price of airline tickets between Chicago and New York leads to a 50 percent increase in the quantity of tickets purchased, the price elasticity of demand for the tickets is
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-2.50
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A local Krispy Kreme doughnut shop reduced its prices by 10 percent, and as a result, the quantity of doughnuts sold increased by 25 percent.ÊOver this range, the absolute value of the price elasticity of demand was
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2.5
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Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption by 10 percent. If the price elasticity of demand for water is Ð .25, by how much would you have to raise the price of water?
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40 percent
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If the price of tickets to Disney World increases 10 percent, and as a result, attendance falls by 15 percent, the demand for the tickets is
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elastic
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If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as
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relatively elastic
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If the demand for a good is elastic, then total revenue
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increase as price decreases
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If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the Pepsi-Cola Company could increase its total revenue by
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lowering price
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If Pizza Al's increases its prices by 10 percent, and as a result, its sales revenue increases by 3 percent, the price elasticity of demand for the services offered by the restaurant must be
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inelastic
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If Pizza Al's reduces its pizza prices by 15 percent, and as a result, its total revenue from pizza sales increases, this indicates that the price elasticity of demand for the firm's pizza was
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elastic
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Suppose a city that operates local electric and natural gas companies wants to raise revenues by increasing its rates for electricity and natural gas. The price rise will increase city revenues if the elasticity of demand for electricity and natural gas is
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inelastic
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Julia knows the price elasticity of movie rentals is 3. She knows, therefore, that if she raises her price from $2 to $2.50, her rentals will drop by approximately
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66 percent
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A recent study on enrollment at a liberal arts college concluded that demand elasticity is 0.91. The administration is considering a tuition increase to help balance the budget. The revenue-maximizing decision is to
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increase tuition, which would generate more revenue.
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Suppose Microsoft announces it is cutting the prices of some of its software titles (mainly games) by 25 percent. Assuming that Microsoft is seeking to increase revenues, it must believe that the elasticity of demand for these products is
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elastic
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Suppose the WVU athletic department wanted to increase revenues by decreasing ticket prices to football games. This would make sense only if the price elasticity of demand for football games was (in absolute value)
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greater than 1
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Elaine, a small grocer, is planning to cut certain prices to increase her sales revenues. What will be the likely result of a price decrease for matches, a good for which the demand is inelastic, and a price decrease for fresh green tomatoes, an item for which consumer demand is elastic?
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The total revenue derived from matches will decline, but total revenues derived from tomatoes will increase.
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