1. When a public transit system (such as a subway or bus line) raises its fares,
ID: 1093862 • Letter: 1
Question
1. When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue. This suggests that demand is: unstable. price-inelastic. price-elastic. price unit-elastic. 2. If the price of chocolate-covered peanuts decreases from $1.10 to $0.95 and the quantity demanded increases from 190 bags to 215 bags, then the price elasticity of demand (using the midpoint method) is: 1.25. 0.5. 0.8. 2.0. 3. If two goods are substitutes, their cross-price elasticity of demand should be: less than 0. negative yet almost equal to 0. equal to 0. greater than 0. 4. The price elasticity of demand is measured by: dividing the percentage change in price by the percentage change in quantity demanded. dividing the percentage change in quantity demanded by the percentage change in price. subtracting the percentage change in price from the percentage change in quantity demanded. adding the percentage change in price to the percentage change in quantity demanded. 5. Suppose the price of gasoline increases 10% and quantity of gasoline demanded in Orlando drops 5% per day. Demand for gasoline in Orlando is: price elastic. price inelastic. price unit-elastic. perfectly price inelastic.Explanation / Answer
1. Price Inelastic
2. 0.8
3. Greater than 0
4. Dividing the percentage change in quantity demannded by percentage change in price
5. Price Elastic
Thanks
(Chirag Nagpal)
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