Exam 4: Using Supply and Demand

The table below shows the price elasticity of demand for a good in the vicinity of seven different points along the demand curve for the good. In the vicinity of which of these points would a price decrease be accompanied by an increase in total revenue?Table 4.4:

Explain the impact of: a. A rent ceiling set below the equilibrium price. b. A price floor set above the equilibrium price.

Identify the correct statement about the price elasticity of demand and the demand curve for a good.

If recent sharp increases in the price of a life-saving drug have had only a small effect on the amount of the drug purchased, then the demand for the drug is said to be:

A subsidy to wheat farmers decreases the price of a bushel of wheat from $2.50 to $2 per bushel. Prior to the subsidy, the equilibrium quantity of wheat sold was equal to 200,000 bushels. If the demand for wheat is known to be unit elastic, then after the imposition of the subsidy, _____ bushels of wheat would be sold in the market.

The tax burden for a good falls largely on _____.

When the local symphony recently raised the ticket price for its summer concerts, the symphony was surprised to see that its total revenue had actually decreased. The reason for the decline in total revenue was that the demand for tickets was:

The price elasticity of demand for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 5 percent increase in price would lead to a:

The following graph shows the demand and supply curves of a good. Identify the areas of consumer and producer surplus when the market price equals $20.Figure 4.2:

When a 9 percent increase in price leads to a 6 percent increase in quantity supplied, the supply is relatively inelastic.

A rent ceiling set below the equilibrium price results in a surplus.

If a price floor imposes a binding constraint on a market, then _____.

The following table shows Tim's demand for video rentals each month. Along Tim's demand curve for video rentals, the price elasticity of demand is:Table 4.2:

The Book Nook reduces prices by 20 percent. If the dollar value of The Book Nook's sales remains constant, it indicates that:

A linear demand curve for a good is:

The supply curve of a good can also be referred to as the:

The demand curve of a good or service represents a collection of minimum prices that consumers are willing and able to pay for additional quantities of a good or service.

Producer surplus for a particular unit of a good is the:

Moving along the inelastic portion of a demand curve, the change in quantity demanded will always be proportionally less than the change in price.

Suppose a government imposes a binding price ceiling on a good. Which of the following groups is most likely to favor the price ceiling?