Q&A Hero

Q: An increase in the demand for green tea raises the price of apples from $16 a pound to $20 a pound. As a result, quantity supplied increases by 30 percent. Using the midpoint formula, calculate the value of the price elasticity of supply? A) 1.35 B) 1.875 C) 2.22 D) 7.5

Q: The price elasticity of the supply of teenage labor services is approximately 1.36. Suppose the minimum wage rises from $7.25 per hour to $8.75. Using the midpoint formula, calculate the approximately change in the quantity supplied of teenage labor. A) 7.3 percent B) 14.4 percent C) 25.5 percent D) There is insufficient information to answer the question.

Q: Figure 6-10 Refer to Figure 6-10. A unit-elastic supply curve is shown in A) Panel A. B) Panel B. C) Panel C. D) Panel D.

Q: Figure 6-10 Refer to Figure 6-10. A perfectly inelastic supply curve is shown in A) Panel A. B) Panel B. C) Panel C. D) Panel D.

Q: Figure 6-10 Refer to Figure 6-10. A perfectly elastic supply curve is shown in A) Panel A. B) Panel B. C) Panel C. D) Panel D.

Q: Figure 6-10 Refer to Figure 6-10. The supply curve on which price elasticity changes at every point is shown in A) Panel A. B) Panel B. C) Panel C. D) Panel D.

Q: Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate the price elasticity of supply. A) 1.22 B) 1.0 C) 0.82 D) 0.07

Q: Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good. Calculate the price elasticity of supply and characterize the product. A) 2; The product is elastic. B) 0.2; The product is inelastic. C) 0.5; The product is inelastic. D) 50%; The product is inelastic.

Q: Suppose the value of the price elasticity of supply is 4. What does this mean? A) A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent. B) A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent. C) A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent. D) For every $1 increase in price, quantity supplied increases by 4 units.

Q: The price elasticity of supply is equal to A) the value of the slope of the supply curve. B) the change in quantity supplied divided by the change in price. C) the percentage change in price divided by the percentage change in quantity supplied. D) the percentage change in quantity supplied divided by the percentage change in price.

Q: Price elasticity of supply is used to gauge A) how responsive suppliers are to price changes. B) how responsive suppliers are to changes in future prices. C) how responsive suppliers are to a change in demand. D) how responsive sales are to a change in input prices.

Q: The price elasticity of an upward-sloping supply curve is always A) positive. B) negative. C) greater than one. D) impossible to determine.

Q: Suppose the price elasticity of demand for cigarettes is -0.4. The FDA decides to regulate tobacco production, which increases the price of cigarettes and causes the quantity of cigarettes demanded to decrease by 25 percent. What is the percentage increase in price which would lead to the 25 percent decrease in quantity demanded? If the price elasticity was -4, what would be the percentage increase in price?

Q: Suppose the price elasticity of demand for methamphetamine is -0.35. If decriminalization caused the price of methamphetamine to fall by 75 percent, what will be the percentage increase in the quantity of methamphetamine demanded? If the price elasticity is -3.5, what will be the percentage increase in quantity demanded?

Q: 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.

Q: The government of Bassaland is looking for new revenue sources. It is considering imposing an excise tax on two goods: palm wine and diapers. If the price elasticity of demand for the goods are -0.47 and -1.89 respectively, which good should it tax if the goal is to raise revenue? If the government wants to tax only one good, which good should it tax if the goal is to discourage consumption? Explain your answer.

Q: Most food products have low income and price elasticities of demand.

Q: 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.

Q: Assume that a 50 percent gasoline tax led to a large increase in its price and only a small decrease in the quantity of gasoline demanded. Economic analysis would lead one to conclude that A) gasoline should be taxed because the benefits of the tax would exceed the costs. B) gasoline should not be taxed because the benefits are uncertain. C) gasoline should not be taxed on ethical grounds since ethical benefits and costs can't be measured. D) the benefits of taxing gasoline is a normative issue. Economic analysis can be used to contribute to discussion of this issue but cannot decide it.

Q: Assume that the price elasticity of demand for gasoline is -0.06. If the government tax causes the price of gasoline to increase by 50 percent, what will be the decrease in the quantity of gasoline demanded? A) 0.5 percent B) 3.0 percent C) 8.33 percent D) 50 percent

Q: Since 1950 there has been a substantial increase in wheat production. The increase in production has led to a decrease in the price of wheat because of which of the following factors? A) The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is greater than 1. B) The absolute value of the price elasticity of demand for wheat is greater than 1 and wheat is a close substitute for other food products. C) The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is low. D) The income elasticity of demand for wheat is high and wheat is an inferior good.

Q: The paradox of American farming is A) the demand for imported luxury food products has risen as the demand for domestic food products has fallen. B) the demand for food has risen as the number of people who pursue farming as a career has fallen. C) food has become cheaper and more abundant as the number of farms has decreased. D) the amount of food produced has increased as the average farm size has fallen.

Q: Between 1950 and 2013 the productivity of wheat farmers in the United States more than doubled. This means that A) the amount of land and other resources devoted to wheat production more than doubled. B) the incomes of wheat farmers more than doubled. C) the total amount of wheat produced more than doubled. D) the amount of wheat produced by the average farmer more than doubled.

Q: From 1950 to 2013 the number of people who lived on farms fell from 23 million to fewer than 3 million? Which of the following factors have contributed to this trend? A) increases in the cost of farming and a desire for young adults to move to urban areas B) rapid growth in farm production and low income and price elasticities for food products C) slow growth in agricultural productivity and low income elasticities for food products D) government policies that have increased the cost of living and working on farms

Q: Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon. How much revenue does the federal government receive from the tax? A) $95.44 billion B) $111.20 billion C) $148.27 billion D) $161.61 billion

Q: Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon. What is the new equilibrium quantity of gasoline demanded after the tax is imposed? A) 109.72 billion gallons per year B) 127.25 billion gallons per year C) 148.27 billion gallons per year D) 161.61 billion gallons per year

Q: Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues. Which of the following best explains this? A) The decrease in supply led to huge price increases. B) Tomatoes are necessities. C) The demand for tomatoes is price inelastic. D) The cross-price elasticity between tomatoes and most other substitute vegetables is very low.

Q: The demand for most farm products is relatively inelastic. All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases in productivity? A) Farm revenues increase. B) Farm revenues decrease. C) Farm revenues remain constant because consumers will not increase their consumption of farm products by much. D) Farm revenues could increase or decrease depending on the cost of this new equipment.

Q: The price of wheat has fallen since 1950. Which of the following explains this price decline? A) The price elasticity of demand is less than 1 (in absolute value) and the income elasticity of demand for wheat is low. B) The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is low. C) The price elasticity of demand is less than 1 (in absolute value) and wheat is an inferior good. D) The price elasticity of demand is greater than 1 (in absolute value) and the income elasticity of demand for wheat is greater than 1.

Q: Between 1950 and 2013 the number of acres devoted to wheat production in the United States ________ and the price of wheat ________. A) declined; decreased B) more than doubled; increased by about 50 percent C) declined; more than doubled D) increased; more than doubled

Q: Which of the following is one reason why the income of small family farms has decreased over time? A) Technology has increase farm productivity and market supply. B) The demand for farm products is price elastic. C) The demand for farm products is income inelastic. D) The U.S. population has increased greatly since 1950.

Q: Table 6-6Quantities PurchasedQuantities PurchasedIncomePricesGood XGood Y$30,000Px = $6, Py = $322050,000Px = $6, Py = $4510Refer to Table 6-6.a. Using the information in the table, calculate the income elasticity of demand for good X and characterize the good. Use the midpoint formula.b. Can you calculate the income elasticity of demand for good Y? If you can, show your calculation and characterize the good. If you cannot, explain why.

Q: When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peets coffee increased by 10 percent. Calculate the cross price elasticity of demand between Starbucks coffee and Peets coffee. What is the relationship between the two products?

Q: Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good. Calculate the income elasticity of demand for the good and determine what type of good it is.

Q: Explain the concepts of cross-price elasticity of demand and income elasticity of demand. What do positive and negative values indicate for each of these demand elasticities ?

Q: What factors would make you more sensitive or less sensitive to price when purchasing gasoline?

Q: A recent study indicated that "Stricter college alcohol policies such as raising the price of alcohol, or banning alcohol on campus, decreases the number of students who use marijuana." This indicates that the cross-price elasticity between alcohol and marijuana is positive.

Q: If the cross-price elasticity of demand for goods A and B is zero, this means the two goods are unrelated.

Q: If the income elasticity for canned food is 0.8, then canned food is an inferior good.

Q: The absolute value of the price elasticity of demand for telescopes is 1.5. Therefore, telescopes can be classified as a luxury.

Q: In the alcohol industry, both wine and spirits are considered to be substitutes for beer.

Q: In recent years, the prices of new domestically produced cars have been falling. Suppose consumers respond by reducing their demand for used cars and mass transport services such as bus travel. This information suggests that the cross-price elasticity between new cars and used cars, and the cross-price elasticity between new cars and bus travel are negative.

Q: Demand for staples such as dairy products and bread is likely to be both income and price inelastic.

Q: Economists have estimated that the cross-price elasticity of demand between beer and spirits is -0.50, the income elasticity for spirits is 1.21 and the income elasticity for wine is 5.03. These elasticities mean that A) beer and spirits are complements, spirits and wine are luxuries. B) beer and spirits are normal goods, spirits and wine are luxuries. C) beer and spirits are complements, spirits are substitutes. D) beer and spirits are substitutes, spirits and wine are luxuries.

Q: Economists estimated that the cross-price elasticity of demand for beer and wine is -0.83 and the income elasticity of wine is 5.03. This means that A) beer and wine are substitutes and wine is an inferior good. B) beer and wine are complements and wine is a luxury good. C) beer and wine are substitutes and wine is a luxury good. D) beer and wine are complements and wine is an inferior good.

Q: Barbara, the consummate hostess, proudly announced as she served dessert, "A port is often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake." Evidently, Barbara views A) port and chocolate cake as luxury items. B) port and chocolate cake as necessities. C) port and chocolate cake as complementary goods. D) port and chocolate cake as substitutes to other desserts.

Q: Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21. This indicates that A) wine and spirits are luxury goods. B) wine is a luxury good and spirits are inferior goods. C) wine and spirits are highly price elastic. D) wine is a luxury good and spirits are necessities.

Q: During an economic expansion as consumer incomes rise, holding everything else constant, A) the demand for most goods, except luxuries, will rise. B) the demand for luxuries will rise while the demand for inferior goods will fall. C) the demand for luxuries and inferior goods will rise. D) the prices of luxuries will fall while the prices of inferior goods will rise.

Q: Suppose the cross-price elasticity of demand between DVDs at Amazon.com and DVDs at Buy.com is 3.5. Based on this information, predict what happens when Amazon.com lowers its DVD prices by 10 percent. A) The quantity of DVDs demanded on Amazon.com will increase by 35 percent. B) The quantity of DVDs demanded on Buy.com will increase by 35 percent. C) The quantity of DVDs demanded on Amazon.com will decrease by 35 percent. D) The quantity of DVDs demanded on Buy.com will decrease by 35 percent.

Q: When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent, and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts indicates that A) the cross-price elasticity between tortilla chips and dips is 0.8, so the two are substitutes. B) the cross-price elasticity between tortilla chips and dips is -0.4, so the two are complements. C) the cross-price elasticity between tortilla chips and dips is -0.8, so the two are complements. D) the cross-price elasticity between tortilla chips and dips is 0.4, so the two are substitutes.

Q: Which of the following pairs of goods is likely to have a negative cross-price elasticity of demand? A) pancakes and syrup B) hot dogs and hamburgers C) orange juice and grapefruit juice D) peanuts and cat food

Q: Consider the following pairs of items: a. shampoo and conditioner b. iPhones and earbuds c. a laptop computer and a desktop computer d. beef and pork e. air-travel and weed killer Which of the pairs listed will have a positive cross-price elasticity? A) a and b only B) c and d only C) e only D) a, b, and c only

Q: If the cross-price elasticity of demand between beer and wine is 0.31, then beer and wine are A) complements. B) price inelastic goods. C) substitutes. D) necessities.

Q: The cross-price elasticity between Gillette razors and a related good is -3.4. What happens to the demand for the related good if the price of Gillette razors falls by 10 percent? A) The quantity demanded of the related good rises by 3.4 percent. B) The quantity demanded of the related good falls by 34 percent. C) The quantity demanded of the related good rises by 34 percent. D) The quantity demanded of the related good falls by 3.4 percent.

Q: In order to prove that Motrin and Ibuprofen are substitutes, one should measure the ________ and get a ________. A) cross-price elasticity; positive number B) cross-price elasticity; negative number C) price elasticity of demand; number greater than 1 (in absolute value) D) price elasticity of demand; number less than 1 (in absolute value)

Q: The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing A) the percentage change in quantity demanded of Coca-Cola by the percentage change in the quantity demanded of Pepsi-Cola. B) the percentage change in the price of Pepsi-Cola by the percentage change in quantity demanded of Coca-Cola. C) the percentage change in the price of Coca-Cola by the percentage change in the price of Pepsi-Cola. D) the percentage change in the quantity demanded of Coca-Cola by the percentage change in the price of Pepsi-Cola.

Q: The cross-price elasticity of demand measures the A) absolute change in the quantity demanded of one good divided by the absolute change in the price of another good. B) percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. C) percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. D) percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location.

Q: Suppose you are considering buying stock in the stock market, and your objective is to maximize your net worth. Furthermore, your study of the market reveals that the economy will be slowing down over the next several months. Under these conditions, it would be best to purchase stock in companies that produce A) normal goods. B) luxury goods. C) inferior goods. D) price elastic goods.

Q: Which of the following items is likely to have the highest income elasticity of demand? A) a luxury cruise to several European countries B) water C) breakfast cereal D) a hamburger

Q: Last year, Joan bought 50 pounds of hamburger when her household income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. Holding everything else constant, Joan's income elasticity of demand for hamburger is A) positive, so Joan considers hamburger to be an inferior good. B) negative, so Joan considers hamburger to be an inferior good. C) positive, so Joan considers hamburger to be a normal good and a necessity. D) negative, so Joan considers hamburger to be a normal good.

Q: Suppose you have surveyed a few industries and obtained information about the income elasticity of demand for their products. If you expect that the economy is headed for a long recession, you would advise people to look for jobs in an industry with A) a high positive income elasticity coefficient such as 5. B) a low positive income elasticity coefficient such as 0.8. C) a "high" negative income elasticity coefficient such as -4. D) a "low" negative income elasticity coefficient such as -0.2.

Q: Figure 6-9 Refer to Figure 6-9. The data in the diagram indicates that DVDs are A) luxury goods. B) inelastic goods. C) necessities. D) both luxury goods and inelastic goods. E) both necessities and inelastic goods.

Q: Demand for a luxury item, such as a yacht, is likely to be A) both income and price inelastic. B) both income elastic and price elastic. C) income elastic and price inelastic. D) income inelastic and price elastic.

Q: If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ________ than 0, and the good is ________ good. A) greater; an inferior B) less; a normal C) less; an inferior D) greater; a normal

Q: If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product this product is A) an income elastic good. B) an inferior good. C) a necessity. D) a luxury good.

Q: If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books the income elasticity of demand is A) -0.67. B) 0.67. C) 1.5. D) 2.

Q: If a 5 percent increase in income leads to a 10 percent increase in quantity demanded for airline travel, then airline travel is A) a necessity. B) a substitute for another good. C) a luxury. D) an inferior good.

Q: If a good has a negative income elasticity of demand, this indicates that the good is A) a substitute with another good. B) a complement with another good. C) inferior. D) normal.

Q: The income elasticity of demand measures A) the responsiveness of quantity demanded to changes in income. B) how a consumer's purchasing power is affected by a change in the price of a product. C) the percentage change in the price of a product divided by the percentage change in consumer income. D) the income effect of a change in price.

Q: The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a cell phone provider would be A) positive if subscribers consider the services substitutes for each other. B) positive if subscribers consider the services complements to each other. C) negative if subscribers consider the services substitutes for each other. D) negative no matter if subscribers consider the services substitutes or complements for each other.

Q: If the cross-price elasticity of demand between Breeze Detergent and Faber Detergent is a relatively large positive number, then it indicates that A) the two brands are probably made by the same company. B) the two brands of detergent are close substitutes. C) consumers have a distinct preference for one brand versus the other. D) detergents are necessities.

Q: Suppose the California Nurses Union successfully secured a 12 percent increase in the wages of registered nurses. If a hospital responds by reducing the quantity of registered nurses hired and increasing the quantity of physician's assistants hired, what conclusion can you draw? A) Physician's assistants are more valuable in terms of their productivity. B) The price elasticity of demand for registered nurses is negative while the price elasticity of demand for physician's assistants is positive. C) The cross-price elasticity of demand between registered nurses and physician's assistants is positive. D) The cross-price elasticity of demand between registered nurses and physician's assistants is negative.

Q: If a firm is in an antitrust court case being accused of monopolizing a product, the firm would hire an economist to show A) the cross-price elasticity of demand between the firm's good and another is negative. B) the cross-price elasticity of demand between the firm's good and another is positive. C) the price elasticity of demand for the firm's good is highly inelastic. D) the income elasticity of the firm's good is inferior.

Q: For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars. So, for these people, the cross-price elasticity of demand between gasoline and public transportation is A) positive. B) negative. C) zero. D) infinity.

Q: In September 2006, the Food and Drug Administration recommended that Americans avoid eating bagged raw spinach in the wake of an outbreak of E. coli bacteria. Following this recommendation, the food industry looked at alternatives and many turned to arugula. One Chicago distributor claimed, "The sale of the stuff has gone through the roof." Based on this information A) arugula is a normal good while raw spinach is an inferior good. B) the cross-price elasticity between arugula and spinach is negative. C) the cross-price elasticity between arugula and spinach is positive D) the price elasticity of arugula is positive while the price elasticity of spinach falls to zero.

Q: Figure 6-8 Refer to Figure 6-8. Identify the two goods which are complements. A) Good X and Good Y B) Good Y and Good Z C) Good X and Good Z D) It is not possible to distinguish any relationship among the goods.

Q: Figure 6-8 Refer to Figure 6-8. Identify the two goods which are substitutes. A) Good X and Good Y B) Good Y and Good Z C) Good X and Good Z D) It is not possible to distinguish any relationship among the goods.

Q: Suppose the cross-price elasticity of demand between grapefruit juice and orange juice is approximately 6. What does this mean? A) A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in orange juice consumption. B) A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in orange juice consumption. C) If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be purchased. D) The demand for orange juice is 6 times more than the demand for grapefruit juice.

Q: Consider the following pairs of items: a. shampoo and conditioner b. iPhones and earbuds c. a laptop computer and a desktop computer d. beef and pork e. air-travel and weed killer Which of the pairs listed will have cross-price elasticity of zero? A) a and b only B) c only since most people cannot do without computers C) e only D) none of the pairs listed

Q: Consider the following pairs of items: a. shampoo and conditioner b. iPhones and earbuds c. a laptop computer and a desktop computer d. beef and pork e. air-travel and weed killer Which of the pairs listed will have a negative cross-price elasticity? A) a and b only B) c and d only C) e only D) a, b, and c only