Question : Table 6-1 Price Quantity $35 : 1387525

 

Table 6-1

 

Price

Quantity

$35

40

  25

50

 

58) Refer to Table 6-1.  Suppose you own a bookstore. You believe that you can sell 40 copies per day of the latest John Grisham novel when the price is $35. You consider lowering the price to $25 and believe this will increase the quantity sold to 50 books per day. Compute the price elasticity of demand using the mid-point formula and these data. Select the correct implication from your work.

A) The demand for the John Grisham book is inelastic. Revenue will fall if the price is lowered.

B) The demand for the John Grisham book is elastic. Revenue will rise if the price is lowered.

C) The demand for the John Grisham book is inelastic. Revenue will rise if the price is lowered.

D) The demand for the John Grisham book is elastic. Revenue will fall if the price is lowered.

 

 

59) Of the following, which is the best example of a good with a perfectly inelastic demand?

A) the demand for tickets in New York City when the Mets or Yankees are in the World Series

B) the demand for gasoline

C) a diabetic’s demand for insulin

D) the demand for a college education by a student who has a full scholarship to an Ivy League school

 

60) A perfectly elastic demand curve is

A) vertical.

B) horizontal.

C) curvilinear.

D) upward sloping.

 

 

61) A newspaper story on the effect of higher milk prices on the market for ice cream contained the following:

“As a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . . . And ice cream consumption is down 3 percent.”

Source: John Curran, “Ice Cream, They Scream: Milk Fat Costs Drive Up Ice Cream Prices,” Associated Press, July 23, 2001.

 

Based on the information given, what is the price elasticity of demand for ice cream?

A) 0.75 (in absolute value)

B) 1.33 (in absolute value)

C) 12%

D) We do not have enough information to calculate the elasticity.

 

 

62) Suppose that when the price per ream of recycled printer paper rises from $4 to $4.50, the quantity demanded falls from 800 to 600 reams per day. Using the midpoint formula, what is the price elasticity of demand (in absolute value) over this range?

A) 0.003

B) 0.41

C) 2.43

D) 4

 

63) The demand for gasoline is perfectly inelastic because most people need gasoline to drive their cars.

 

 

64) If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.

 

 

65) If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.

 

 

66) Suppose at a price of $50, Yoshi’s Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets. Based on this information, the demand for Yoshi’s jazz performance is elastic.

 

 

67) If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one.

 

 

 

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