Consider the demand curve below (figure 2). If area OABC is smaller than area ODEF,we may conclude that demand in this range is:PFigure 2price-inelasticincome-inelasticOprice-elasticincome-elasticBAED0CFTopic: Income elasticityDemand

Price elasticity of demand measures how sensitive the quantity demanded of a good or service is to…

Answered: Consider the demand curve below (figure…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 1QR

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What does a price elasticity of demand of 0.39 mean?
Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
(Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of demand measures, for a given price, the __________ in quantity demanded divided by the __________ income from which it resulted. b. If a decrease in the price of one good causes a decrease in demand for another good, the two goods are __________. c. If the value of the cross-price elasticity of demand between two goods is approximately zero, they are considered __________.
Suppose that your demand schedule for pizza is as follows: a. Use the midpoint method to calculate your price elasticity of demand as the price of pizza increases from 8 to 10 if (i) your income is 20,000 and (ii) your income is 24,000. b. Calculate your income elasticity of demand as your income increases from 20,000 to 24,000 if (i) the price is 12 and (ii) the price is 16.
The price elasticity of demand for personal computers is estimated to be 2.2. If the price of personal computers declines by 20 percent, what will be the expected percentage increase in the quantity of computers sold?
The equation for a demand curve is P=483Q. What is the elasticity in moving from quantity of 5 to a quantity of 6?
The avenge annual income rises from 25,000 to 33,000, and the quantity of bleed consumed in a year by the avenge person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?
Isabella always spends $50 on red roses each month and simply adjusts the quantity she purchases as the price changes. What can you say about Isabella's elasticity of demand for roses?
Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve.
Why is the supply curve with constant unitary elasticity a straight line?
Would you expect supply to play a more significant role in determining the price of a basic necessity like food or a luxury like perfume? Explain. Hint: Think about how the price elasticity of demand will differ between necessities and luxuries.
What are the major determinants of a products price elasticity of demand? Studies indicate that the demand for Florida oranges, Bayer aspirin, watermelons, and airfares to Europe are elastic. Why?

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Consider the demand curve below (figure 2). If area OABC is smaller than area ODEF, we may conclude that demand in this range is: P Figure 2 price-inelastic income-inelastic Oprice-elastic income-elastic B A E D 0 CF Topic: Income elasticity Demand