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Suppose as a result of a 5% increase in the price of pizza, the

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...

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Elasticity measures the responsiveness of

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one variable to changes in another.

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If elasticity is given by, EX,Y = %ΔX%ΔY%ΔX%ΔY, then elasticity is positive when:

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an increase in Y leads to an increase in X.

a decrease in Y leads to a decrease in X.

a decrease in Y leads to a decrease in X.

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Suppose elasticity is given by, EX,Y = %ΔX%ΔY%ΔX%ΔY.

The absolute value of elasticity will be ________ 1 when the change in X is large relative to the change in Y.

The absolute value of elasticity will be ________ 1 when the change in X is large relative to the change in Y.

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greater than

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Which of the following is the formula of price elasticity of demand for a good, X?

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%changeQd / % change Px

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If ||EQ,P||EQ,P> 1, then demand is said to be ________.

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elastic

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The primary analytic tool used to evaluate the responsiveness of one variable to change in another variable is called ______.

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elasticity

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If ||EQ,Px||EQ,Px= 1, total revenue is _____.

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maximized

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If elasticity is given by, EX,Y = %ΔX%ΔY%ΔX%ΔY, then elasticity is negative when:

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a decrease in Y produces an increase in X.

an increase in Y produces a decrease in X.

an increase in Y produces a decrease in X.

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Suppose elasticity is given by, EX,Y = %ΔX%ΔY%ΔX%ΔY.

The absolute value of elasticity will be ________ 1 when the change in X is small relative to the change in Y.

The absolute value of elasticity will be ________ 1 when the change in X is small relative to the change in Y.

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less than

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Given a demand function, Qxd = f(Px, Py, M, H), define own price elasticity.

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...

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If ||EQ,P||EQ,P= 1, then demand is said to be ________ elastic.

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unitary

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If ||EQ,Px||EQ,Px > 1, an increase in the price of a good will _______ total revenue.

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decrease

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If demand is inelastic, a(n) in price will lead to an increase in total revenue.

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Blank 1: increase or rise

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If ||EQ,Px||EQ,Px=∞, then demand is said to be perfectly _____.

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elastic

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What is true of demand for a good that has many available substitutes?

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Demand is relatively elastic.

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If ||EQ,P||EQ,P< 1, then demand is said to be ________.

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inelastic

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Demand tends to be ___________ elastic when consumers have more time to react to price changes.

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more

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Total revenue is maximized at a point where demand is

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unitary elastic.

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If ||EQ,Px||EQ,Px= 0, then demand is said to be perfectly _________.

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inelastic

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Demand tends to be ___________ elastic for goods that require a relatively small portion of consumers' budgets and ____________ elastic for goods that require a relatively large portion of consumers' budgets.

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less; more

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Consider the following relationship between marginal revenue and elasticity of demand: MR = P × {1+EE}1+EE.

If demand is inelastic:

If demand is inelastic:

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Marginal revenue is negative.

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What is true of demand for a good that has few close substitutes?

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Demand is relatively inelastic.

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When consumers have more time to react to a price change of a good,

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the consumers are able to locate more substitutes.

the demand for the good becomes relatively more elastic.

the demand for the good becomes relatively more elastic.

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If demand is elastic, a(n) in price will lead to an increase in total revenue.

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Blank 1: decrease, reduction, lowering, fall, drop, decline, or cut

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Total revenue is maximized when marginal revenue equals which is when the own price elasticity of demand is equal to .

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Blank 1: zero or 0

Blank 2: -1, negative one, unit elastic, or unitary elastic

Blank 2: -1, negative one, unit elastic, or unitary elastic

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True or false: A new car is likely to have a more elastic demand than paper clips.

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True

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Consider the following relationship between marginal revenue and elasticity of demand: MR = P × {1+EE}1+EE.

If demand is elastic:

If demand is elastic:

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Marginal revenue is positive.

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Cross-price elasticity is given by which of the following expressions?

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%change Qx^d / % change Py

(Qx^d/Py) x (Py/Qx)

(Qx^d/Py) x (Py/Qx)

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Suppose as a result of a 5% increase in the price of pizza, the demand for soft drinks decreases by 1.1%. In this example, soft drinks and pizza are ____________.

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complements

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Consider the following relationship between marginal revenue and elasticity of demand: MR = P × {1+EE}1+EE.

If elasticity is unitary, marginal revenue is ___________ and total revenue is ____________.

If elasticity is unitary, marginal revenue is ___________ and total revenue is ____________.

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zero; maximized

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Suppose a firm produces two products, X and Y. The firm earns revenues from X equal to $50,000 and revenues from Y equal to $30,000. The own price elasticity of demand for X is -2 and the cross-price elasticity of demand between X and Y is -0.6. If the firm lowers the price of product X by 1%, the change in total revenues will be $. (Do not add any negative sign before your answer.)

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Blank 1: 680

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Income elasticity tells us whether goods are

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normal or inferior

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Responsiveness of demand for a good due to changes in the price of a related good is measured using

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cross-price elasticity.

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What can be said about goods X and Y if the cross-price elasticity between X and Y is negative?

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They are complements.

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Total revenue is maximized when marginal revenue equals which is when the own price elasticity of demand is equal to . (Enter a number in both blanks.)

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Blank 1: zero or 0

Blank 2: -1, negative one, unit elastic, or unitary elastic

Blank 2: -1, negative one, unit elastic, or unitary elastic

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Suppose a firm produces two products, X and Y. The firm earns revenues from X equal to $70,000 and revenues from Y equal to $60,000. The own price elasticity of demand for X is -1.5 and the cross-price elasticity of demand between X and Y is -0.80. If the firm decreases the price of product X by 1%, the change in total revenues will be $.

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Blank 1: 830

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Which of the following are considered expressions for income elasticity?

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...

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If income elasticity of good X is negative, (EQx, M < 0), then good X is considered a(n) good.

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Blank 1: inferior

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Cross advertising elasticity measures

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changes in consumption of one good due to changes in advertising on another good.

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Suppose that demand is linear and given by:

Qxd = α0 - αxPx + αyPy + αMM + αHH

Cross-price elasticity is given by:

Qxd = α0 - αxPx + αyPy + αMM + αHH

Cross-price elasticity is given by:

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αy × PyQx

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If income elasticity of good X is positive, (EQx, M > 0), then good X is considered a(n) good.

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Blank 1: normal

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Advertising elasticity measures

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changes in consumption due to changes in advertising

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Suppose that demand is linear and given by:

Qxd = αo - αxPx + αyPy + αMM + αHH

Own price elasticity is given by:

Qxd = αo - αxPx + αyPy + αMM + αHH

Own price elasticity is given by:

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αx × PxQx

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Suppose the demand for good X is log-linear and given by

lnQxd = β0 + βxlnPx + βylnPy + βMlnM + βHlnH

Own price elasticity is

lnQxd = β0 + βxlnPx + βylnPy + βMlnM + βHlnH

Own price elasticity is

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βx

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Suppose that demand is linear and given by:

Qxd = αo - αxPx + αyPy + αMM + αHH

Income elasticity is given by:

Qxd = αo - αxPx + αyPy + αMM + αHH

Income elasticity is given by:

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αM × MQx

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Suppose the demand for good X is log-linear and given by

lnQxd = β0 + βxlnPx + βylnPy + βMlnM + βHlnH

Cross-price elasticity is

lnQxd = β0 + βxlnPx + βylnPy + βMlnM + βHlnH

Cross-price elasticity is

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βy

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Suppose the demand for good X is log-linear and given by

lnQxd = β0 + βxlnPx + βylnPy + βMlnM + βHlnH

Income elasticity is

lnQxd = β0 + βxlnPx + βylnPy + βMlnM + βHlnH

Income elasticity is

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βM

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