Microeconomics Chapter Five Homework

question

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

answer

Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.

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The price elasticity of demand measures how much

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quantity demanded responds to a change in price.

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Demand is said to be elastic if

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buyers respond substantially to changes in the price of the good.

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If demand is inelastic, then

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buyers to not respond much to a change in price.

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For a good that is a luxury, demand

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tends to be elastic.

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When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bubble gum is

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elastic

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The value of the price elasticity of demand for a good will be relatively large when

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the good is a luxury as opposed to a necessity.

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If the price elasticity of demand for a good is 1.65, then a 3 percent decrease in price results in a

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4.95 percent increases in the quantity demanded.

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Consider airfares on flights between New York and Minneapolis. When the airfare is $250, the quantity demanded of tickets is 2,000 per week. When the airfare is $280, the quantity demanded of tickets is 1,700 per week. Using the midpoint method,

answer

the price elasticity of demand is about 1.43 and an increase in the airfare will cause
airlines' total revenue to decrease.

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Refer to Figure 5-2. The price elasticity of demand between point A and point B, using the midpoint method, is

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2.5

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Refer to Figure 5-2. The elasticity of demand between point B and point C, using the midpoint method, is

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0.75

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Refer to Figure 5-2. If the price decreased from $18 to $6,

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total revenue would increase by $1,200 and demand is elastic between points A and C.

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Refer to Figure 5-2. Sellers' total revenue would increase if the price

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increased from $4 to $6.

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Refer to Figure 5-2. Sellers' total revenue would increase if the price

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All of the above are correct.

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Refer to Figure 5-2. Which of the following price changes would result in no change in sellers' total revenue?

answer

The price decreases from $12 to $9.

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Demand is said to be unit elastic if

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quantity demanded changes by the same percent as the price.

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The smaller the price elasticity of demand, the

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steeper the demand curve will be through a given point.

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How does total revenue change as one moves downward and to the right along a linear demand curve?

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It first increases, then decreases.

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Refer to Figure 5-3. If price falls within the A range of the demand curve we can expect total revenue to

answer

increase.

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Refer to Figure 5-3. If price falls within the C range of the demand curve we can expect total revenue to

answer

decrease.

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Refer to Figure 5-3. If price is originally within the C range of the demand curve and then it increases to a value within the A range of the demand curve, we can expect total revenue to

answer

This determination cannot be made without further information.

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Refer to Figure 5-4. As price falls from PA to PB, which demand curve represents the most elastic demand?

answer

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Refer to Figure 5-4. As price falls from PA to PB, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity?

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Refer to Figure 5-8. The maximum value of total revenue corresponds to a price of

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$30

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Refer to Figure 5-8. Demand is unit elastic between prices of

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$24 and $36.

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Refer to Figure 5-8. Using the midpoint method, between prices of $12 and $18, price elasticity of demand is

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0.33

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Refer to Figure 5-8. Using the midpoint method, between prices of $48 and $54, price elasticity of demand is about

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5.67

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Refer to Figure 5-8. At a price of $48 per unit, sellers' total revenue amounts to

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$288

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Refer to Figure 5-9. Between point A and point B,

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the slope is equal to -1/4 and the price elasticity of demand is equal to 3/2.

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Refer to Figure 5-9. Between point A and point B on the graph, demand is

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elastic, but not perfectly elastic.

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Whether a good is a luxury or necessity depends on

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the preference of the buyer.

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When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather,

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macaroni is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.

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Refer to Table 5-1. Using the midpoint method, what is the income elasticity of demand for good X?

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3.5

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Refer to Table 5-1. Using the midpoint method, the income elasticity of demand for good Y is

answer

-0.43 and Y is an inferior good.

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Refer to Figure 5-10. The price elasticity of supply between point A and point B, using the midpoint method, is approximately

answer

0.71

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Refer to Figure 5-10. The price elasticity of supply between point B and point C, using the midpoint method, is approximately

answer

0.78

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Refer to Figure 5-10. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $8, then sellers' total revenue would

answer

increase.

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Refer to Figure 5-11. Which supply curve represents perfectly inelastic supply?

answer

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Refer to Figure 5-11. Which supply curve is most likely relevant over a very long period of time?

answer

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Refer to Figure 5-12. Along which of these segments of the supply curve is supply least elastic?

answer

between E and F

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Refer to Figure 5-12. Along which of these segments of the supply curve is supply most elastic?

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between A and B

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Refer to Figure 5-12. Using the midpoint method, what is the price elasticity of supply between points D and E?

answer

0.53

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Refer to Figure 5-12. Using the midpoint method, what is the price elasticity of supply between points B and C?

answer

1.19

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Demand is inelastic if the price elasticity of demand is greater than 1.

answer

False

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When demand is inelastic, a decrease in price increases total revenue.

answer

False

1 of 45

question

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

answer

Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.

question

The price elasticity of demand measures how much

answer

quantity demanded responds to a change in price.

question

Demand is said to be elastic if

answer

buyers respond substantially to changes in the price of the good.

question

If demand is inelastic, then

answer

buyers to not respond much to a change in price.

question

For a good that is a luxury, demand

answer

tends to be elastic.

question

answer

elastic

question

The value of the price elasticity of demand for a good will be relatively large when

answer

the good is a luxury as opposed to a necessity.

question

If the price elasticity of demand for a good is 1.65, then a 3 percent decrease in price results in a

answer

4.95 percent increases in the quantity demanded.

question

answer

the price elasticity of demand is about 1.43 and an increase in the airfare will cause
airlines' total revenue to decrease.

question

Refer to Figure 5-2. The price elasticity of demand between point A and point B, using the midpoint method, is

answer

2.5

question

Refer to Figure 5-2. The elasticity of demand between point B and point C, using the midpoint method, is

answer

0.75

question

Refer to Figure 5-2. If the price decreased from $18 to $6,

answer

total revenue would increase by $1,200 and demand is elastic between points A and C.

question

Refer to Figure 5-2. Sellers' total revenue would increase if the price

answer

increased from $4 to $6.

question

Refer to Figure 5-2. Sellers' total revenue would increase if the price

answer

All of the above are correct.

question

Refer to Figure 5-2. Which of the following price changes would result in no change in sellers' total revenue?

answer

The price decreases from $12 to $9.

question

Demand is said to be unit elastic if

answer

quantity demanded changes by the same percent as the price.

question

The smaller the price elasticity of demand, the

answer

steeper the demand curve will be through a given point.

question

How does total revenue change as one moves downward and to the right along a linear demand curve?

answer

It first increases, then decreases.

question

Refer to Figure 5-3. If price falls within the A range of the demand curve we can expect total revenue to

answer

increase.

question

Refer to Figure 5-3. If price falls within the C range of the demand curve we can expect total revenue to

answer

decrease.

question

Refer to Figure 5-3. If price is originally within the C range of the demand curve and then it increases to a value within the A range of the demand curve, we can expect total revenue to

answer

This determination cannot be made without further information.

question

Refer to Figure 5-4. As price falls from PA to PB, which demand curve represents the most elastic demand?

answer

question

answer

question

Refer to Figure 5-8. The maximum value of total revenue corresponds to a price of

answer

$30

question

Refer to Figure 5-8. Demand is unit elastic between prices of

answer

$24 and $36.

question

Refer to Figure 5-8. Using the midpoint method, between prices of $12 and $18, price elasticity of demand is

answer

0.33

question

Refer to Figure 5-8. Using the midpoint method, between prices of $48 and $54, price elasticity of demand is about

answer

5.67

question

Refer to Figure 5-8. At a price of $48 per unit, sellers' total revenue amounts to

answer

$288

question

Refer to Figure 5-9. Between point A and point B,

answer

the slope is equal to -1/4 and the price elasticity of demand is equal to 3/2.

question

Refer to Figure 5-9. Between point A and point B on the graph, demand is

answer

elastic, but not perfectly elastic.

question

Whether a good is a luxury or necessity depends on

answer

the preference of the buyer.

question

answer

macaroni is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.

question

Refer to Table 5-1. Using the midpoint method, what is the income elasticity of demand for good X?

answer

3.5

question

Refer to Table 5-1. Using the midpoint method, the income elasticity of demand for good Y is

answer

-0.43 and Y is an inferior good.

question

Refer to Figure 5-10. The price elasticity of supply between point A and point B, using the midpoint method, is approximately

answer

0.71

question

Refer to Figure 5-10. The price elasticity of supply between point B and point C, using the midpoint method, is approximately

answer

0.78

question

Refer to Figure 5-10. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $8, then sellers' total revenue would

answer

increase.

question

Refer to Figure 5-11. Which supply curve represents perfectly inelastic supply?

answer

question

Refer to Figure 5-11. Which supply curve is most likely relevant over a very long period of time?

answer

question

Refer to Figure 5-12. Along which of these segments of the supply curve is supply least elastic?

answer

between E and F

question

Refer to Figure 5-12. Along which of these segments of the supply curve is supply most elastic?

answer

between A and B

question

Refer to Figure 5-12. Using the midpoint method, what is the price elasticity of supply between points D and E?

answer

0.53

question

Refer to Figure 5-12. Using the midpoint method, what is the price elasticity of supply between points B and C?

answer

1.19

question

Demand is inelastic if the price elasticity of demand is greater than 1.

answer

False

question

When demand is inelastic, a decrease in price increases total revenue.

answer

False

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