Question 1

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

Accepted Answer

The midpoint approach to calculating the price elasticity of demand is given by:```Ed = (Q2 - Q1) / ((Q2 + Q1) / 2) * (P2 - P1) / ((P2 + P1) / 2)```where:* Q1 is the initial quantity demanded* Q2 is the final quantity demanded* P1 is the initial price* P2 is the final pricePlugging in the values given in the question, we get:```Ed = (46 - 50) / ((46 + 50) / 2) * (P2 - P1) / ((P2 + P1) / 2)``````Ed = -4 / 48 * (P2 - P1) / ((P2 + P1) / 2)```Since the price increased by 4%, we have:```P2 = 1.04 * P1```Substituting this into the equation, we get:```Ed = -4 / 48 * (1.04 * P1 - P1) / ((1.04 * P1 + P1) / 2)``````Ed = -4 / 48 * 0.04 * P1 / (1.02 * P1)``````Ed = -1 / 60.48``````Ed = -0.0165```Since the price elasticity of demand is negative, the demand for ice cream cones in this price range is elastic.

Question 2

When the price of candy bars is $1.00,the quantity demanded is 500 per day.When the price falls to $0.80,the quantity demanded increases to 600.Given this information and using the midpoint method,we know that the demand for candy bars is

Accepted Answer

The answer of When the price of candy bars is...

Question 3

If the price elasticity of demand for a good is 0.5,then a 5 percent increase in price results in a

Accepted Answer

The formula for price elasticity of demand is % change in quantity demanded / % change in price. If the elasticity is 0.5, it means that a 1% increase in price will result in a 0.5% decrease in quantity demanded. 
Therefore, a 5% increase in price will result in a 2.5% decrease in the quantity demanded. Hence, the correct answer is C.

Question 4

If the price elasticity of demand for a good is 2.0,then a 10 percent increase in price results in a

Accepted Answer

The formula for price elasticity of demand is (% change in quantity demanded / % change in price). Given that the price elasticity of demand is 2.0, a 10% increase in price would result in a 20% decrease in quantity demanded (since 20% = 2.0 x 10%). Therefore, the correct choice is (C) 20% decrease in the quantity demanded.

Question 5

If the price elasticity of demand for a good is 5,then a 10 percent increase in price results in a

Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. If the elasticity is 5, a 10% increase in price results in a 50% decrease in quantity demanded (5 * 10% = 50%).

Question 6

If the price elasticity of demand for a good is 1,then a 3 percent decrease in price results in a

Accepted Answer

When the price elasticity of demand is 1, it indicates unitary elasticity, meaning the percentage change in quantity demanded is equal to the percentage change in price. Therefore, a 3 percent decrease in price results in a 3 percent increase in quantity demanded.

Question 7

When the price of chai tea lattés is $5,Maxine buys 20 per month.When the price is $4,she buys 30 per month.Maxine's demand for chai tea lattés is

Accepted Answer

Maxine's demand is elastic because a decrease in price from $5 to $4 leads to a significant increase in quantity demanded from 20 to 30. An elastic demand curve is relatively flat.

Question 8

If the price elasticity of demand for a good is 1.2,then a 3 percent decrease in price results in a

Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 1.2, a 3% decrease in price results in a 3% * 1.2 = 3.6% increase in quantity demanded.

Question 9

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

Accepted Answer

The price elasticity of demand is calculated using the midpoint method as follows:
Price elasticity of demand = (percentage change in quantity demanded) / (percentage change in price)

We need a 10% decrease in the quantity of the good demanded, which means the percentage change in quantity demanded is -10%. We can use this information and the price elasticity of demand to find the percentage change in price needed to achieve this:

0.75 = (-10%) / (percentage change in price)
Percentage change in price = (-10%) / 0.75
Percentage change in price = -13.33%

Therefore, a 13.33% increase in the price of the good is consistent with a 10% decrease in the quantity demanded. Choice B is the correct answer.

Question 10

If the price elasticity of demand for a good is 0.3,then a 20 percent decrease in price results in a

Accepted Answer

The price elasticity of demand formula is (% change in quantity demanded / % change in price). Here, the elasticity coefficient is 0.3, which means that a 1% decrease in price will result in a 0.3% increase in quantity demanded. So, a 20% decrease in price will result in a (20 x 0.3) = 6% increase in the quantity demanded. Therefore, the correct choice is C.

Question 11

When the price of an eBook is $15.00,the quantity demanded is 400 eBooks per day.When the price falls to $10.00,the quantity demanded increases to 700.Given this information and using the midpoint method,we know that the demand for eBooks is

Accepted Answer

Using the midpoint method formula ([(Q2-Q1)/((Q1+Q2)/2)] / [(P2-P1)/((P1+P2)/2)]), we get:

[(700-400)/((700+400)/2)] / [(10-15)/((10+15)/2)] = 1.14

Since the result is greater than 1, the demand for eBooks is considered elastic, meaning that a change in price has a significant impact on the quantity demanded.

Question 12

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and,as a result,the quantity of bags demanded increases from 600 to 800.Using the midpoint method,the price elasticity of demand for frozen chicken nuggets in the given price range is

Accepted Answer

The price elasticity of demand is calculated using the midpoint method: [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Substituting the given values: [(800 - 600) / 700] / [(5.75 - 6.50) / 6.125] = 2.33.

Question 13

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

Accepted Answer

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

Using the midpoint method:
% change in quantity demanded = (change in quantity demanded / average quantity demanded) x 100%
= [(80-100) / ((80+100)/2)] x 100%
= -20/90 x 100%
= -22.22%

% change in price = (change in price / average price) x 100%
= [(7-5) / ((7+5)/2)] x 100%
= 2/6 x 100%
= 33.33%

Price elasticity of demand = (-22.22% / 33.33%)
= -0.6666
= 0.67 (approx.)

Therefore, the price elasticity of demand is about 0.67. Option B is the correct choice.

Question 14

When the price of a good is $5,the quantity demanded is 120 units per month;when the price is $7,the quantity demanded is 100 units per month.Using the midpoint method,the price elasticity of demand is about

Accepted Answer

The midpoint method for calculating price elasticity of demand is:Ed = (% Change in Quantity Demanded) / (% Change in Price)% Change in Quantity Demanded = (100 - 120) / 120 = -0.1667% Change in Price = (7 - 5) / 5 = 0.4Ed = -0.1667 / 0.4 = -0.4167The absolute value of the price elasticity of demand is 0.4167, which is closest to 0.55.

Question 15

Using the midpoint method,the price elasticity of demand for a good is computed to be approximately 2.Which of the following events is consistent with a 0.1 percent increase in the price of the good?

Accepted Answer

Using the midpoint method, the formula for calculating price elasticity of demand is:
E = [(Q2-Q1)/((Q2+Q1)/2)] / [(P2-P1)/((P2+P1)/2)]

We are told that E = 2. Let's assume that the initial price was $100.

For a 0.1% increase in price, P1 = $100 and P2 = $100.1.

Using the formula, we can rearrange it to solve for the change in quantity demanded (Q2-Q1):

(Q2-Q1) = E * [(Q2+Q1)/2] * (P2-P1)/[(P2+P1)/2]

(Q2-Q1) = 2 * [(250+150)/2] * (0.1)/[(100.1+100)/2] = 25

This means that quantity demanded will decrease by 25 units. To find the percentage change, we can use the midpoint method again:

% change in quantity demanded = (Q2-Q1)/[(Q2+Q1)/2] * 100%

% change in quantity demanded = (-25)/[(250+150)/2] * 100% = -8.33%

However, we are looking for a decrease of only 0.1%. Therefore, the answer is D: The quantity of the good demanded decreases by 0.2%.

Question 16

If the price elasticity of demand for a good is 0.2,then a 3 percent decrease in price results in a

Accepted Answer

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. With an elasticity of 0.2, a 3% decrease in price results in a 0.6% increase in quantity demanded (0.2 * 3% = 0.6%).

Question 17

When the price of a bracelet was $28 each,the jewelry shop sold 128 per month.When it raised the price to $32 each,it sold 112 per month.Using the midpoint method,the price elasticity of demand for bracelets is

Accepted Answer

The answer of When the price of a bracelet was...

Question 18

Which of the following expressions can be used to compute the price elasticity of demand?

Accepted Answer

The answer of Which of the following expressions can be...

Question 19

Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and,as a result,the quantity of tortilla chips demanded increases from 200 bags to 300 bags.Using the midpoint method,the price elasticity of demand for tortilla chips in the given price range is

Accepted Answer

The midpoint method formula for price elasticity of demand is [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Plugging in the values: [(300 - 200) / (300 + 200) / 2] / [($2.50 - $3.00) / ($2.50 + $3.00) / 2] = (100 / 250) / (-0.50 / 2.75) = 0.4 / -0.1818 = -2.20. The absolute value is 2.20.

Question 20

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded.Price elasticity of demand for X is

Accepted Answer

When the price of good X increases by 6%, the quantity demanded of X decreases by 6%. Therefore, the price elasticity of demand for X can be calculated as:
% change in quantity demanded / % change in price
= (-6%) / (+6%)
= -1
The negative sign indicates that the change in quantity demanded is in the opposite direction of the change in price. Since the price elasticity of demand is a unitless measure, we can ignore the negative sign and say that the price elasticity of demand for X is 1. This means that the percentage change in quantity demanded is equal to the percentage change in price, which makes X have unit elastic demand.

Quiz 5: Elasticity and Its Applications: The Elasticity of Demand