Exam 4: Using Supply and Demand

Among the following pairs, which is likely to have the greatest price elasticity of demand? Why? a. Cars or Toyotas b. Electricity usage during a month or during a year c. Cable television or a vacation in Hawaii

If the demand for a good is unit elastic, then _____.

Price elasticity of demand is defined as the:

If the demand for a good is perfectly elastic, the price elasticity of demand is equal to _____ and the demand curve is _____.

Graph A below shows an elastic demand curve, and Graph B shows an inelastic demand curve. Graph A shows that as the price decreases from $20 to $10, total revenue _____ and quantity demanded _____.Figure 4.1:

Arrange the following goods from the least to the most elastic, explaining your ordering: gasoline, Shell gasoline, and Shell gasoline at a particular gas station.

A price floor is binding when it is set:

Graph A below shows an elastic demand curve, and Graph B shows an inelastic demand curve. With reference to Graph A, at a price of $10, total revenue equals _____.Figure 4.1:

The following table shows Kate's demand for sub sandwiches. Along Kate's demand curve for sub sandwiches, the price elasticity of demand is:.Table 4.1:

If most passenger trains operate far below full capacity and demand is _____, a decrease in travel fares would likely increase total revenue.

The demand for a good is said to be _____ when the percentage change in quantity demanded is greater than the percentage change in price.

If a consumer buys six units of a good, _____.

The government proposes a tax on flowers in order to boost its tax revenue. Consumers will bear no part of the tax burden if the:

The table below shows the price elasticity of demand for a good in the vicinity of eight different points along the demand curve for the good. At which of the following points would a price increase be accompanied by an increase in total revenue?Table 4.3:

Moving down the linear demand curve for a good, the demand becomes increasingly price elastic.

If a price floor is not binding, then it will have no effect on the market.

A steel mill raises the price of steel by 20 percent, which results in a 7 percent reduction in the quantity of steel demanded. The price elasticity of demand is _____.

A perfectly elastic demand curve is vertical.

A "war on drugs" is waged, and, as a result, a large quantity of drugs flowing into the United States is seized and the drug traffickers are arrested. If the demand for drugs is inelastic, which of the following is true?

Consumer surplus increases whenever the price of a good decreases due to a rightward shift of the supply curve.