Exam 5: Elasticity and Its Applications

Which of the following mostly likely has a perfectly inelastic supply curve?

In 1808, when slavery in the United States was still legal, Congress banned the importation of new slaves. Under these circumstances, would a slave redemption campaign have worked well? Why?

Extensive flooding in the Midwest decreases the world supply of corn. If corn is inelastically demanded, what will happen to total revenues from corn production?

Nobel prize-winning economist Gary Becker suggested prohibited drugs should be legalized and then taxed. This would _____ the seller's cost and _____ government revenue.

For each of the following goods would you expect the demand to be elastic or inelastic? Provide explanation for each of your rationales. a. oil b. Coca-Cola c. bread

Evidence from the Sudan indicates that the supply of slaves is likely:

Suppose that a group of humans build an enormous space ship of fixed size and travel into outer space, never to return. They live on board the ship and allocate all goods on the ship using markets. As the population grows, the price of housing on board the ship will

Goods tend to be more elastic in the short run than in the long run.

Supply is more elastic if it is easy to expand production at a constant unit cost.

Table: Elasticity Characteristics The table lists the characteristics of three goods. Good ________ is the most inelastic, and Good ________ is the most elastic.

The elastic demand curve for drugs makes the war on drugs hard to win.

A new per unit subsidy for hybrid car production increases the supply of hybrid cars. If hybrid cars are elastically demanded, what will happen to total revenues from hybrid car production?

The more quantity demanded responds to a change in the price of that good the _____ is for that good.

When demand is ______, an increase in price ______ total revenue.

Figure: Price Increase and Elasticity Refer to the figure. If price increases from $10 to $20, total revenue will:

Assume that the supply curve for a good is fixed at 100 units. Now suppose that the demand curve for the good increases such that the equilibrium price rises from $20 to $30. How does total revenue for the sale of this product change?

The demand for fruit is more elastic than the demand for apples.

The price elasticity of demand concept applies only when the price of a good increases.

The demand for most goods tends to become ______ over time.

The quantity demanded for cosmetic surgery increased by 12 percent following a period of strong economic growth that raised consumer income by 4 percent. What type of good is cosmetic surgery?