Q6. If the admission price for a rock concert is raised from $25 to $30 causing sales to drop from 60,000 to 40,000, the price elasticity of demand for tickets to the concert is:

A)  2.20.

B)  -1.67.

C)  -2.20.

Q7. Suppose the price of computers increases from $1,000 to $1,200. Assuming the original quantity demanded for computers was 50 million units, and the new quantity demanded is 45 million computers, what is the price elasticity of demand, and is the demand for computers elastic or inelastic?

A)    -0.58, inelastic.

B)    0.58, inelastic.

C)    -1.73, elastic.

Q8. Antonio Conti consumes 2 pounds of beef per week when beef is $4.50 per pound and 3 pounds of chicken when chicken sells for $3.50 per pound. If the price of chicken increases to $4.00 per pound, Conti’s consumption of beef increases to 2.5 pounds per week. Which of the following most accurately describes Conti’s cross elasticity of demand for beef versus chicken? The cross elasticity of demand for:

A)   beef relative to chicken is +1.67 and beef and chicken are complimentary goods.

B)   chicken relative to beef is +1.75 and beef and chicken are substitutes.

C)   beef relative to chicken is +1.67 and beef and chicken are substitutes.

Q9. Assume that for the average consumer, the quantity demanded for jeans increases from 5 to 7 pairs per year in response to a price decrease from $29 to $24 per pair. The respective price elasticity and relative elasticity of demand for jeans is best described by which of the following?

A)   −1.77; relatively inelastic.

B)   −1.77; relatively elastic.

C)   −2.32; relatively elastic.

答案和详解如下：

Q6. If the admission price for a rock concert is raised from $25 to $30 causing sales to drop from 60,000 to 40,000, the price elasticity of demand for tickets to the concert is:

A)  2.20.

B)  -1.67.

C)  -2.20.

Correct answer is C)         

Price elasticity of demand is calculated by dividing the percent change in quantity demanded by the percent change in price, using the average value of the variable in the computations. The percent change in quantity demanded is (40,000 − 60,000) / ((60,000 + 40,000) / 2) = -0.4. The percent change in price is (30 − 25) / ((30 + 25) / 2) = 0.1818. The price elasticity of demand is -0.40 / 0.1818 = -2.2.

Q7. Suppose the price of computers increases from $1,000 to $1,200. Assuming the original quantity demanded for computers was 50 million units, and the new quantity demanded is 45 million computers, what is the price elasticity of demand, and is the demand for computers elastic or inelastic?

A)    -0.58, inelastic.

B)    0.58, inelastic.

C)    -1.73, elastic.

Correct answer is A)

Price elasticity of demand is calculated by dividing the percent change in quantity demanded by the percent change in price, using the average value of the variable in the computations. The percent change in quantity demanded is (45 − 50) / [(50 + 45) / 2] = −5 / 47.5 = -0.105 or -10.5%. The percent change in price is = (1,200 − 1,000) / [(1,000 + 1,200) / 2] = 200 / 1,100 = 0.1818 or 18.2% . The price elasticity of demand is -10.5 / 18.2 = -0.58.

Q8. Antonio Conti consumes 2 pounds of beef per week when beef is $4.50 per pound and 3 pounds of chicken when chicken sells for $3.50 per pound. If the price of chicken increases to $4.00 per pound, Conti’s consumption of beef increases to 2.5 pounds per week. Which of the following most accurately describes Conti’s cross elasticity of demand for beef versus chicken? The cross elasticity of demand for:

A)   beef relative to chicken is +1.67 and beef and chicken are complimentary goods.

B)   chicken relative to beef is +1.75 and beef and chicken are substitutes.

C)   beef relative to chicken is +1.67 and beef and chicken are substitutes.

Correct answer is C)

The average quantity of beef demanded is (2.0 + 2.5) / 2 = 2.25 pounds, so the percentage change in the quantity of beef demanded is (2.5 – 2.0) / 2.25 = +22.22%. The average price of chicken is ($3.50 + $4.00) / 2 = $3.75 per pound, so the percentage change in the price of chicken ($4.00 – $3.50) / $3.75 = +13.33%. The cross elasticity of demand for beef relative to the price of chicken is 22.2 / 13.3 = 1.67. Since the cross elasticity is positive, chicken and beef are substitutes for Conti.

Q9. Assume that for the average consumer, the quantity demanded for jeans increases from 5 to 7 pairs per year in response to a price decrease from $29 to $24 per pair. The respective price elasticity and relative elasticity of demand for jeans is best described by which of the following?

A)   −1.77; relatively inelastic.

B)   −1.77; relatively elastic.

C)   −2.32; relatively elastic.

Correct answer is B)

The percentage change in quantity demanded is (7 − 5) / [(7 + 5) / 2] = 33.33% and the percentage change in price is (24 − 29) / [(24 + 29) / 2] = -18.87%. Thus, price elasticity = 33.33% / -18.87% = -1.77.

A good is considered to be elastic if the absolute value of price elasticity is greater than 1. In this case, the absolute value of the price elasticity of demand for jeans is 1.77, so the price elasticity for jeans is relatively elastic.

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