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Exam 5: Elasticity: Measuring Responsiveness

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Question 41

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The university hopes to raise more revenue by increasing student housing fees. This plan will work only if:

A) the percent rise in price is larger in magnitude than the percent decline in quantity demanded.
B) the percent rise in price is smaller in magnitude than the percent decline in quantity demanded.
C) the percent decrease in price is smaller in magnitude than the percent decline in quantity demanded.
D) the percent decrease in price is larger in magnitude than the percent increase in quantity demanded.

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Question 42

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(Figure: Demand Curve for Pears) Use Figure: Demand Curve for Pears. The figure shows a demand curve that is:

A) unit-elastic.
B) elastic.
C) perfectly inelastic.
D) perfectly elastic.

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Question 43

Multiple Choice

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Which of the following individuals is LEAST likely to lose their job if the economy is doing poorly?

You are given data on four products - toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand?

Good M has an income elasticity of demand of -0.7. Which of the following items is good M?

The price of a gallon of milk rises from $2 to $2.60. In response to this price change, the quantity demanded for milk falls by 5%. The absolute value of the price elasticity of demand for milk is _____, and the price elasticity of demand is _____.

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which one of the supply curves probably belongs to a seller who has a large stock of product available for sale?

The price elasticity of demand for an item is impacted by:

If an item is a necessity rather than a luxury, its demand curve will be:

If the price of a good increases by 15%, and quantity demanded changes by 5%, then the price elasticity of demand is equal to:

(Figure: Estimating Price Elasticity in the Market for Garden Gnomes) Use Figure: Estimating Price Elasticity in the Market for Garden Gnomes. Which demand curve is perfectly inelastic?

Which statement is FALSE?

The cross-price elasticity of demand between Fanta and Dr. Pepper has been estimated at 0.61. If the price of Dr. Pepper falls by 10%, the quantity demanded of Fanta will:

The percentage change in quantity demanded divided by the percentage change in price is the _____.

The price elasticity of demand is measured as the percentage change in _____ divided by the percentage change in _____.

(Figure: Supply Curve for Peaches) Use Figure: Supply Curve for Peaches. The figure depicts a supply curve that is:

(Figure: Supply Curves) The figure shows four different supply curves for four products: A, B, C and D. Which of the products has a perfectly elastic supply curve?

If the price of a good increases by 10%, and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

Janelle recently received a promotion at her job, increasing her income from $940 per week to $1,060 per week. As a result, she decides to purchase 9% more sushi per week. Computed using the midpoint method, the income elasticity of Janelle's demand for sushi is:

(Figure: Demand Curves) The figure shows four different demand curves for four products: A, B, C, and D. Which of the products has the most inelastic demand curve?