Supply and Demand and Elasticity

You are on a committe that is considering ways to raise money for your city's symphony program. You would recommend increasing the price of symphony tickets only if you thought the demand curve for these tickets was

• Inelastic 
• Elastic 
• Unit Elastic 
• Perfectly Elastic 

To determine whether two goods are substitutes or complements, an economist would estimate the

• Price elasticity of demand.
• Income elasticity of demand.
• Price elasticity of supply.
• Cross-elasticity of demand

Which of the following is most likely to have a negative income elasticity of demand?

•  Fancy restaurant meals.
• Vacations.
• Day-old bakery goods at a discount bakery.
• New cars.

An increase in the price of aspirin is likely to be paired with a(n) ___________________ in the demand for Tylenol because the two goods are __________________.

• increase; complements
  
• increase; substitutes 
•  decrease; complements 
•  decrease; substitutes

Income elasticity measures

• how a good's quantity demanded responds to change in the goods price.
  
• how a good's quantity demanded responds to change in the price of another good. 
• how a good's quantity demanded responds to change in buyers' incomes.
  
•  how a good's quantity demanded responds to producers' incomes. 

Cross-price elasticity of demand is calculated as the

• percentage change in quantity demanded divided by percentage change in price of a good. 
•  percentage change in quantity demanded of one good divided by percentage change in price of a different good.
  
•  percentage change in quantity sold divided by percentage change in buyers' incomes.
  
•  percentage change in quantity supplied divided by percentage change in price of a good. 

The cross elasticity of demand between Coca-Cola and Pepsi is 

• positive, that is, Coke and Pepsi are complements. 
• negative, that is, Coke and Pepsi are complements. 
• positive, that is, Coke and Pepsi are substitutes.
  
• negative, that is, Coke and Pepsi are substitutes. 

The elasticity of supply measures the responsiveness of 

• quantity supplied to changes in price. 
• quantity demanded to changes in supply. 
• quantity supplied to changes in income. 
• quantity supplied to changes in demand. 

The above figure illustrates the demand curve for a good. The good has 

• many substitutes. 
• only one substitute. 
• no substitutes.
  
• only a few substitutes. 

Electricity is a good with few or no close substitutes. What would you expect about the price elasticity of demand for electricity?

• Perfectly elastic
• Relatively inelastic
• Perfectly inelastic
• Relatively elastic