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# Applications of elasticity concepts

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Questions 1 through 6, refer to the following table showing a demand schedule:

Price Quantity Demanded
\$200 1000
\$150 1400
\$100 1800

1. If price falls from \$200 to \$150, what is the elasticity of demand over this range?
A. -0.625
B. -1.0
C. -1.17
D. -2.5
E. -3.0

2. As output increases from 1,000 to 1,400 what is marginal revenue?
A. \$25
B. \$50
C. -\$400
D. -\$25
E. -\$75

3. If price falls from \$200 to \$150,
A. Arrows representing the price and quantity affects both point down.
B. An arrow representing the price effect points down and is longer than an arrow for the quantity effect.
C. An arrow representing the price effect points down and is shorter than an arrow for the quantity effect.
D. Arrows representing the price and quantity effects both point up.
E. Total revenue moves in the same direction as the arrow representing the price effect.

4. If price falls from \$150 to \$100, what is the elasticity of demand over this range?
A. -0.625
B. -1.0
C. -1.17
D. -2.5
E. -3.0

5. As output rises from 1,400 to 1,800, what is marginal revenue?
A. \$25
B. \$50
C. -\$400
D. -\$50
E. -\$75

6. If price falls from \$200 to \$150,
A. Arrows representing the price and quantity affects both point down.
B. An arrow representing the price effect points down and is longer than an arrow for the quantity effect.
C. An arrow representing the quantity effect points up and is shorter than an arrow for the price effect.
D. Arrows representing the price and quantity effects both point up.
E. Total revenue moves in the same direction as the arrow representing the quantity effect.

7. If price falls from \$150 to \$100,
A. Arrows representing the price and quantity affects both point down.
B. An arrow representing the price effect points down and is shorter than an arrow for the quantity effect.
C. Total revenue moves in the same direction as the arrow representing the price effect.
D. The arrow representing the price effect points down and the arrow representing the quantity effect points up.
E. Both c and d

8. Suppose that the Tennessee Titans' owner, Bud Adams, is considering a plan in which fans who donate blood get a \$20 reduction in their ticket price. If both ticket REVENUES and blood donations (i.e., number of pints donated) rise with this plan, which of the following is true?
A. The demand for Tennessee Titans' tickets is price elastic.
B. The demand for Tennessee Titans' tickets is price inelastic.
C. The demand for blood donations is price elastic.
D. The demand for blood donations is price inelastic.

https://brainmass.com/economics/elasticity/551770

#### Solution Summary

Solutions select the correct options. Answers are supported by suitable working/explanation wherever needed.

\$2.19

## Apply the concept of elasticity on a particular product.

Think of a good that you have purchased recently. Be specific (e.g. is it breakfast cereal in general or Cheerios cereal specifically).

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1. If the price of this item increases, how would this affect the quantity of the good that you consume?

2. Is the demand for this good price elastic or price inelastic? Justify your classification by talking about the determinants of elasticity as they apply to this product.

3. Say price is on the rise for this product and you are the manager of a store, would you be thrilled to be selling this product? Under what circumstances would you want to own a business that sells this product? In other words, how does an increase in price for this good affect your Total Revenue?

4. Using specific examples, relate the concepts of Cross Elasticity and Income Elasticity to this product.

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