Exam 3: Applying the Supply-And-Demand Model

Suppose the market for grass seed can be expressed as Demand: Q^D = 200 - 5p Supply: Q^S = 40 + 5p If the government collects a $5 specific tax from sellers, how much will the quantity demanded change from the amount demanded before the tax? What price will consumers pay after the tax? What price will sellers receive after the tax? What is the tax revenue?

As the demand for corn increases to provide input for ethanol production, what is expected to happen to the price elasticity of corn supply?

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 10%, then one can conclude that the demand for orange juice

Some environmental groups are on record suggesting that the price of gasoline should be much higher than it was in the early 1990s. Why might they say this?

The short-run price elasticity of demand for refrigerators is relatively inelastic.

The duration of the "short-run"

Suppose the market for grass seed can be expressed as Demand: Q^D = 100 - 2p Supply: Q^S = 3p At the market equilibrium, calculate the price elasticities of supply and demand. Use these numbers to predict the change in price resulting from a specific tax.

The cross price elasticity of demand for a good x is the percentage change in the quantity demanded of good x in response to a given percentage change in

A specific tax on sellers will

Which of the following goods probably has the lowest (absolute value)short-run price elasticity of demand?

The tax incidence of a specific tax or ad valorem tax is influenced by

Explain why the price elasticity of demand changes along a linear demand curve.

Only in the case of perfectly inelastic demand will consumers pay the full amount of a specific tax or ad valorem tax.

The market demand for wheat is Q = 100 - 2p + 1p_b, where p_b is the price of barley. The cross price elasticity of demand for wheat with respect to barley

If a government wants to maximize revenues from a tax, it should

The price elasticity of demand for gasoline is estimated to be -0.2. Two million gallons are sold daily at a price of $3. Use this information to calculate a demand curve for gasoline assuming it is linear.

Suppose the inverse demand curve for a good is expressed as Q = 50 - 2p. If the good currently sells for $3, then the price elasticity of demand is

Consider the following products. Which of them has the flattest demand curve?

Because demand curves slope downward according to the Law of Demand, the price elasticity of demand is a negative number.

A vertical supply curve exhibits