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Questions and Answers
What does the price elasticity of demand indicate?
What does the price elasticity of demand indicate?
- The slope of the demand curve
- The extent to which consumers respond to a change in price (correct)
- The extent to which changes in a product's price affect consumers' incomes
- How far business executives can stretch their fixed costs
- The extent to which a demand curve shifts as income changes
Which statement characterizes an elastic demand curve?
Which statement characterizes an elastic demand curve?
- The absolute change in price is smaller than the absolute change in quantity demanded
- The absolute change in price is bigger than the absolute change in quantity demanded
- The absolute changes in price and quantity demanded are the same
- A given percentage change in price causes a smaller percentage change in quantity demanded
- A given percentage change in price causes a larger percentage change in quantity demanded (correct)
If the price elasticity of demand is elastic, which of the following will occur?
If the price elasticity of demand is elastic, which of the following will occur?
- A 1 percent increase in the price will lead to a higher than 1 percent increase in quantity demanded.
- A 1 percent increase in the price will lead to a lower than 1 percent decrease in quantity demanded.
- A 1 percent fall in the price will lead to a higher than 1 percent increase in quantity demanded. (correct)
- A 1 percent fall in the price will lead to a lower than 1 percent increase in quantity demanded.
- A 1 percent fall in the price will lead to a 1 percent increase in quantity demanded.
If the price elasticity of demand is inelastic, which of the following scenarios is most likely to occur?
If the price elasticity of demand is inelastic, which of the following scenarios is most likely to occur?
If the demand for product X is inelastic, what is the likely impact of a 4 percent increase in the price of X?
If the demand for product X is inelastic, what is the likely impact of a 4 percent increase in the price of X?
Suppose a 10 percent increase in the quantity of lettuce demanded is observed as a result of a 40 percent decline in its price. What is the price elasticity of demand for lettuce?
Suppose a 10 percent increase in the quantity of lettuce demanded is observed as a result of a 40 percent decline in its price. What is the price elasticity of demand for lettuce?
Consider a scenario where a 40 percent increase in the quantity of quinoa demanded follows a 10 percent decline in its price. What is the price elasticity of demand for quinoa?
Consider a scenario where a 40 percent increase in the quantity of quinoa demanded follows a 10 percent decline in its price. What is the price elasticity of demand for quinoa?
Consider the following list of snack products: Ketchup chips, Potato chips, Lay's ketchup chips, Potato-based snacks. Which of the following correctly ranks their elasticity of demand from the most to least elastic?
Consider the following list of snack products: Ketchup chips, Potato chips, Lay's ketchup chips, Potato-based snacks. Which of the following correctly ranks their elasticity of demand from the most to least elastic?
The figures above show the demand and supply curves for four different Canadian craft breweries. Which graph depicts a brewery that has customers who are very sensitive to price changes?
The figures above show the demand and supply curves for four different Canadian craft breweries. Which graph depicts a brewery that has customers who are very sensitive to price changes?
Which of the following describes a perfectly inelastic demand curve?
Which of the following describes a perfectly inelastic demand curve?
Which of the following is true of a perfectly elastic demand curve?
Which of the following is true of a perfectly elastic demand curve?
If a business can sell 3000 units of a product at $10 per unit and 5000 units at $8 per unit, is its demand elastic, inelastic, or unit-elastic?
If a business can sell 3000 units of a product at $10 per unit and 5000 units at $8 per unit, is its demand elastic, inelastic, or unit-elastic?
Under which of the following circumstances does total revenue increase?
Under which of the following circumstances does total revenue increase?
If a business can sell 20,000 units of a product at $2 per unit and 10,000 units at $4 per unit, characterize its demand.
If a business can sell 20,000 units of a product at $2 per unit and 10,000 units at $4 per unit, characterize its demand.
Suppose that VIA Rail asked government authorities for permission to increase its commuter rates by 20 percent. The railroad argues that declining revenues make this rate increase essential. Opponents of the rate increase contend that the railroad's revenues would fall because of the rate hike. What can be concluded?
Suppose that VIA Rail asked government authorities for permission to increase its commuter rates by 20 percent. The railroad argues that declining revenues make this rate increase essential. Opponents of the rate increase contend that the railroad's revenues would fall because of the rate hike. What can be concluded?
If the demand for farm products is inelastic, what is the effect of a good harvest on farm revenues?
If the demand for farm products is inelastic, what is the effect of a good harvest on farm revenues?
A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. What can be concluded about the pizza's elasticity of demand at $5?
A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. What can be concluded about the pizza's elasticity of demand at $5?
If the University Chamber Music Society decides to raise ticket prices to acquire more funds to finance concerts, what is the Society assuming about the demand for tickets?
If the University Chamber Music Society decides to raise ticket prices to acquire more funds to finance concerts, what is the Society assuming about the demand for tickets?
You just started a new job at a marketing firm and received the following demand schedule based on survey data collected by the customer service department:
Price
Quantity Demanded (000's)
$5
25
$4
75
$3
155
$2
260
$1
340
Given the data provided, what selling price would you suggest to your manager, ignoring any costs associated with producing the good?
You just started a new job at a marketing firm and received the following demand schedule based on survey data collected by the customer service department:
| Price | Quantity Demanded (000's) |
|---|---|
| $5 | 25 |
| $4 | 75 |
| $3 | 155 |
| $2 | 260 |
| $1 | 340 |
| Given the data provided, what selling price would you suggest to your manager, ignoring any costs associated with producing the good? |
You just started a new job at a marketing firm and received the following demand schedule based on survey data collected by the customer service department.
Price
Quantity Demanded (000's)
$5
25
$4
75
$3
155
$2
260
$1
340
The company is currently charging a price of $2 and your manager has asked your advice about raising the price to $5 to boost department sales revenue. Given the data provided, which of the following is the correct response you would give to your manager?
You just started a new job at a marketing firm and received the following demand schedule based on survey data collected by the customer service department.
| Price | Quantity Demanded (000's) |
|---|---|
| $5 | 25 |
| $4 | 75 |
| $3 | 155 |
| $2 | 260 |
| $1 | 340 |
| The company is currently charging a price of $2 and your manager has asked your advice about raising the price to $5 to boost department sales revenue. Given the data provided, which of the following is the correct response you would give to your manager? |
What characteristic makes the elasticity of demand for a product likely to be greater?
What characteristic makes the elasticity of demand for a product likely to be greater?
Which of the following generalizations about price elasticity of demand is not correct?
Which of the following generalizations about price elasticity of demand is not correct?
For products like salt, bread, and electricity, the demand tends to be:
For products like salt, bread, and electricity, the demand tends to be:
Which of the following products is most likely to have an elastic demand?
Which of the following products is most likely to have an elastic demand?
A product's price rises from $4 to $6, causing consumption to fall from 2 million to 1 million units. What is the numerical value of price elasticity of demand?
A product's price rises from $4 to $6, causing consumption to fall from 2 million to 1 million units. What is the numerical value of price elasticity of demand?
Flashcards
Price elasticity of demand
Price elasticity of demand
The extent to which consumers change their demand in response to a change in price.
Elastic Demand Curve
Elastic Demand Curve
A curve where a percentage change in price leads to a larger percentage change in quantity demanded.
Elastic Price Elasticity
Elastic Price Elasticity
Occurs when a 1% fall in price causes a greater than 1% increase in quantity demanded.
Inelastic Price Elasticity
Inelastic Price Elasticity
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Inelastic Demand Impact
Inelastic Demand Impact
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Elastic Demand
Elastic Demand
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Inelastic Demand Products
Inelastic Demand Products
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Elastic Demand
Elastic Demand
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Elastic Demand
Elastic Demand
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Raising Ticket Prices
Raising Ticket Prices
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Elasticity of Demand
Elasticity of Demand
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Elasticity and Time
Elasticity and Time
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Perfectly Inelastic Demand
Perfectly Inelastic Demand
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Supply Curve Parallel
Supply Curve Parallel
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Upward-Sloping Supply
Upward-Sloping Supply
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Price Elasticity of Supply
Price Elasticity of Supply
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Marx based his attack.
Marx based his attack.
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Marx's theory.
Marx's theory.
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Study Notes
- The price elasticity of demand measures how much consumers respond to price changes.
- An elastic demand curve means a percentage change in price leads to a larger percentage change in quantity demanded.
- If the price elasticity of demand is elastic, a 1% fall in price results in more than a 1% increase in quantity demanded.
- If the price elasticity of demand is inelastic, a 1% increase in price leads to less than a 1% decrease in quantity demanded.
- For product X, if demand is inelastic, a 4% increase in price leads to less than a 4% decrease in quantity demanded.
- A 10% increase in lettuce quantity demanded from a 40% price decline indicates a price elasticity of demand that's inelastic and equal to 0.25.
- A 40% increase in quinoa quantity demanded from a 10% price decline means the price elasticity of demand is elastic and equal to 4.
- The ranking of elasticity of demand from most to least elastic for snack products is: Lay's ketchup chips, Ketchup chips, Potato chips, Potato-based snacks.
- A graph depicting a brewery with customers very sensitive to price changes is most likely to be graph "c".
- A perfectly inelastic demand curve can be shown as a line parallel to the vertical axis.
- A perfectly elastic demand curve can be shown as a line parallel to the horizontal axis.
- A business selling 3000 units at $10 each or 5000 units at $8 each has elastic demand.
- Total revenue increases when price rises and demand is inelastic.
- A business selling 20,000 units at $2 or 10,000 units at $4 has unit-elastic demand.
- If VIA Rail wants to increase commuter rates by 20%, the railroad feels that passenger service demand is inelastic, while opponents feel it is elastic.
- A good harvest will cause farm revenues to decrease if the demand for farm products is inelastic.
- If total revenue decreases both when the price is lowered from $5 to $4 and when the price is raised from $5 to $6, then the demand for pizza is elastic above $5 and inelastic below $5.
- If the University Chamber Music Society raises ticket prices to gain more funds, it is assuming that the demand for tickets is inelastic.
- The lowest price of $2 is be the selling price based on the provided data for maximized revenue.
- Raising the price from $2 to $5 would result in a loss of sales of about $395,000; therefore, not recommended.
- Elasticity of demand for a product is likely to be greater, the greater the time buyers adjust to a price change.
- The incorrect generalization is: The price elasticity of demand is greater for necessities than it is for luxuries.
- The demand for products such as salt, bread, and electricity tends to be relatively inelastic.
- Automobiles are most likely to have an elastic demand.
- When a product's price rises from $4 to $6, consumption falls from 2 million to 1 million units; the numerical value of price elasticity of demand is approximately 1.67.
- The quantity demanded of smartphones increases by 15 million units from an initial quantity of 22.5 million phones when its price drops from $500 to $300; the price elasticity of demand has a numerical value of 1.00.
- With a rise in the price of digitally streamed music from $0.50 to $1.00 per song, the number of songs bought falls from 3 million to 1 million; the numerical value of the price of elasticity of demand for this product is 1.50.
- The quantity demanded of a product rises from 200,000 to 300,000 units when its price falls from $4 to $1; the numerical value of the price of elasticity of demand for this product is 0.33.
- If graphed, the demand schedule shown in the table would be a downsloping line.
- Using the midpoint formula, the numerical value of the price elasticity of demand between prices $0 and $1 is 0.07.
- Using the midpoint formula, the numerical value of the price elasticity of demand between prices $6 and $7 is 4.33.
- Using the midpoint formula, the numerical value of the price elasticity of demand between prices $3 and $4 is 0.78.
- Average annual consumer incomes rise from $50,000 to $60,000, pushing up the quantity demanded for cars in a given region from 750,000 to 1.25 million; the numerical value of the income elasticity of cars is approximately 2.75.
- A drop in a town's average monthly incomes from $2000 to $1000 causes sales of canned meat to rise from 10,000 to 15,000 cans; the numerical value of the income elasticity of this item is -0.6.
- A rise in the price of butter from $3 to $5 per kilogram causes the quantity demanded of margarine to increase from 100,000 to 200,000 kilograms; the numerical value of the cross-price elasticity between these two goods is 1.33.
- A drop in the price of gasoline from $1.75 to $1.25 per litre causes purchases of cars to rise from 20,000 to 40,000; the numerical value of the cross-price elasticity between these two goods is -2.0.
- Anna's income elasticity of demand for chicken hotdogs is equal to -1.75. Suppose that at her current annual income of $50,000 she buys 100 hotdogs per year. Now suppose that next year her income falls to $40,000, how many hotdogs will she now purchase is 135.
- The price elasticity of supply measures how responsive the quantity supplied of X is to changes in the price of X.
- Assume that the price of product X rises by 13 percent and the quantity supplied of X increases by 15 percent; the supply for good X is elastic.
- If the supply of product X is perfectly inelastic and there is an increase in the demand for the product, the quantity supplied of the product will remain unchanged in the immediate run.
- For a particular market, if a drop in price from $100 to $50 causes quantity supplied to decrease from 3 million to 2 million units, then supply is inelastic.
- For a particular market, if a rise in price from $10 to $15 causes quantity supplied to increase from 3 million to 6 million units, then supply is elastic.
- Graph "d" depicts a situation in which a production manager faces a great deal of obstacles to increasing the amount of beer production.
- Supply for a particular product is more elastic in the long run than in the short run.
- A supply curve that is parallel to the horizontal axis suggests that in the long run, additional units of output will be forthcoming without an increase in price, in a constant cost industry.
- An upward-sloping long-run supply curve suggests that this is an increasing-cost industry.
- A supply curve that is parallel to the vertical axis suggests that the relevant time period is the immediate run.
- If the quantity supplied of tomatoes rises from 7 million to 9 million kilograms when the price rises from $3.50 to $4.50 per kilogram, then the numerical value of the price elasticity of supply is approximately 1.0.
- It is not possible to calculate the numerical value of the price elasticity of supply for an item if all you are told is that a $1 rise in price leads to an increase in quantity supplied of 10 units; you need to know the initial and final values for both price and quantity supplied.
- The number of tonnes of wheat sold rises from 100 million to 200 million tonnes due to an increase in the price of wheat from $500 to $700 per tonne; the numerical value of the price elasticity of supply is 2.0.
- A rise in the price of apples from $3 to $4 per kilogram raises quantity supplied from 3 million to 5 million kilograms; the numerical value of the price elasticity of supply is approximately 1.75.
- Karl Marx based his attack on capitalism on the labour theory of value.
- Marx's theory of exploitation asserts that workers are paid less than the value they contribute to production.
- Marx's labour theory of value has current significance because it has provided philosophical support for labour movements.
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