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Exam 5: Elasticity and Its Application

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Question 51

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Necessities tend to have price inelastic demands,whereas luxuries have price elastic demands.

A) True
B) False

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Question 52

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When her income increased from $30,000 to $40,000,Toby's consumption of macaroni decreased from 8 kilograms to 6 kilograms and her consumption of soy burgers increased from 3 kilograms to 4 kilograms.What can we conclude for Toby

A) Macaroni and soy burgers are both normal goods with income elasticities equal to 1.
B) Macaroni is an inferior good and soy burgers are normal goods; both have income elasticities of 1.
C) Macaroni is an inferior good with an income elasticity of -1, and soy burgers are normal goods with an income elasticity of 1.
D) Macaroni and soy burgers are both inferior goods with income elasticities equal to -1.

E) B) and D)
F) All of the above

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Question 53

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Why does Werther's Original candy tend to have an elastic demand

Elasticity of demand is closely related to the slope of the demand curve.What is the slope when demand elasticity is greater

Normal goods have negative income elasticities of demand while inferior goods have positive income elasticities of demand.

What impact does an increase in farm technology that increases market supply have for farmers and for consumers

What does the elasticity of demand for luxuries tend to be

If a good is a necessity,what would demand for the good tend to be

If the price elasticity of demand for a good is 3.0,what would result from a 10 percent increase in price

Figure 5-7 -Refer to Figure 5-7.What areas represent the total revenue at P₁

Use the graph shown to answer the following questions.Put the correct letter in the blank.Letters may be used more than once. ​ a.The elastic section of the graph is represented by section _______. b.The inelastic section of the graph is represented by section _______. c.The unit elastic section of the graph is represented by section _______. d.The portion of the graph in which a decrease in price would cause total revenue to fall would be _________. e.The portion of the graph in which a decrease in price would cause total revenue to rise would be _________. f.The portion of the graph in which a decrease in price would not cause a change in total revenue would be _________. g.The section of the graph in which total revenue would be at a maximum would be _______. h.The section of the graph in which elasticity is greater than 1 is _______. i.The section of the graph in which elasticity is equal to 1 is ______. j.The section of the graph in which elasticity is less than 1 is _______.​

According to a Ford press release in April 2013,sales of the fuel-efficient four-cylinder Ford Fusion rose by 4 percent in the first quarter.Over the same period,according to data from National Resources Canada,the average price of regular gasoline rose from 118.9 cents per litre to 129.4 cents per litre.Using the midpoint method,calculate the cross-price elasticity of demand between the Ford Fusion and regular gasoline.According to your estimate of the cross-price elasticity,are the two goods gross complements or gross substitutes Does your answer make sense

As the price elasticity of demand increases,what happens to the slope of the linear demand curve

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

Table 5-2 -Refer to Table 5-2.Using the midpoint method,what is the income elasticity of good Y

Which of the following statements applies to a perfectly elastic supply curve

Brenna's income elasticity of demand for football tickets is 1.5.All else equal,if her income increases by 18 percent,how many more football tickets will she buy

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

The flatter the demand curve that passes through a given point,the more inelastic the demand.

Company E,Canada's largest eBook company,wants to increase its total revenue.One strategy is to offer a 10 percent discount on every eBook it sells.Company E knows that its customers can be divided into two distinct groups according to their likely responses to the discount.The accompanying table shows how the two groups respond to the discount. ​ a.Using the midpoint method, calculate the price elasticities of demand for group I and group II. b.Explain how the discount will affect total revenue from each group. c.Suppose Company E knows which group each customer belongs to when he logs on and can choose whether or not to offer the discount.If Company E wants to increase its total revenue, should discounts be offered to group I or to group II, to neither group, or to both groups?