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

Calculate the price elasticity of demand if a 2.6 percent change in the price of a product results in a 10.5 percent change in quantity demanded, and indicate whether demand is elastic, inelastic, or unit elastic.

In the case of a price floor, price is not allowed to increase above a certain level.

Carla buys one soft drink a day, regardless of the price. Which of the following statements is correct with respect to Carla?

If the price elasticity of demand is 5.3, demand is said to be

Suppose that the revenue of a product increases when its price decreases. Then demand for the product must

If a firm lowers the price of a product when demand is elastic, then the firm should expect total revenue to

If the price elasticity of demand is equal to 4, a 1 percent increase in price will cause the quantity demanded to ____ by ____ percent.

Exhibit 4-1 -Refer to Exhibit 4-1. The price elasticity of demand is most likely to be inelastic

When supply shifts, supply elasticity affects the changes in equilibrium price and quantity.

A price floor would result in a(n)

A product with an elastic demand means that

Exhibit 4-2 -Refer to Exhibit 4-2. If the supply curve shifts to the right, then which of the following is true?

Given the following income elasticities of demand, would you classify the good as a luxury, necessity, or inferior good?

Suppose a $1 change in the price of a good results in the quantity demanded changing by .2 percent. Then you know

The price elasticity of demand measures

Does a price floor result in a shortage or a surplus? Why?

Which of the following correctly represents the midpoint formula?

For a given shift in demand, the less elastic is supply, the

The income elasticity of demand

The price elasticity of supply is a measure of how