The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that:
  • percentage change in quantity demanded/percentage change in price
  • D. from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.
  • negative and therefore these goods are complements.
  • The railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic
Refer to the diagrams. In which case would the coefficient of income elasticity be negative?
  • B
  • C
  • A
  • D
Most demand curves are relatively elastic in the upper-left portion because the original price:
  • D. from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.
  • No conclusion can be reached with respect to the elasticity of supply.
  • consumers are largely unresponsive to a per unit price change
  • Relatively price elastic.
Refer to the diagram. In the P3P4 price range, demand is:
  • perfectly elastic.
  • relatively elastic.
  • of unit elasticity.
  • relatively inelastic.
Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:
  • positive, and the good is a normal good.
  • A. negative and therefore X is an inferior good.
  • negative and therefore these goods are complements.
  • B. 2 percent and total expenditures on bread will fall.
The demand for a luxury good whose purchase would exhaust a big portion of one's income is:
  • consumers are largely unresponsive to a per unit price change
  • elastic in high-price ranges and inelastic in low-price ranges.
  • relatively inelastic.
  • Relatively price elastic.
Assume that a 3 percent increase in income across the economy produces a 1 percent decline in the quantity demanded of good X. The coefficient of income elasticity of demand for good X is:
  • positive, and the good is a normal good.
  • A. negative and therefore X is an inferior good.
  • B. 2 percent and total expenditures on bread will fall.
  • negative and therefore these goods are complements.
A supply curve that is a vertical straight line indicates that:
  • elastic in high-price ranges and inelastic in low-price ranges.
  • consumers are largely unresponsive to a per unit price change
  • No conclusion can be reached with respect to the elasticity of supply.
  • a change in price will have no effect on the quantity supplied.
Refer to the diagram and assume that price increases from $2 to $The coefficient of the price elasticity of supply (midpoint formula) relating to this price change is about:
  • relatively inelastic.
  • positive, and the good is a normal good.
  • .25 and supply is inelastic.
  • increase total revenue D-A
Refer to the diagram. The decline in price from P1 to P2 will:
  • increase total revenue D-A
  • relatively inelastic.
  • .25 and supply is inelastic.
  • elastic.
Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
  • B. 2 percent and total expenditures on bread will fall.
  • A. negative and therefore X is an inferior good.
  • negative and therefore these goods are complements.
  • positive, and the good is a normal good.
The price elasticity of demand of a straight-line demand curve is:
  • consumers are largely unresponsive to a per unit price change
  • percentage change in quantity demanded/percentage change in price
  • elastic in high-price ranges and inelastic in low-price ranges.
  • a change in price will have no effect on the quantity supplied.
Suppose the price of a product rises and the total revenue of sellers increases.
  • B. 2 percent and total expenditures on bread will fall.
  • a change in price will have no effect on the quantity supplied.
  • No conclusion can be reached with respect to the elasticity of supply.
  • an increase in price will increase total revenue.
When the percentage change in price is greater than the resulting percentage change in quantity demanded:
  • a change in price will have no effect on the quantity supplied.
  • an increase in price will increase total revenue.
  • No conclusion can be reached with respect to the elasticity of supply.
  • B. 2 percent and total expenditures on bread will fall.
Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 toThen the price elasticity of demand is:
  • negative and therefore these goods are complements.
  • B. 2 percent and total expenditures on bread will fall.
  • b
  • c
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