Question 1

List the four determinants of price elasticity of demand.

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Question 2

Ford Motor Company announced a major rebate program for its cars and trucks. The rebate program amounts to a simple reduction in price. The company executives hope to increase revenue as a result of this rebate program. What economic explanation would justify this decision?

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Question 3

Explain how colleges and universities charge students differently based on price elasticity of demand.

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Question 4

You would think that if people's income increased over time, then all industries in the economy should benefit equally, but this is not the case. Explain why.

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Question 5

Federal and state governments often seek to raise tax revenue by levying excise or sales taxes on specific products. What economic factors should be considered in determining the products that will raise the most tax revenue?

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Question 6

Describe the elasticity of supply of a farm product that is sold at a farmer's market on a particular day.

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Question 7

Why is the price elasticity of demand for air travel for business travelers different from that of leisure travelers?

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Question 8

Why is there no total revenue test for elasticity of supply?

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Question 9

Explain the differences between the immediate market period, the short run, and the long run as they relate to price elasticity of supply.

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Question 10

Paper newspapers have an elasticity of demand of .10. Interpret this number and offer an explanation to why the elasticity is so low.

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Question 11

Why do economists use percentages rather than absolute amounts in measuring the responsiveness of consumers to changes in price?

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Question 12

Explain how each of four determinants of elasticity of demand can affect the price elasticity of demand.

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Question 13

How do you interpret the coefficient of the price elasticity of demand? Explain when Ed is 1.5, 0.7, and 1.0.

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Question 14

What is the meaning of perfectly inelastic demand and perfectly elastic demand? How would each be graphed?

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Question 15

What is the price elasticity of supply? How is it measured?

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Question 16

Discuss the pros and cons of legalizing drugs such as heroin or cocaine from an economic perspective using the concept of elasticity.

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Question 17

A computer company is considering lowering the price of its laptop computer to promote sales. However, it worries that this will reduce desktop computer sales. It finds the cross elasticity of demand to be 1. 5. Are its concerns legitimate? Explain.

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Question 18

Explain how the price elasticity of supply is related to the prices of antiques.

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Question 19

What is the main determinant of the price elasticity of supply? Explain.

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Quiz 6: Elasticity