Chp 6

Question 1

Price elasticity of demand measures

Answer 1

how responsive quantity demanded is to a change in price.

Question 2

Suppose the value of the price elasticity of demand is -3. What does this​ mean?

Answer 2

A 1 percent increase in the price of the good causes the quantity demanded to decrease by 3 percent.

Question 3

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -​3, then quantity demanded

Answer 3

will decrease by 45 percent.

Question 4

A demand curve that is​ ________ represents perfectly inelastic​ demand, and a demand curve that is​ ________ represents inelastic demand.

Answer 4

​vertical; downward sloping

Question 5

Seth is a competitive body builder. He says he has to have his​ 12-oz package of protein powder to​ “feed his​ muscles” every day. On the basis of this​ information, what can you conclude about his price elasticity of demand for protein​ powder?

Answer 5

It is perfectly inelastic.

Question 6

If 50 units are sold at a price of​ $20 and 80 units are sold at a price of​ $15, what is the absolute value of the price elasticity of​ demand? Use the midpoint formula.

Answer 6

1.62

Question 6

If 50 units are sold at a price of​ $20 and 80 units are sold at a price of​ $15, what is the absolute value of the price elasticity of​ demand? Use the midpoint formula.

Answer 6

1.62

Question 7

Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from​ $120 a ton to​ $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of​ demand? Use the midpoint formula.

Answer 7

2.69

Question 8

Which of the following statements about elasticity of demand is​ false?

Answer 8

The value of the price elasticity of demand is the reciprocal of the value of the demand​ curve’s slope.

Question 9

The demand for all carbonated beverages is likely to be​ ________ the demand for Dr. Pepper.

Answer 9

less elastic than

Question 10

Which of the following would result in a higher absolute value of the price elasticity of demand for a​ product?

Answer 10

A wide variety of substitutes are available for the good.

Question 11

If the market for a product is broadly​ defined, then

Answer 11

there are few substitutes for the product and the demand for the product is relatively inelastic.

Question 12

If the market for a product is broadly​ defined, then

Answer 12

there are few substitutes for the product and the demand for the product is relatively inelastic.

Question 13

Which of the following could explain why the demand for table salt is​ inelastic?

Answer 13

Households devote a very small portion of their income to salt purchases.

Question 14

Suppose a convenience store owner in Philadelphia was worried that the implementation of the 1.5 cents per ounce tax on sweetened beverages would cause the quantity demanded to fall by so much that he would be in a worse situation if he passed the tax on to customers by raising prices than if he did not raise prices. If raising the price of sweetened beverages would cause the owner to receive less total revenue from the sale of sweetened​ beverages, the demand for sweetened beverages is

Answer 14

elastic

Question 15

Suppose a convenience store owner in Philadelphia was worried that the implementation of the 1.5 cents per ounce tax on sweetened beverages would cause the quantity demanded to fall by so much that he would be in a worse situation if he passed the tax on to customers by raising prices than if he did not raise prices. If raising the price of sweetened beverages would cause the owner to receive less total revenue from the sale of sweetened​ beverages, the demand for sweetened beverages is

Answer 15

elastic

Question 16

Studies show that the income elasticity of demand for Ramen noodles is -0.44. What does this​ mean?

Answer 16

A 1 percent increase in income leads to a 0.44 percent decrease in Ramen noodle consumption.

Question 17

If the​ cross-price elasticity of demand for two goods is​ positive, this implies that the two goods are

Answer 17

substitutes

Question 18

Suppose​ Pump-U-Up lowers the price of its gym membership by 10 percent and as a​ result, Sweat-It-Out experienced a 16 percent decline in its gym membership. What is the value of the​ cross-price elasticity between the two gym​ memberships?

Answer 18

1.6