Question 1

Table 5-2
 $$\begin{array} { | l | l | } 
\hline \text { Priea } & \text { Quintit } \
\hline \$ 100 & 0 \
\hline \$ 80 & 10 \
\hline \$ 60 & 20 \
\hline \$ 40 & 30 \
\hline \$ 20 & 40 \
\hline \$ 0 & 50 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the price elasticity of demand is
A)zero.
B)unit elastic.
C)inelastic.
D)elastic.

Accepted Answer

Using the midpoint method, we can calculate the price elasticity of demand as:
\begin{align*}
	ext{Elasticity} &= \frac{	ext{percent change in quantity demanded}}{	ext{percent change in price}}\
&= \frac{\frac{20-10}{((20+10)/2)}	imes100}{\frac{60-80}{((60+80)/2)}	imes100}\
&= \frac{\frac{10}{15}	imes100}{\frac{-20}{70}	imes100}\
&= \frac{66.67}{28.57}\
&\approx 2.33
\end{align*}
Since the elasticity coefficient is greater than 1, the demand is elastic.

Question 2

Table 5-2
 $$\begin{array} { | l | l | } 
\hline \text { Priea } & \text { Quintit } \
\hline \$ 100 & 0 \
\hline \$ 80 & 10 \
\hline \$ 60 & 20 \
\hline \$ 40 & 30 \
\hline \$ 20 & 40 \
\hline \$ 0 & 50 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $60 to $40, the absolute value of the price elasticity of demand is
A) 0.4.
B) 1.
C) 4.
D) 20.

Accepted Answer

The midpoint method formula for elasticity is $(Q2 - Q1) / ((Q2 + Q1)/2)$ divided by $(P2 - P1) / ((P2 + P1)/2)$. Here, $(30 - 20) / ((30 + 20)/2)$ divided by $(40 - 60) / ((40 + 60)/2)$ equals 1.

Question 3

Table 5-2
 $$\begin{array} { | l | l | } 
\hline \text { Priea } & \text { Quintit } \
\hline \$ 100 & 0 \
\hline \$ 80 & 10 \
\hline \$ 60 & 20 \
\hline \$ 40 & 30 \
\hline \$ 20 & 40 \
\hline \$ 0 & 50 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $60 to $40, the price elasticity of demand is
A)zero.
B)inelastic.
C)unit elastic.
D)elastic.

Accepted Answer

The answer of Table 5-2
 \[\begin{array} { | l |...

Question 4

The midpoint method for calculating elasticities is convenient in that it allows us to
A)ignore the percentage change in quantity demanded and instead focus entirely on the percentage change in price.
B)calculate the same value for the elasticity, regardless of whether the price increases or decreases.
C)assume that sellers' total revenue stays constant when the price changes.
D)restrict all elasticity values to between 0 and 1.

Accepted Answer

The answer of The midpoint method for calculating elasticities is...

Question 5

Table 5-4
 $$\begin{array} { | c | c } 
\hline \text { Prica } & \begin{array} { c } 
\text { Tatal } \
\text { Revenup }
\end{array} \
\hline \$ 10 & \$ 100 \
\hline \$ 12 & \$ 108 \
\hline \$ 14 & \$ 112 \
\hline \$ 16 & \$ 112 \
\hline
\end{array}$$
-Refer to Table 5-4. When price is between $10 and $14, demand is
A)elastic.
B)unit elastic.
C)inelastic.
D)There is not enough information given to determine whether demand is elastic, unit elastic, or inelastic.

Accepted Answer

As price increases from \$10 to \$14, total revenue increases from \$100 to \$112, which is a small increase. This suggests that demand is relatively inelastic, meaning that changes in price have only a small effect on the quantity demanded.

Question 6

When the price of a bracelet was $25 each, the jewelry shop sold 20 per month. When it raised the price to $35 each, it sold 14 per month. Using the midpoint method, the price elasticity of demand for bracelets is about
A)1.66.
B)1.06.
C)0.94.
D)0.60.

Accepted Answer

Using the midpoint method, we have:

Price = (25 + 35)/2 = 30
Quantity = (20 + 14)/2 = 17

Using the formula for price elasticity of demand:

%ΔQ/%ΔP = [(Q2-Q1)/((Q2+Q1)/2)] / [(P2-P1)/((P2+P1)/2)]
%ΔQ/%ΔP = [(14-20)/((14+20)/2)] / [(35-25)/((35+25)/2)]

%ΔQ/%ΔP = [-6/17] / [10/30]
%ΔQ/%ΔP = [-0.3529] / [0.3333]
%ΔQ/%ΔP = -1.058

The absolute value of price elasticity of demand is 1.058 or approximately 1.06,which means that the bracelets are relatively elastic, because the value is greater than 1. Therefore, a change in price leads to a more than proportionate change in quantity demanded.

Question 7

Figure 5-1 
-Refer to Figure 5-1. Between point A and point B, the slope is equal to
A)-1/4, and the price elasticity of demand is equal to 2/3.
B)-1/4, and the price elasticity of demand is equal to 3/2.
C)-3/2, and the price elasticity of demand is equal to 1/4.
D)-2/3, and the price elasticity of demand is equal to 3/2.

Accepted Answer

The slope between two points on a demand curve represents the change in quantity demanded divided by the change in price. In this case, the slope between A and B is -1/4, meaning that for every increase in price of $1, the quantity demanded decreases by 0.25 units. The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Using the midpoint formula, we can see that the price elasticity of demand between A and B is 3/2. Therefore, the correct answer is B.

Question 8

When the price of used cds is $4, Daphne buys five per month. When the price is $3, she buys nine per month. Daphne's demand for used cds is
A)elastic, and her demand curve would be relatively flat.
B)elastic, and her demand curve would be relatively steep.
C)inelastic, and her demand curve would be relatively flat.
D)inelastic, and her demand curve would be relatively steep.

Accepted Answer

Daphne's demand is elastic because there is a large change in the quantity demanded (from 5 to 9) in response to a relatively small change in price (from $4 to $3). Her demand curve would be relatively flat because the percentage change in quantity demanded is greater than the percentage change in price.

Question 9

Table 5-3
The following table shows the demand schedule for a particular good. $$\begin{array} { | c | c | } 
\hline \text { Prise } & \text { Quantity } \
\hline \$ 15 & 0 \
\hline \$ 12 & 5 \
\hline \$ 9 & 10 \
\hline \$ 6 & 15 \
\hline \$ 3 & 20 \
\hline \$ 0 & 25 \
\hline
\end{array}$$
-Refer to Table 5-3. Using the midpoint method, what is the price elasticity of demand when price rises from $9 to $12?
A)0.43
B)0.67
C)1.50
D)2.33

Accepted Answer

The answer of Table 5-3
The following table shows the demand...

Question 10

Table 5-4
 $$\begin{array} { | c | c } 
\hline \text { Prica } & \begin{array} { c } 
\text { Tatal } \
\text { Revenup }
\end{array} \
\hline \$ 10 & \$ 100 \
\hline \$ 12 & \$ 108 \
\hline \$ 14 & \$ 112 \
\hline \$ 16 & \$ 112 \
\hline
\end{array}$$
-Refer to Table 5-4. As price rises from $10 to $12, the price elasticity of demand using the midpoint method is approximately
A)0.08.
B)0.18.
C)0.42.
D)0.58.

Accepted Answer

The answer of Table 5-4
 \[\begin{array} { | c |...

Question 11

Table 5-3
The following table shows the demand schedule for a particular good. $$\begin{array} { | c | c | } 
\hline \text { Prise } & \text { Quantity } \
\hline \$ 15 & 0 \
\hline \$ 12 & 5 \
\hline \$ 9 & 10 \
\hline \$ 6 & 15 \
\hline \$ 3 & 20 \
\hline \$ 0 & 25 \
\hline
\end{array}$$
-Refer to Table 5-3. Using the midpoint method, when price falls from $6 to $3, the price elasticity of demand is
A)0.43
B)0.67
C)1.50
D)2.33

Accepted Answer

The answer of Table 5-3
The following table shows the demand...

Question 12

Table 5-2
 $$\begin{array} { | l | l | } 
\hline \text { Priea } & \text { Quintit } \
\hline \$ 100 & 0 \
\hline \$ 80 & 10 \
\hline \$ 60 & 20 \
\hline \$ 40 & 30 \
\hline \$ 20 & 40 \
\hline \$ 0 & 50 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $40 to $20, the price elasticity of demand is
A)zero.
B)inelastic.
C)unit elastic.
D)elastic.

Accepted Answer

The answer of Table 5-2
 \[\begin{array} { | l |...

Question 13

Table 5-2
 $$\begin{array} { | l | l | } 
\hline \text { Priea } & \text { Quintit } \
\hline \$ 100 & 0 \
\hline \$ 80 & 10 \
\hline \$ 60 & 20 \
\hline \$ 40 & 30 \
\hline \$ 20 & 40 \
\hline \$ 0 & 50 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $80 to $60, the absolute value of the price elasticity of demand is
A) 20.
B) 10.
C) 2.33.
D) 0.43.

Accepted Answer

The midpoint method formula for calculating price elasticity of demand is:

Price elasticity of demand = ((Q2 - Q1) / ((Q1 + Q2) / 2)) / ((P2 - P1) / ((P1 + P2) / 2))

Using the values from the table, if the price falls from $80 to $60 the new values are:

P1 = $80 
P2 = $60 
Q1 = 10 
Q2 = 20

Plugging these values into the formula:

Price elasticity of demand = ((20-10) / ((10+20) / 2)) / (($60-$80) / (($60+$80) / 2))

Price elasticity of demand = (10 / 15) / (-20 / 70)

Price elasticity of demand = 2.33

Therefore, the answer is C) 2.33.

Question 14

Table 5-4
 $$\begin{array} { | c | c } 
\hline \text { Prica } & \begin{array} { c } 
\text { Tatal } \
\text { Revenup }
\end{array} \
\hline \$ 10 & \$ 100 \
\hline \$ 12 & \$ 108 \
\hline \$ 14 & \$ 112 \
\hline \$ 16 & \$ 112 \
\hline
\end{array}$$
-Refer to Table 5-4. Demand is unit elastic when quantity demanded changes from
A)10 to 9.
B)9 to 8.
C)8 to 7.
D)There is not enough information given to determine the correct answer.

Accepted Answer

Unit elasticity of demand occurs when the percentage change in quantity demanded is equal to the percentage change in price. Looking at the table, when the price increases from \$14 to \$16, the quantity demanded remains the same at \$112. Therefore, the percentage change in price (33.33%) is equal to the percentage change in quantity demanded (33.33%), indicating unit elasticity of demand. This occurs when the quantity demanded changes from 8 to 7.

Question 15

Figure 5-1 
-Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to
A)0.33.
B)0.67.
C)1.5
D)2.67.

Accepted Answer

Price elasticity of demand between two points is calculated using the midpoint formula, which is the percentage change in quantity demanded divided by the percentage change in price. The correct answer, 1.5, suggests a relatively elastic demand between points A and B, meaning the quantity demanded changes by a greater percentage than the price does.

Question 16

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about
A)0.22.
B)0.67.
C)1.33.
D)1.50.

Accepted Answer

Using the midpoint method, the formula for price elasticity of demand is:

Price elasticity of demand = [(change in quantity demanded ÷ average quantity demanded) ÷ (change in price ÷ average price)]

Plugging in the values given:

Price elasticity of demand = [(100-80) ÷ [(100+80) ÷ 2] ÷ (7-5) ÷ [(7+5) ÷ 2]]

Price elasticity of demand = [(20 ÷ 90) ÷ (2 ÷ 6)] = 0.67

Therefore, the price elasticity of demand is about 0.67.

Question 17

Table 5-2
 $$\begin{array} { | l | l | } 
\hline \text { Priea } & \text { Quintit } \
\hline \$ 100 & 0 \
\hline \$ 80 & 10 \
\hline \$ 60 & 20 \
\hline \$ 40 & 30 \
\hline \$ 20 & 40 \
\hline \$ 0 & 50 \
\hline
\end{array}$$
-Refer to Table 5-2. Using the midpoint method, if the price falls from $40 to $20, the absolute value of the price elasticity of demand is
A) 20.
B) 10.
C) 2.33.
D) 0.43.

Accepted Answer

The answer of Table 5-2
 \[\begin{array} { | l |...

Question 18

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the
A)demand for ice cream cones in this price range is elastic.
B)demand for ice cream cones in this price range is inelastic.
C)demand for ice cream cones in this price range is unit elastic.
D)price elasticity of demand for ice cream cones in this price range is 0.

Accepted Answer

The midpoint approach formula for calculating price elasticity of demand is ((Q2-Q1)/((Q1+Q2)/2))/((P2-P1)/((P1+P2)/2)). Using this formula, we get a price elasticity of demand of -2. This means that a 4% increase in price results in a 2% decrease in quantity demanded (since the elasticity is negative). Since the elasticity is greater than 1, demand is elastic.

Question 19

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by
A)30%.
B)40%.
C)80%.
D)250%.

Accepted Answer

The midpoint method formula for calculating the percentage change in quantity demanded due to a price change is:

[(New price - Old price) ÷ (Midpoint of new and old prices)] ÷ [(New quantity - Old quantity) ÷ (Midpoint of new and old quantities)]

Using the given values:

Old price = $2

New price = $6

Midpoint of old and new prices = ($2+$6)/2 = $4

Price change = [(6-2)/4]*100 = 100%

Price elasticity of demand = 0.4

Using the price elasticity of demand formula:

Price elasticity of demand = (Percentage change in quantity demanded)/(Percentage change in price)

0.4 = (Percentage change in quantity demanded)/100

Percentage change in quantity demanded = 0.4 * 100 = 40%

Therefore, the government policy should have reduced smoking by 40% according to the midpoint method.

Question 20

Table 5-3
The following table shows the demand schedule for a particular good. $$\begin{array} { | c | c | } 
\hline \text { Prise } & \text { Quantity } \
\hline \$ 15 & 0 \
\hline \$ 12 & 5 \
\hline \$ 9 & 10 \
\hline \$ 6 & 15 \
\hline \$ 3 & 20 \
\hline \$ 0 & 25 \
\hline
\end{array}$$
-Refer to Table 5-3. Using the midpoint method, when price rises from $6 to $9, the price elasticity of demand is
A)0.43
B)0.67
C)1.00
D)1.5

Accepted Answer

The answer of Table 5-3
The following table shows the demand...

Quiz 5: Elasticity and Its Application

The midpoint method for calculating elasticities is convenient in that it allows us to

When the price of a bracelet was $25 each, the jewelry shop sold 20 per month. When it raised the price to $35 each, it sold 14 per month. Using the midpoint method, the price elasticity of demand for bracelets is about

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, the slope is equal to

When the price of used cds is $4, Daphne buys five per month. When the price is $3, she buys nine per month. Daphne's demand for used cds is

Figure 5-1 -Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by