Site MapHelpFeedbackPractice Exercises
Practice Exercises
(See related pages)

1
Suppose the price of paper rises 10% and the quantity demanded falls 15%.
a. Is the price elasticity of demand for paper elastic, unit elastic, or inelastic.

b. Will revenue rise, decline, or stay the same with the given change in price?
2
Suppose the price of a can of green beans rises 6 percent and the quantity supplied rises 3 percent. Is the price elasticity of supply elastic, unit elastic, or inelastic.
3
For each of the following items assume the price elasticity of demand is as indicated. Determine whether the good or service is elastic, unit elastic, or inelastic. Also determine what would happen to the total revenue for the sellers of the items given the indicated price change?
a. Medical care. ED = 0.1. Price rises.

b. Cars. ED = 1.2. Price falls.

c. Wheat. ED = 1.8. Price rises.

d. Cigarettes. ED = 0.7. Price falls.

e. Carpet cleaning. ED = 1. Price rises.
4
Suppose the price of almonds rises from $4.35 to $5.15 per pound and the quantity demanded falls from 800 to 735 kilograms.
a. What is the price elasticity of demand for almonds in this price range?

b. Are almonds elastic, unitary elastic, or inelastic in this price range?

c. What is the interpretation of that price elasticity of demand-what does it mean?

d. Suppose the price elasticity of demand coefficient calculated in part (a) above is the exact number representing consumer responsiveness to a price change for almonds. If there is a 10% decrease in the price of almonds, what would the percentage change in the quantity demanded be equal to? If the price was to rise by 15%, what would the percentage change in the quantity demanded be equal to?

e. What happens to total revenue for almond sellers when the price rises from $4.35 to $5.15 per kilogram? How is this related to the price elasticity of demand for almonds?

f. What could cause almonds to have this elasticity of demand calculated in part (a) above?
5
a. Suppose the cross-price elasticity of demand between two goods is equal to 2. Would these goods be substitutes or complements? Why?

b. Suppose the cross-price elasticity of demand between two goods is equal to -3. Would these goods be substitutes or complements? Why?

c. Suppose the income elasticity of demand for a good is 2.5. Is this good a normal good or an inferior good? If it is a normal good, then is it a luxury or a necessity? Why?

d. Suppose the income elasticity of demand for a good is -4. Is this good a normal good or an inferior good? If it is a normal good, then is it a luxury or a necessity? Why?







MicroeconomicsOnline Learning Center

Home > Chapter 5 > Practice Exercises