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Exam 6: Elasticity: the Responsiveness of Demand and Supply

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Question 21

True/False

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The demand for heating oil in the short run is more elastic than the long run demand for heating oil.

A) True
B) False

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Question 22

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If the demand for cell phone service is inelastic,then

A) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value) .
B) the percentage change in quantity demanded is equal to the percentage change in price.
C) the quantity demanded does not change in response to changes in price.
D) the percentage change in quantity demanded is less than the percentage change in price (in absolute value) .

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

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Question 23

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Over longer periods of time,increases in oil prices provide firms with incentives to explore and recover oil.What does this indicate about the long-run price elasticity of supply for oil?

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

If a supply curve is a horizontal line,supply is said to be

Suppose the current price of oil is $90 a barrel and the quantity supplied is 800 million barrels per day.If the price elasticity of supply for oil in the short run is estimated at 0.5,use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $98 a barrel.

Figure 6-1 -Refer to Figure 6-1.A perfectly elastic demand curve is shown in

Which of the following statements is true?

Suppose the supply curve for digital cameras shifts to the right.This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value). a.Insulin for a diabetic or aspirin for someone suffering a headache. b.A new Whirlpool 27 cu.ft.side-by-side refrigerator or electricity to power your all-electric home. c.A can of Red Bull or soft drinks in general.

If demand for a product is perfectly inelastic,a change in price will not change total revenue.

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

If demand is perfectly elastic,the absolute value of the price elasticity coefficient is

Which of the following statements is true?

You are the manager of a theater.At present the theater charges the same admission price of $8 to all customers,regardless of age.You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults.You tell your supervisor that your proposal is likely to increase revenue.What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.

If the cross-price elasticity of demand between beer and wine is 0.31,then beer and wine are

Figure 6-1 -Refer to Figure 6-1.A perfectly inelastic demand curve is shown in

Supply is elastic whenever the value of the elasticity of supply is positive and greater than 1.

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is -0.75.Suppose that the government is considering raising the minimum wage from $7.25 per hour to $7.75 per hour.Based on this information,calculate the percentage change in the employment of low skilled workers.Use the midpoint formula.

Explain the economic concept of price elasticity of supply.How is price elasticity of supply calculated?