Exhibit 5-3 Quantity Quantity Price Demanded Supplied of Good A of Good A of Good A $5.50 5 55 $4.50 15 45 $3.50 25 35 $2.50 35 25 $1.50 45 15 $0.50 55 5 Refer to Exhibit 5-3. When price decreases from $3.50 to $2.50, the price elasticity of supply is Oo. 1.0. 5.0. 0.1. 0.5. Question 17 (0.35 points) Price elasticity of demand registers perfect elasticity at the value of infinity. O 1 Oo O - 1Question 15 (0.35 points) Exhibit 5-7 0 1 o 100 o oo Ouantity Quantity Quantity [2) (3) iq Refer to Exhibit 5-7. As a producer, if you had a choice, which of the depicted markets would you operate in? O O @ O ) @) | N Question 13 (0.35 points) A demand or supply curve with __ ___would be horizontal in appearance. O unitary elasticity () zero elasticity () infinite elasticity \\ | () infinite cost elasticity Question 14 (0.35 points) Exhibit 5-2 Frice dallars) | I I | I I | o Quantity of Bood X Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of 54 to S,. Approximately what percentage of the tax do producers end up paying? () 55 percent () 45 percent p () 70 percent () 63 percent () 25 percent UL L . W ) ) Income elasticity of 0.12 Horizontal supply curve Anegative __________implies the good is an inferior good. Quantity sold x unit price A company can increase its revenue by decreasing the price of its product Substitutes The price of a good increased by 10% which increased quantity supplied by 5% Price elasticity of demand 90% of the tax the government imposed on Good X was successfully passed on to consumers by the company. A 2% price increase leads to a 10. 11. 12 % change in quantity demanded % change in price Positive cross-price elasticity of demand Demand for the good is unitary elastic % change in quantity demanded % change in income Supply is price inelastic with price elasticity of supply equal to 0.5 Demand for the good is more price-inelastic than supply is Demand for the good is price- elastic Supply of the good is infinitely or perfectly elastic Total Revenue Example of a normal good which is a necessity Negative cross-price elasticity of demand Supply is highly elastic with price elasticity of supply equal to 2 I The price of a good increased by 10% which increased quantity supplied by 5% Price elasticity of demand 90% of the tax the government imposed on Good X was successfully passed on to consumers by the company. A 2% price increase leads to a 2% decline in quantity demanded of Good X. 10. 11. 12. 13. 14. 15. 2UPPY OF e g00u 05 mirrneery or perfectly elastic Total Revenue Example of a normal good which is a necessity Negative cross-price elasticity of demand Supply is highly elastic with price elasticity of supply equal to 2 Price elasticity of demand for the good is equal to O Price elasticity of supply for the good is equal to O Total Profit