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

Suppose there is a sudden decrease in the supply of oranges. Compare the effect of the change in orange supply on the price of oranges in a market with high demand elasticity and a market with low demand 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.

Suppose that the government imposes a sales tax on the consumption of natural gas, which of the following would have the least impact on the producers of natural gas?

Suppose the price of a good falls from $200 to $150, and the quantity demanded changes from 45,000 units to 50,500 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit elastic.

The concept of price elasticity of demand makes it possible to

If the cross-price elasticity between two goods is positive, then it is most likely that the two goods are

Suppose the price of a good rises from $2.25 to $3.15, and the quantity demanded changes from 2,360 units to 1,250 units. Calculate the price elasticity of demand using the midpoint formula, and indicate whether demand is elastic, inelastic, or unit elastic.

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

The minimum wage is an example of a

The price elasticity of demand is expressed in dollar changes in price and quantity demanded.

The elasticity of demand changes

Total revenue decreases if price increases and demand is inelastic.

When price rises by 3 percent and quantity demanded changes by 6 percent,

If supply decreases and total revenue in an industry increases,

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

If the price of a good decreases by 5 percent and total revenue does not change, then the price elasticity of demand is

The measurement for the price elasticity of demand is

Use the following data for a demand curve. (A)Use the midpoint formula to calculate the elasticity between a price of $14 and $15. (B)Use the midpoint formula to calculate the elasticity between $7 and $8. (C)Because this is a linear demand curve, why does the elasticity change? (D)At what point is price $\times$ quantity maximized? What is the elasticity at that point?

To say that gasoline has a low price elasticity of demand is to say the quantity demanded of gasoline

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