Elasticity

If the price of sushi drops from $8 to $4 and sales rise from 20 to 40, what is the price elasticity of demand? (Use the midpoint formula!)

• .5

• .66

• 1

• 2

If your salary increase by 30 % and in response you increase your clothing purchases by 20 %, income elasticity equals______and clothing is_______.

• 0.67; normal good

• .67; inferior good

• 1.5; normal good

• 1.5; luxury good

The tax incidence of items such as gasoline, tobacco, and alcohol tends to fall heavily on ________because these goods have a ________.

• producers; relatively elastic demand

• producers; relatively inelastic demand

• consumers; relatively elastic demand

• consumers; relatively inelastic demand

If the elasticity of demand for a product equals 1.5, then an increase in the product price will cause total revenue to

• decrease.

• increase.

• remain the same.

The determinants of the price elasticity of demand for a specific good include all of the following except:

• the availability of substitutes

• the time period involved

• the ease with which resources can be shifted to and from the production of this good to other uses

• whether the good is a luxury or neccessity

Consumers will bear more of the burden of a tax when

• the supply is very elastic

• the supply is very inelastic

• the demand is very elastic

Which of the following products would likely have an inelastic demand?

• Fizzy cola, a carbonated soda

• A meal at an expensive steak house

• auto repair for your car

• Nike's Air Force One's

If the price of sushi drops from $8 to $4 and sales rise from 20 to 40, what is the price elasticity of demand? (Use the midpoint formula!)

• .5

• .66

• 1

• 2