ECON 213 InQuizitive 4 Elasticity Assignment solutions complete answers

ECON 213 InQuizitive 4 Elasticity Assignment solutions complete answers 

Chapter 4: Elasticity 

 

The graph below shows a demand curve for skinny lattes. Drag the elasticity labels to the appropriate regions of the demand curve.

 

Fill in the blanks to describe how price elasticity of demand is different for necessities versus luxury goods.

Demand for a good that is a necessity is likely to be –Press Space to open
inelastic
need
complements
want
unitary
substitutes
have more time to adjust to a change
elastic
 because consumers –Press Space to open
inelastic
need
complements
want
unitary
substitutes
have more time to adjust to a change
elastic
 to have the product regardless of the price. Demand for a good that is a luxury is likely to be –Press Space to open
inelastic
need
complements
want
unitary
substitutes
have more time to adjust to a change
elastic
 because consumers can take their time to find –Press Space to open
inelastic
need
complements
want
unitary
substitutes
have more time to adjust to a change
elastic
 for the product when the price increases, as they do not need to have the good.

 

Fill in the blanks to complete the passage comparing the cross-price elasticity of demand for two products that are substitutes with that of two products that are complements.

Consider two substitute goods: good A and good B. A price increase for good A will cause the quantity demanded for good A to –Press Space to open
decline
production
increase
. The demand for good B will –Press Space to open
decline
production
increase
. Consider two complementary goods: good C and good D. A price increase for good C will cause the quantity demanded for good C to –Press Space to open
decline
production
increase
. The demand for good D will also –Press Space to open
decline
production
increase
.

 

Fill in the blanks to complete the passage about income elasticity of demand.

If a decrease in income leads to an increase in quantity demanded of that good, we say that the good is –Press Space to open
inferior
negative
positive
zero
normal
. For such goods the income elasticity is –Press Space to open
inferior
negative
positive
zero
normal
.

 

During the initial phases of the coronavirus pandemic in 2020, many pet owners rushed to take their pets to the veterinarian before lockdowns began. This surge in demand caused the price of veterinary care to increase by 10%. If the elasticity of supply was estimated to be .75, then the quantity supplied changed by what percentage?

 

Fill in the blanks to explain how price elasticity of demand is related to total revenue.

If a business sees that demand for its product is –Press Space to open
inelastic
decrease
elastic
perfectly elastic
popular
increase
, it makes sense to lower the price in order to –Press Space to open
inelastic
decrease
elastic
perfectly elastic
popular
increase
 revenue. However, if demand is –Press Space to open
inelastic
decrease
elastic
perfectly elastic
popular
increase
, lowering the price will not increase revenue.

 

What are some strategies producers can use to maintain an elastic supply, so that they can quickly respond to changes in prices?

 

Fill in the blanks to complete the passage about elasticity between two goods.

When the –Press Space to open
income elasticity of demand
substitutes
complements
price elasticity of supply
negative
cross-price elasticity of demand
 between two goods is –Press Space to open
income elasticity of demand
substitutes
complements
price elasticity of supply
negative
cross-price elasticity of demand
, we know that the goods are –Press Space to open
income elasticity of demand
substitutes
complements
price elasticity of supply
negative
cross-price elasticity of demand
 because an increase in the price of one good leads to a decrease in the quantity demanded of the other good.

 

Talia’s income has increased from $500 to $1,000 a week. As a result of this, Talia’s consumption of tacos at Margarita’s Mexican Grill has increased from 10 tacos a week to 50 tacos a week. What is Talia’s income elasticity of demand, using the midpoint method?

 

Fill in the blanks to explain why the supply of oceanfront property is perfectly price inelastic.

If the price of oceanfront property increases, the quantity –Press Space to open
elastic
supply
demand
demanded
supplied
inelastic
 of land will stay the same. As a result, the price elasticity of –Press Space to open
elastic
supply
demand
demanded
supplied
inelastic
 will be –Press Space to open
elastic
supply
demand
demanded
supplied
inelastic
.

 

Determine the price elasticity of demand for a microwave that experienced a 20% drop in price and a 50% increase in weekly quantity demanded.

 

During the weekends, Juanita competes in eSports video game tournaments. She takes her computer to different events and plays her favorite computer-based video game, “ECON Legends 2.” Juanita has won enough money from playing in tournaments to purchase a new computer. Order the scenarios below starting with the case where Juanita’s price elasticity of demand would be the most elastic to least elastic (which is very inelastic).

 

For consumers with an income around $50,000 a year, you can expect the price elasticity of demand to be more elastic for a $20,000 ski boat than for a $1 roll of toilet paper.

 

How does the existence of substitutes for a product affect the product’s price elasticity of demand?

 

Which determinants influence whether the price elasticity of demand is elastic or inelastic?

 

If an increase in the price of good E leads to a large decrease in the demand for good F, what is the relationship between the two goods?

 

Identify the statement that correctly describes the income elasticities of necessities.

 

The textbook discusses several things that determine how price elastic the supply of a good or service is. These are known as the determinants of the price elasticity of supply. Changes in these determinants can cause the elasticity of supply to change. The figure below shows a supply curve that starts out perfectly inelastic at S1 and then becomes more elastic as it moves to S2, and then to S3.

Which of the determinants of the elasticity of supply could this graph be representing?

 

Using the midpoint method described in the textbook, find the cross-price elasticity of demand for FedEx and UPS overnight shipping. The price of FedEx increased from $65 to $75. The quantity demanded of UPS increased from 1.2 million packages per day to 1.3 million. Round to two decimal places as necessary.

0.56

 

The graph below depicts a series of changes in the market for oil. The initial demand curve is D1, and the initial (short-run) supply curve is SSR.

First, the demand for oil changes from D1 to D2. This leads to a price increase from $50 to $90.

Then, over time, supply becomes more elastic as represented by the supply curve changing from SSR to SLR. This leads to a price drop from $90 to $80.

What role does the elasticity of demand play in the price change from $90 to $80?

 

Holding the prices of goods constant, how does an increase in income affect consumer spending on necessities versus luxuries?

 

Label each pair of products with the correct cross-price elasticity of demand.

 

What graph would you expect to illustrate the price elasticity of demand for life-saving heart surgery?

 

2.
As the prices in markets change, buyers and sellers respond in different ways according to how much time they have to react. Match the time period to its correct description. Buyers have a significant amount of time to adjust to a change in the market. Demand is elastic. Buyers have no time to adjust to a change in the market. Demand is inelastic. Demand is somewhat elastic. Buyers have some time to adjust to a change in the market.
 
 
3.
Consider the market for oil. As shown, a shift in the demand curve causes a price increase, followed by a price drop because long-run supply is more elastic than short-term supply. What role does the elasticity of demand play in the second price movement?
 
 
4.
Consider the supply curve for bottles of soda. Identify each event as causing either a shift in supply or a movement along the supply curve.
 
 
5.
Fill in the blanks to complete the passage comparing the cross-price elasticity of demand for two products that are substitutes with that of two products that are complements.

 

Consider two goods that are substitutes. A price increase for one good will cause the quantity demanded of that good to –. The quantity demanded of the substitute good will –. When two goods are complements of each other, a price – for either product will cause – of both goods to decline.
 
 
6.
The cross-price elasticity of demand for jeans and textbooks is zero because the two products have no particular relationship.
 
 
7.
Determine the price elasticity of demand for a microwave that experienced a 20% drop in price and a 50% increase in weekly demand quantity.
 
 
8.
Drag the products to the demand curve that might represent their price elasticity of demand.
 
 
9.
The graph shows the short- and long-run price elasticity of demand and supply in a situation where demand for corn has increased. Match each label on the graph to the appropriate description.
 
 
10.
How does an increase of income affect spending on necessities and luxuries? As income increases, spending on luxuries increases slowly, but spending on necessities increases dramatically. As income increases, spending on luxuries increases dramatically, but spending on necessities increases slowly. As income increases, spending on luxuries increases dramatically and spending on necessities remains unchanged. As income increases, spending on necessities increases dramatically and spending on luxuries remains unchanged.
 
 
11.
How does the existence of substitutes affect the price elasticity of demand? If there are many substitutes, the price elasticity of the good will be elastic, The existence of substitutes leads to a situation with perfect elasticity, the existence of substitutes makes the price elasticity of demand inelastic, the existence of substitutes leads to higher prices in the marketplace.
 
 
12.
Explain how price elasticity of demand is related to total revenue.

 

If a business sees that demand for its product is –, it makes sense to lower the price in order to – revenue. However, if demand is –, lowering the price will not increase revenue.
 
 
13.
If demand for oil increases, what can we assume about the price elasticity of supply and demand?
 
 
14.
Explain why oceanfront property is an example of a product with a perfectly inelastic price elasticity of supply.

 

If the price of oceanfront property increases, the quantity – for land will stay the same. As a result, the price elasticity of – will be –.
 
 
15.
In the – run, a producer may have difficulty increasing its –, which makes supply –. However, in the – run the producer may be able to increase the quantity supplied to make its supply more –.
 
 
17.
In the figure, which determinants of the price elasticity of supply do S1, S2, and S3 depict?
 
 
 

18.
Jenna is looking to buy a new computer. When would the price elasticity of demand be most elastic for her computer? Order the situations from most elastic to most inelastic.
 
 
19.
Match the price elasticity of supply to the product it describes.
 
 
20.
Match the product to its correct income elasticity.
 
 
21.
Match the type of demand to the effect on total revenue if a producer lowered the purchase price of its product.
 
 
22.
The price elasticity of     equals the percentage change in      divided by the percentage change in    . When the percentage change in the quantity demanded is larger than the percentage change in price, the demand is    .
 
 
23.
The price elasticity of demand is given by this equation:

When you are using this equation, what does it mean when you obtain a zero in the numerator?
 
 
24.
Why do economists use the midpoint method to calculate the price elasticity of demand between demand/price combination (Q1, P1) and combination (Q2, P2)?

 

A simple calculation of the price elasticity of demand will yield – results depending on whether one considers the change as going from (Q1, P1) to (Q2, P2) or in the reverse direction. The midpoint method gives the same answer either way because it uses – price and – quantity as the basis for the – change calculations.
 
 
25.
Suppose that due to unfavorable growing conditions, this year’s global coffee crop was unusually small. What can we assume about the short-run price elasticity of supply and demand for coffee?
 
 
26.
Total revenue is calculated by subtracting the total costs from the price.
 
 
27.
Use the midpoint method to calculate the price elasticity of demand for potato chips that increased in price from $2.00 to $3.00. The quantity demanded decreased from 100 bags a week to 50 bags a week at the local grocery store. Round to one decimal place.
 
 
28.
Use the midpoint method to calculate the price elasticity of supply for tablet computers, using the following information: Q1 = 10, P1 = 100 Q2 = 30, P2 = 150
 
 
 

29.
Using the midpoint method, find the cross-price elasticity of demand for FedEx and UPS overnight shipping if the price of FedEx increased from $65 to $75 and the quantity demanded of UPS went up from 1.2 million packages per day to 1.3 million. Round to two decimal places as necessary.
 
 
30.
What are some strategies producers can use to maintain an elastic supply?
 
 
31.
What are the determinants of the price elasticity of supply?
 
 
32.
What correctly describes the income elasticities of necessities? Necessities have income elasticities greater than 1. Necessities have income elasticities between 0 and 1. Necessities do not have income elasticity. Necessities have income elasticities less than 0.
 
 
33.
What does the price elasticity of supply measure? The responsiveness of the quantity supplied to a change in price, how social class affects spending, the responsiveness of buyers to changes in price, how income affects spending
 
 
34.
When consumers are unresponsive, what does that mean? When consumers are unresponsive, what does that mean?

They don’t notice that a new good has been introduced to the market. Sellers have charged too much for their product or service. The demand has failed to keep up with the supply of a particular good or service. They are unwilling to change their behavior, even when the price of a good or service changes.
 
 
35.
Fill in the blanks to complete the passage about income and inferior goods.

 

When consumers have more money, they are – likely to purchase inferior goods. When this is the case, it means that – elasticity of demand is –: as income goes up, demand goes –.
 
 
36.
Describe how price elasticity of demand is different for necessities versus luxury goods.

 

When the price of a necessity increases, demand is likely to be – because consumers – that product to survive. However, when the price of a luxury good increases, consumers may – because the good is not crucial to survival. Thus, the demand would be –.
 
 
37.
Which determinants influence whether demand is elastic or inelastic? the products and services used by people in the consumers’ peer groups, advertising associated with the change in price, time and the adjustment process, necessities versus luxury goods, the share of the budget spent on the good, the existence of substitutes
 
 
38.
Which products would you expect to have a higher price elasticity of demand? Order them from most inelastic to most elastic.
 
 
39.
Why might a producer be willing to sell a product at a price that leads to little or no profit on that product? The producer might also sell complementary products. There are few alternatives for the product. The producer has a very limited supply of the product. Demand for their product is very high.
 
 
40.
You can expect the price elasticity of demand to be more elastic for a car than for a restaurant meal.