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Exam 3: Demand Elasticities

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Question 61

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As we move down a linear demand curve,the absolute value of the price elasticity of demand:

A) increases.
B) stays the same.
C) decreases.
D) cannot be determined without more information.

E) C) and D)
F) B) and C)

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Question 62

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Assume that,for a particular demand curve,when price rises from $50 to $60,total revenue falls from $8,750 to $7800. a.Based on this information,what is the quantity demanded at each price. b.Without calculating the coefficient of elasticity,is demand over this range elastic or inelastic? How do you know?

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a.When price is $50,quantity demanded is...

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Question 63

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For a linear demand function,slope and the price elasticity of demand are equal.

Assume an analyst has been hired to estimate the price elasticity of demand for hamburger (which sells for about $2.30 per pound) and filet mignon (which sells for about $20 per pound) ,respectively.Considering the different determinants of the price elasticity of demand and assuming the consumers in both markets have approximately the same incomes,we would expect the coefficient of price elasticity of demand in absolute value to be:

Assume an individual is currently using all of his income to consume two goods - X and Y.If the prices of X and Y are $3 and $8,respectively,and the marginal rate of substitution of X for Y is four,is this individual maximizing his net benefits from consumption? If not,what should he do to increase his total utility?

For a normal good,the income elasticity of demand is:

Assume the demand function for a particular good can be written as P = 150 - 6Q.When P = 12,the point elasticity of demand equals 2.08.

Suppose a consumer's income increases from $30,000 to $36,000.As a result,the consumer increases her purchases of compact disks (CDs) from 25 CDs to 30 CDs.What is the consumer's income elasticity of demand for CDs?

As the number of available substitutes for a good increases,the price elasticity of demand for the good will increase as well.

Assuming the inverse demand function for good Z can be written as P = 90 - 3Q,the corresponding total revenue function is:

According to one study,the price elasticity of demand for restaurant meals is -2.27.This implies that if restaurants want to increase their total revenues they should:

Knowledge about the price elasticity of demand is especially useful to managers because it allows them to predict how a change in price would affect a firm's total revenues.