A life-saving medicine without any close substitutes will tend to have |
a small elasticity of demand |

The price of a good rises from $8 to $12, and the quantity demanded falls from 110 to 90 units. Calculated with the midpoint method, the elasticity is |
1/2 |

A linear, downward-sloping demand curve is |
inelastic at some points, and elastic at others. |

The ability of firms to enter and exit a market over time means that, in the long run, |
the supply curve is more elastic. |

An increase in the supply of a good will decrease the total revenue producers receive if |
the demand curve is inelastic. |

Tom: Demand increased, but supply was perfectly inelastic. |
Tom, Harry, and Mary |

A decrease in supply will cause the smallest increase in price when |
both supply and demand are elastic. |

If price increases from $10 to $20, total revenue will |
increase by $120, so demand must be inelastic in this price range |

Using the midpoint method, the price elasticity of demand between point X and point Y is |
2.5 |

A key determinant of the price elasticity of supply is the |
time horizon. |

Income elasticity of demand measures how |
the quantity demanded changes as consumer income changes. |

Total revenue when the price is P1 is represented by the area(s) |
B + D. |

For prices above $5, demand is price |
elastic, and lowering price will increase total revenue. |

At a price of $10 per unit, sellers’ total revenue equals |
$450. |

Using the midpoint method, demand is unit elastic when quantity demanded changes from |
400 to 300. |

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by |
1.92%, and apples sellers’ total revenue will increase as a result. |

Which of the following could be the price elasticity of demand for a good for which a decrease in price would decrease revenue? |
0.8 |

Moving downward and to the right along a linear demand curve, we know that total revenue |
first increases, then decreases |

As we move downward and to the right along a linear, downward-sloping demand curve, |
slope remains constant but elasticity changes. |

Using the midpoint method, what is the price elasticity of supply between points A and B? |
2.33 |

Along which of these segments of the supply curve is supply most elastic? |
AB |

A linear, upward-sloping supply curve has |
A constant slope and a changing price elasticity of supply. |

A key determinant of the price elasticity of supply is |
the ability of sellers to change the amount of the good they produce. |

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is |
inelastic |

As price falls from Pa to Pb, which demand curve represents the most elastic demand? |
D1 |

The demand curve representing the demand for a luxury good with several close substitutes is |
C |

If demand is price inelastic, then when price rises, total revenue |
will rise |

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue? |
0.3 |

If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by |
3.48%, and aluminum foil sellers’ total revenue will increase as a result. |

As price rises from $5 to $6, the price elasticity of demand using the midpoint method is approximately |
0.41. |

# Chapter 5 Econ

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