Chapter 5(sample exercise)

Chapter 5(sample exercise) - Chapter 5Elasticity and Its...

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Chapter 5—Elasticity and Its Application 1. When studying how some event or policy affects a market, elasticity provides information on the a. direction of the effect on the market. b. magnitude of the effect on the market. c. efficiency of the effect on the market. d. equity of the effect on the market. 2. If a good is a luxury, demand for the good would tend to be a. inelastic. b. elastic. c. unit elastic. d. horizontal. 3. When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, you know that the demand for bubble gum is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic. 4. The main reason for using the midpoint method is that it a. gives the same answer regardless of the direction of change. b. uses fewer numbers. c. rounds prices to the nearest dollar. d. rounds quantities to the nearest whole unit. Figure 5-1 5. Refer to Figure 5-1 . The section of the demand curve labeled A represents the a. elastic section of the demand curve. b. inelastic section of the demand curve. c. unit elastic section of the demand curve. d. perfectly elastic section of the demand curve.
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Figure 5-2 6. Refer to Figure 5-2 . The elasticity of demand from point B to point C, using the midpoint method would be a. 0.5. b. 0.75. c. 1.0. d. 1.3. 7. Refer to Figure 5-2 . If the price decreased from $18 to $6, what would happen to total revenue? a. Total revenue would increase by $1200 and demand would be elastic. b.
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This note was uploaded on 01/07/2010 for the course ECO eco1104 taught by Professor Davidgray during the Fall '09 term at University of Ottawa.

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Chapter 5(sample exercise) - Chapter 5Elasticity and Its...

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