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elastic, and her demand curve would be relatively flat
answer
When the price of coffee is $10, Joey buys 20 per month. When the price is $9, he buys 30 per month. Joey's demand for coffee is
question
inelastic and equal to 0.60
answer
Suppose that quantity demand rises by 90% as a result of a 150% decrease in price. The price elasticity of demand for this good is
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blue jeans
answer
Which has a higher price elasticity of demand. blue jeans or rice?
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demand for cigarettes is perfectly inelastic
answer
Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's
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unit elastic
answer
Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is
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inelastic
answer
Holding all other forces constant, if decreasing the price of a good leads to a decrease in total revenue, then the demand for the good must be
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increase the price of ice cream
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Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand for ice cream at your shop is 0.8. You should
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decrease total revenue of donut sellers
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If the demand for donuts is elastic, then a decrease in the price of donuts will
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-0.71, and X and Y are complements
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Suppose that when the price of butter falls from $6 to $4, the quantity demanded of good orange juice rises from 30 units to 40 units. Using the midpoint method, the cross-price elasticity of demand is
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-0.71, and they are complements
answer
Debo purchased 4 pounds of beans and 6 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pound of beans and 4 pounds of rice per month when the price of beans is $4 per pound. Debo's cross-price elasticity of demand for beans and rice is
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sellers will bear more of the burden of the tax than buyers will
answer
If a tax of $6 per unit is imposed on the market,
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elasticity
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measure of the Responsiveness of Quantity demanded or Quantity supplied
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Price Elasticity of Demand
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How much the quantity demanded of a good responds to a change in the price of that good
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percentage change in quantity demanded/percentage change in Price
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Price Elasticity of Demand Formula
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positive numbers
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All Price Elasticities are reported as
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end value - start value/ start value x 100%
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percentage change formula
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midpoint
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number halfway between the start and end values
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(Q2-Q1)/[(Q2+Q1)/2] / (P2-P1)/[(P2+P1)/2]
answer
Price elasticity of demand formula
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% Change in q/ % change in p
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How to calculate percentage change using midpoint method of computing % Changes
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substitutes
answer
With ______ buyers can easily switch products if the prices rise
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higher
answer
price elasticity is ______ when close substitutes are available
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higher
answer
price elasticity is ______ for narrowly defined goods than for broadly defined ones.
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luxuries
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price elasticity is higher for ______ than necessities
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higher
answer
In the long-run, price elasticity is ______
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elastic
answer
when price elasticity of demand > 1, demand is
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inelastic
answer
when price elasticity of demand is < 1, demand is
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unit elasticity
answer
when price elasticity of demand = 1, demand has
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perfectly inelastic
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demand is ______ when price elasticity of demand = 0/demand curve is vertical
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perfectly elastic
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demand is ______ when price elasticity of demand= infinity/demand curve is horizontal
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the greater the price elasticity of demand
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the flatter the demand curve,
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cross-price elasticity of demand
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how much the quantity demanded of one good responds to a change in the price of another good
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price ceiling
answer
legal maximum on the price at which a good can be sold
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price floor
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legal minimum on the price at which a good can be sold
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DWL
answer
decline in total surplus that results from tax
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substitutes
answer
When cross price elasticity is greater than 0, goods are
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compliments
answer
When cross price elasticity is less than 0, goods are
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Q2-Q1/2
answer
Midpoint Method
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% change in Qd/% change in P
answer
Price Elasticity of Demand formula
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((End Value - Start Value) / (Start Value)) * 100%
answer
% change formula
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(Q2-Q1)/[(Q2+Q1)/2]100/(P2-P1)/[(P2+P1)/2]100
answer
Elasticity formula
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PxQ
answer
Revenue Formula
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WTP-Price
answer
Consumer Surplus Formula
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consumer surplus
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amount buyer is willing to pay - amount buyer actually pays
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Consumer Surplus + Producer Surplus
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Total Surplus Formula
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Price - Cost
answer
Producer Surplus Formula
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Producer Surplus
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amount a seller is paid for a good - seller's cost of providing it
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1/2bh
answer
triangle formula for straight line graph
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