Questions and Answers
What is the percent change in gasoline sales based on the rise from 360 million gallons to 375 million gallons?
4.1%
What is Andrina's income elasticity of demand for drumsticks if she spends 30% of her income on them?
1
What is Michelle's price elasticity of demand for caviar given that she spends $30 even though its price has doubled?
1
Rank the demand curves in terms of elasticity from most elastic to least elastic: A, B, C, D, E.
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Label demand as elastic, unit elastic, or inelastic for the following scenarios: a. When the price of a Lunchbox container increases from $3.00 to $4.00, the quantity sold drops from 20,000 to 15,000. The demand is ______.
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Label demand as elastic, unit elastic, or inelastic for the following scenarios: b. Elasticity of demand for gasoline has been determined to be ______.
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Label demand as elastic, unit elastic, or inelastic for the following scenarios: c. When bus fare rates increase from $2.00 to $2.21, and the number of passengers decreases from 70,000 to 61,000, the demand is ______.
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Label the scenarios as examples of elastic, inelastic, or unit elastic demand: a. When Ruko increases its price by 48%, total revenue decreases by 67%, it is considered ______.
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Label the scenarios as examples of elastic, inelastic, or unit elastic demand: b. When Cinema Supreme increases ticket prices by 26%, total revenue does not change, it is considered ______.
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Label the scenarios as examples of elastic, inelastic, or unit elastic demand: c. When Bluebox raises its prices by 41%, total revenue increases by 28%, it is considered ______.
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If the firm lowers DVD prices from $16 to $14, what is the change in revenue?
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What is the revenue change from the increased quantity at the new price of $14?
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What is the overall net effect of the price decrease on the firm's total revenue?
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What is the price elasticity of demand?
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How does demand tend to change over longer periods of time?
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When there are fewer substitutes, how tends the demand be?
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Calculate the cross-price elasticity between the two goods if a 20% price increase for Product A causes a 10% decrease in its quantity demanded, with no change in the quantity demanded for Product B.
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What is the relationship between Product A and Product B based on the cross-price elasticity?
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If Product C increases in price from $5 a pound to $11 a pound causing the quantity demanded for Product D to increase from 10 units to 18 units, what is the cross-price elasticity?
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If the price of Product E decreases by 2% causing its quantity demanded to increase by 14% and the quantity demanded for Product F to increase by 17%, what is the cross-price elasticity?
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If a 30% price increase for Product A causes a 10% decrease in its quantity demanded, with no change in the quantity demanded for Product B, what is the cross-price elasticity?
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What is the relationship between Product A and Product B based on the cross-price elasticity?
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Study Notes
Gasoline Sales and Percent Change
- Gasoline sales rose from 360 million gallons to 375 million gallons.
- Percent change in gasoline sales calculated using the midpoint formula is 4.1%.
Income Elasticity of Demand for Drumsticks
- Andrina spends 30% of her income on drumsticks regardless of income changes.
- The income elasticity of demand for drumsticks is 1, indicating unit elasticity.
Price Elasticity of Demand for Caviar
- Michelle maintains her $30 spending on caviar despite its price doubling.
- The price elasticity of demand for caviar is calculated at 1, indicating unit elasticity.
Ranking Demand Curves by Elasticity
- Demand curves ranked from most to least elastic: C, E, B, D, A.
Scenarios of Demand Elasticity
- Lunchbox containers: Price increased from $3.00 to $4.00, quantity sold dropped from 20,000 to 15,000: unit elastic.
- Gasoline: Elasticity determined at 0.5: inelastic.
- Bus fare increase: Fare raised from $2.00 to $2.21 leading to a drop in ridership from 70,000 to 61,000: elastic.
Identifying Demand Elasticity Types
- Ruko Streaming Device: Price increase of 48% led to a 67% decrease in revenue: elastic.
- Cinema Supreme: 26% price increase with unchanged revenue: unit elastic.
- Bluebox DVD rentals: 41% price increase resulting in a 28% revenue increase: inelastic.
Changes in Revenue for DVDs
- Price reduction of DVDs from $16 to $14 results in:
- Price effect leads to a revenue decrease of $400.
- Quantity effect leads to an increase of $1,400 in revenue.
- Overall net effect on revenue totals a $1,000 increase.
- Price elasticity of demand for DVDs classified as elastic.
Long-Term Demand Trends
- Over extended time frames, demand generally becomes more elastic.
Demand and Substitutes
- Lower availability of substitutes correlates with less elastic demand.
Cross-Price Elasticity of Goods
- Product A: 20% price increase caused no demand change for Product B; elasticity is 0 (no relationship).
- Product C & D: Price of C rose from $5 to $11 leading to quantity for D increasing from 10 to 18; cross-price elasticity is 0.8 (substitutes).
- Product E & F: 2% decrease in price for E causes 14% increase in quantity for E and 17% increase for F; cross-price elasticity is -8.5 (complements).
Cross-Price Elasticity Example
- For Product A: 30% price increase caused a 10% decrease in quantity demanded, no change for Product B; cross-price elasticity is 0 (no relationship).
Studying That Suits You
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Description
Prepare for your upcoming exam with these flashcards covering key concepts from Chapters 6, 7, 9, and 10. Each card presents mathematical problems related to percent change and spending habits, with definitions provided for clarity. Test your understanding and improve your performance in the exam.
