Question 1

Give four instances that cause price elasticity to vary. Explain.

Accepted Answer

Substitutability. The easier it is to fi

Question 2

If price gouging is prohibited by the government so that sellers cannot suddenly raise prices, then a sudden drop in gasoline supply due to bad weather will most likely result in

Accepted Answer

A)  an equilibrium in the gasoline market. 
B)  a surplus in the gasoline market. 
C)  a shortage in the gasoline market. 
D)  high profits for sellers. 
E)  a sudden increase in the gasoline supply. 
A)  an equilibrium in the gasoline market. 
B)  a surplus in the gasoline market. 
C)  a shortage in the gasoline market. 
D)  high profits for sellers. 
E)  a sudden increase in the gasoline supply.

Question 3

Use the following data for a supply curve to calculate the elasticity of supply.

Accepted Answer

The answer of Use the following data for a supply...

Question 4

If a firm wishes to raise the revenue of a product with elastic demand, then it should reduce price.

Accepted Answer

A) True 
 B)False

Question 5

The price elasticity of demand is negative because the demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 6

The price elasticity of supply is always negative.

Accepted Answer

A) True 
 B)False

Question 7

The elasticity of demand changes

Accepted Answer

A)  along a vertical demand curve. 
B)  along a horizontal demand curve. 
C)  along a linear, downward-sloping demand curve. 
D)  along a supply curve. 
E)  only when the demand curve shifts. 
A)  along a vertical demand curve. 
B)  along a horizontal demand curve. 
C)  along a linear, downward-sloping demand curve. 
D)  along a supply curve. 
E)  only when the demand curve shifts.

Question 8

Define, in words, income elasticity of demand and tell why we care if it is positive or negative.

Accepted Answer

Income elasticity is the perce

Question 9

Rent control for apartments in New York City is an example of a

Accepted Answer

A)  price floor. 
B)  price ceiling. 
C)  market equilibrium. 
D)  restriction on quantity. 
E)  price elasticity. 
A)  price floor. 
B)  price ceiling. 
C)  market equilibrium. 
D)  restriction on quantity. 
E)  price elasticity.

Question 10

A price ceiling would result in a(n)

Accepted Answer

A)  surplus. 
B)  shortage. 
C)  increase in equilibrium price. 
D)  decrease in equilibrium price. 
E)  increase in quantity supplied. 
A)  surplus. 
B)  shortage. 
C)  increase in equilibrium price. 
D)  decrease in equilibrium price. 
E)  increase in quantity supplied.

Question 11

If a 1 percent change in price results in a 5 percent change in quantity demanded, then

Accepted Answer

A)  the price elasticity of demand is 5. 
B)  the slope of the demand curve is 1/5. 
C)  the slope of the demand curve is 5. 
D)  the price elasticity of demand is 1/5. 
E)  there is not enough information to calculate slope or elasticity. 
A)  the price elasticity of demand is 5. 
B)  the slope of the demand curve is 1/5. 
C)  the slope of the demand curve is 5. 
D)  the price elasticity of demand is 1/5. 
E)  there is not enough information to calculate slope or elasticity.

Question 12

Which of the following is not a likely result of a price floor?

Accepted Answer

A)  Excess supply of a good 
B)  A persistent shortage 
C)  A market price higher than equilibrium 
D)  The quantity supplied exceeds the quantity demanded. 
E)  Resources are diverted away from other activities to deal with the extra output. 
A)  Excess supply of a good 
B)  A persistent shortage 
C)  A market price higher than equilibrium 
D)  The quantity supplied exceeds the quantity demanded. 
E)  Resources are diverted away from other activities to deal with the extra output.

Question 13

If demand for a product is unit elastic, then increasing the price of the product leaves total revenue unchanged.

Accepted Answer

A) True 
 B)False

Question 14

If a 3 percent change in price results in a 1.5 percent change in quantity demanded, then the price elasticity of demand is ____ and demand is ____.

Accepted Answer

A)  1/2; inelastic 
B)  1/2; elastic 
C)  2; inelastic 
D)  1; unit elastic 
E)  2; elastic 
A)  1/2; inelastic 
B)  1/2; elastic 
C)  2; inelastic 
D)  1; unit elastic 
E)  2; elastic

Question 15

Calculate the price elasticity using the midpoint formula for the following demand when price changes from $200 to $240: Qd = 625 -.25P.

Accepted Answer

625 - .25(240) = 565

Question 16

A product with an inelastic demand means that

Accepted Answer

A)  consumers are relatively insensitive to a change in the price of the product. 
B)  producers are relatively sensitive to a change in the quantity demanded. 
C)  consumers are relatively sensitive to a change in the price of the product. 
D)  producers are relatively insensitive to a change in the quantity demanded. 
E)  consumers are relatively insensitive to a change in the quantity demanded. 
A)  consumers are relatively insensitive to a change in the price of the product. 
B)  producers are relatively sensitive to a change in the quantity demanded. 
C)  consumers are relatively sensitive to a change in the price of the product. 
D)  producers are relatively insensitive to a change in the quantity demanded. 
E)  consumers are relatively insensitive to a change in the quantity demanded.

Question 17

Normal goods have positive income elasticities of demand, and inferior goods have negative income elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 18

If demand is perfectly inelastic, then the

Accepted Answer

A)  quantity demanded does not change when price changes. 
B)  demand curve is nonexistent. 
C)  elasticity of demand is -1. 
D)  elasticity of demand is 1. 
E)  demand curve is a horizontal line. 
A)  quantity demanded does not change when price changes. 
B)  demand curve is nonexistent. 
C)  elasticity of demand is -1. 
D)  elasticity of demand is 1. 
E)  demand curve is a horizontal line.

Question 19

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

Accepted Answer

A) True 
 B)False

Question 20

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?

Accepted Answer

A)  It cannot be determined from the information given. 
B)  .02 
C)  25 
D)  50 
E)  .04 
A)  It cannot be determined from the information given. 
B)  .02 
C)  25 
D)  50 
E)  .04

Give four instances that cause price elasticity to vary. Explain.

If price gouging is prohibited by the government so that sellers cannot suddenly raise prices, then a sudden drop in gasoline supply due to bad weather will most likely result in

Use the following data for a supply curve to calculate the elasticity of supply.

If a firm wishes to raise the revenue of a product with elastic demand, then it should reduce price.

The price elasticity of demand is negative because the demand curve slopes downward.

The price elasticity of supply is always negative.

The elasticity of demand changes

Define, in words, income elasticity of demand and tell why we care if it is positive or negative.

Rent control for apartments in New York City is an example of a

A price ceiling would result in a(n)

If a 1 percent change in price results in a 5 percent change in quantity demanded, then

Which of the following is not a likely result of a price floor?

If demand for a product is unit elastic, then increasing the price of the product leaves total revenue unchanged.

If a 3 percent change in price results in a 1.5 percent change in quantity demanded, then the price elasticity of demand is and demand is .

Calculate the price elasticity using the midpoint formula for the following demand when price changes from $200 to $240: Q_d = 625 -.25P.

A product with an inelastic demand means that

Normal goods have positive income elasticities of demand, and inferior goods have negative income elasticities of demand.

If demand is perfectly inelastic, then the

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters

Exam 4: Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Give four instances that cause price elasticity to vary. Explain.

If price gouging is prohibited by the government so that sellers cannot suddenly raise prices, then a sudden drop in gasoline supply due to bad weather will most likely result in

Use the following data for a supply curve to calculate the elasticity of supply.

If a firm wishes to raise the revenue of a product with elastic demand, then it should reduce price.

The price elasticity of demand is negative because the demand curve slopes downward.

The price elasticity of supply is always negative.

The elasticity of demand changes

Define, in words, income elasticity of demand and tell why we care if it is positive or negative.

Rent control for apartments in New York City is an example of a

A price ceiling would result in a(n)

If a 1 percent change in price results in a 5 percent change in quantity demanded, then

Which of the following is not a likely result of a price floor?

If demand for a product is unit elastic, then increasing the price of the product leaves total revenue unchanged.

If a 3 percent change in price results in a 1.5 percent change in quantity demanded, then the price elasticity of demand is ____ and demand is ____.

Calculate the price elasticity using the midpoint formula for the following demand when price changes from $200 to $240: Qd = 625 -.25P.

A product with an inelastic demand means that

Normal goods have positive income elasticities of demand, and inferior goods have negative income elasticities of demand.

If demand is perfectly inelastic, then the

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters

If a 3 percent change in price results in a 1.5 percent change in quantity demanded, then the price elasticity of demand is and demand is .

Calculate the price elasticity using the midpoint formula for the following demand when price changes from $200 to $240: Q_d = 625 -.25P.