Economics for Today's World International Edition 5th Edition by Irvin B. Tucker - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below Chapter 5 Price Elasticity of Demand and Supply MULTIPLE CHOICE Topic: Price elasticity of demand, Difficulty: M, Type: RE, …
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Economics for Today’s World International Edition 5th Edition by Irvin B. Tucker – Test Bank
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Sample Questions Are Posted Below
Chapter 5
Price Elasticity of Demand and Supply
MULTIPLE CHOICE
Price elasticity of demand refers to the ratio of the:
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Price elasticity of demand is defined as the ratio of the:
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Price elasticity of demand refers to the:
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If demand is price elastic, a decrease in price causes:
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If a decrease in the price of movie tickets increases the total revenue of movie theaters, this is evidence that demand is:
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A perfectly elastic demand curve has an elasticity coefficient of:
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Over the elastic portion of a demand curve, a decrease in price causes:
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Using the midpoints formula, what would be price elasticity of demand for a gallbladder operation if the number of operations fell from 6,000 to 4,000 per week after its price increased from $6,000 to $10,000?
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If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is:
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If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:
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If the percentage change in the quantity demanded of a good equals the percentage change in price, price elasticity of demand is:
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Along the elastic range of a demand curve, a decrease in price causes:
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If a decrease in the price of theater tickets increases the total revenue earned by the theater, this is evidence that demand is:
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Along the elastic range of a demand curve, a price change causes:
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Suppose the president of a college argues that a 25 percent tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attend this college is:
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Suppose Good Food’s supermarket raises the price of its steak and finds its total revenue from steak sales does not change. This is evidence that price elasticity of demand for steak is:
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The price elasticity of demand for a vertical demand curve is:
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The president of Tucker Motors says, “Lowering the price won’t sell a single additional Tucker car.” The president believes that the price elasticity of demand is:
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If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:
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Demand price elasticity measures:
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In Exhibit 1, the demand curve between points a and b is:
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In Exhibit 1, the demand curve between points b and c is:
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In Exhibit 1, between points a and b, the price elasticity of demand measures:
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In Exhibit 1, between points b and c, the price elasticity of demand measures
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If demand price elasticity measures 2, this implies that consumers would:
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If the demand curve over a certain range is “price elastic,” this implies that the:
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If the demand curve is unit elastic, this implies that:
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Which of the statements below does not describe a demand curve that is unit elastic?
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Demand price elasticity is measured by the:
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If Sam, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week, then the demand for Sam’s pizzas in this range is:
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If Herbert, the hair stylist, raises the price of his cuts from $13 to $15 and finds the number
of cuts falls from 300 to 260, then the demand for Herbert’s cuts in this range is:
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If a 10 percent cut in price causes a 15 percent increase in sales, then:
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If Pete raises his price of muffins from $2 to $3 and his sales revenue increases from $35,000 to $38,000, then:
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You are part of a local community theater group. It is the goal of the group to increase the amount of revenue earned through ticket sales. Mary says the obvious solution is to increase ticket prices. Is Mary correct?
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Elasticity measures how “sensitive” consumers are by measuring their change in __________ as the price of the product changes.
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If the price elasticity of demand for a product measures .45,
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If a straight-line demand curve slopes down, price elasticity will:
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As one moves down a straight-line, down-sloping demand curve, price elasticity will:
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Since it is always a negative number, economists use the convention of taking the absolute value of:
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Leo’s Bakery reduces the price of wheat bread from $3 to $1 and finds that quantity demanded increases from 100 to 120 loaves. Leo calculates that his price elasticity of demand for wheat bread is:
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Tara buys four music cassettes when the price is $10 and two cassettes when the price is $14. Her price elasticity of demand is:
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As price decreases and we move down further along a linear demand curve, the price elasticity of demand will:
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If the price elasticity of demand for football tickets is estimated to be 4.5, then a 10 percent increase in football ticket prices would be expected to cause a:
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A health club sells 50 memberships when the monthly price is $60 and 70 memberships when the monthly price is $40. The price elasticity of demand for memberships at this health club is (using the average values method):
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Within different price ranges along a linear demand curve, elasticities are:
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If demand for a good is price elastic, then the price elasticity will be:
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An economist estimates that .67 is the price elasticity of demand for disposable diapers. This suggests that disposable diaper producers could:
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If demand is price elastic, then when price decreases, total revenue:
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When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:
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The short-run price elasticity of demand for airline travel is .05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:
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On a part of the demand curve where the price elasticity of demand is less than 1, a decrease in price:
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A public transit company finds that when it reduces the price of a bus ticket, total revenues remain the same. One can conclude from this that:
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It is Valentine’s Day and Jason is desperately looking all over town for a dozen roses to give to Judy. Most likely, Jason’s price elasticity of demand is:
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Sally is an average shopper, with average income. When she is in the store she buys a few items which cost more than $20, several items which cost between $5 and $20, and many items which cost less than $1. The price elasticity of Sally’s demand for these goods most likely ____________.
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Elasticity has which special meaning for economists?
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Which statement about price elasticity of demand along a linear demand curve is true?
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Looking at the relationship between elasticity and total revenue, we can see that __________.
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Which of the following statements is true?
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Larissa is a famous attorney with a great reputation in court. She charges her clients $300 for each hour she spends working on their cases. If she earned $450,000 in hourly wages last year, and by raising her rates to $350 per hour her income increased to $490,000 what can we say about the elasticity of demand for Larissa’s legal services?
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Dana is an art historian who needs to travel to Italy to do research. Art historians usually don’t have a lot of money, and therefore are very sensitive to price changes. Dana’s funding agency pays her a fixed amount to travel. At current exchange rates, Dana can stay in Italy for 35 days. If the exchange rate improves by 10 percent, she can stay for 40 days. What is Dana’s price elasticity of demand for days spent in Italy?
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Exhibit 2 Price and quantity demanded data
| Price | Quantity Demanded |
| 5 | 20 |
| 4 | 25 |
| 3 | 30 |
| 2 | 35 |
| 1 | 40 |
The data in Exhibit 2 shows that price elasticity of demand is:
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Using Exhibit 2, what is the price elasticity of demand when the price falls from five dollars to four?
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One of the reasons that price elasticities of demand are always stated as positive numbers
is because:
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Avital and Joshua each have their own business selling lemonade in front of their houses. When they each charge 25 cents per glass, their total revenues are equal. However, when they each charge 40 cents per glass, Avital’s revenues are bigger than Joshua’s revenues. This
is because:
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The price elastic portion of the linear demand curve lies:
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If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:
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Exhibit 3 Demand curves for gallons of orange juice
| Price | Albert | Betty | Carl | Dana | Edward |
| 10 | 0 | 1 | 2 | 0 | 0 |
| 9 | 0 | 1.5 | 2 | 0.5 | 0 |
| 8 | 0 | 2 | 2 | 2 | 4 |
| 7 | 0 | 2.5 | 2 | 3.5 | 8 |
| 6 | 1 | 3 | 3 | 5 | 12 |
| 5 | 3 | 3.5 | 3 | 6.5 | 16 |
| 4 | 5 | 4 | 3 | 8 | 20 |
| 3 | 7 | 4.5 | 3 | 9.5 | 24 |
| 2 | 9 | 5 | 3 | 11 | 28 |
| 1 | 11 | 5.5 | 3 | 12.5 | 32 |
Using Exhibit 3, whose elasticity of demand is greatest when the price falls from $7 to $6?
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Using Exhibit 3, in general, whose demand for orange juice is the most inelastic?
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Using Exhibit 3, in general, whose demand for orange juice is the most elastic?
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Using Exhibit 3, whose “quantity demanded” experiences the largest percentage increase when the price falls from $2 to $1?
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If a revenue-maximizing firm is told that the price elasticity of demand is equal to one, it should:
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Another word for elasticity is:
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Firms would like to know the price elasticity of demand for their products because it helps determine the effect of price changes on the firms’:
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If the price of Pepsi-Cola increases from 40 cents to 50 cents per bottle and the quantity demanded decreases from 100 bottles to 50 bottles, then according to the averaging equation, the value of price elasticity of demand for Pepsi-Cola is:
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If the value of the price elasticity of demand is 0.2, this means that:
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If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then demand is:
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If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is:
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If Stimpson University increases tuition in order to increase its revenue, it will:
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If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is:
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Which of the following describes a situation in which demand must be inelastic?
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Which of the following describes a situation in which demand must be elastic?
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A measure of sensitivity or responsiveness to changes in price or income is called:
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Elasticity is a measure of:
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Consider the market for bicycles. If a dealer cuts prices by 10 percent and sells 20 percent more bikes, then demand for bicycles is:
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The percentage change in the quantity demanded of film divided by the percentage change
in the price of cameras indicates:
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Governments can use price elasticity of demand to estimate how changes in excise tax rates will affect:
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Exhibit 4 Demand curves for silver
Assume that a wealthy buyer, Mr. Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 4, which graph illustrates the shape of the demand curve for silver?
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If the quantity of concert tickets sold decreases by 10 percent when the price increases by 5 percent, the price elasticity of demand over this range of the demand curve is:
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Suppose the quantity demanded of steak is 200 million pounds per year when the price is $6 per pound and 400 million pounds per year when the price is $2 per pound. The price elasticity of demand for steak over this range is:
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Suppose the Good Food supermarket increases the price of a pound of bananas from $.75 to $1.25 and finds that the quantity of bananas it sells per month drops from 1,500 to 1,000. The price elasticity of demand coefficient for bananas in this price range is:
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Suppose the quantity demanded is 1,000 million bushels of peaches per year when the price is $3 per bushel and 1,500 million bushels when the price is $1 per bushel. The price elasticity of demand in this range of the demand curve is:
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If a 5 percent decrease in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand is:
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Suppose there is no change in total revenue when the price changes. The demand curve for this good is:
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Any change in price along a perfectly inelastic demand curve produces:
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A perfectly elastic demand curve has a price elasticity of demand coefficient of:
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A demand curve that has constant price elasticity of demand coefficient equals to one at all points is a (an):
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Exhibit 5 Demand curve for computers
In Exhibit 5, if the area OABC equals the area ODEF, the demand curve is:
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In Exhibit 5, the change in total revenue resulting from a change in price from A to D indicates that the demand curve is:
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In Exhibit 5, the total revenue at point B on the demand curve equals:
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In Exhibit 5, the total revenue at point E on the demand curve equals:
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You are on a campus committee which sets the ticket prices for basketball games. The committee wants to increase the total money generated from ticket sales. When should the committee choose to lower its ticket prices?
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A 10 percent rise in the price of housing reduces the quantity demanded of housing by 3 percent. We can conclude that the demand for housing is:
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Suppose an oil company wants to make its total revenue as large as possible. It should charge a price at which the demand for oil is:
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If a decrease in the price of football tickets increases the total revenue of the athletic department, this is evidence that demand is:
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If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is:
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Suppose the president of a textbook publisher argues that a 10 percent increase in the price of textbooks will raise total revenue for the publisher. It can be concluded that the company president thinks that demand for textbooks is:
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If the quantity of tickets to the fair sold decreases by 10 percent when the price increases by 5 percent, the price elasticity of demand over this range of the demand curve is:
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There is no change in total revenue when the demand curve for a good is:
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If a good has a price elasticity of demand coefficient less than one, then:
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If the price elasticity of demand coefficient equals 2 then:
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Which of the following statements is true?
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Exhibit 6 Demand curve for concert tickets
In Exhibit 6, suppose promoters charge a price of $30 per ticket. How much total revenue will their sales generate?
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In Exhibit 6, if promoters lower their ticket price form $30 to $20, then:
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In Exhibit 6, the demand curve for concert tickets shown above is classified as:
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Exhibit 7 Demand curve for concert tickets
According to Exhibit 7, the demand for concert tickets is:
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In Exhibit 7, If promoters charge a price of $10 per ticket, then their total revenue is:
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In Exhibit 7, if promoters raise their prices from $10 to $40 per ticket, then their total revenue will:
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A product would be more demand price elastic:
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A product would be more demand price inelastic:
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The longer the time period under study,
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Demand sensitivity depends on all of the following except:
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In the short run, consumers typically ___________ to price changes (when compared to the long run).
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A product would be more demand price elastic:
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A product would be more demand price inelastic:
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The longer the time period under study,
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If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:
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Which of the following events would increase the price elasticity of demand for Chicago Bears tickets that sell at a price of $20?
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The price elasticity of demand for a particular good is influenced by which of the following factors?
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The long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because:
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Demand sensitivity depends on all of the following except:
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If the short-run price elasticity of demand for hospital care is .27, then the long-run price elasticity is expected to be:
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The long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because:
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In the long run, price elasticities of demand are usually __________.
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A lower price elasticity of demand coefficient occurs when:
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In the long run, price elasticities of demand are usually __________.
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The price elasticity of demand coefficient for a good will be greater:
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Which of the following goods is likely to have the most elastic demand curve?
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If the price elasticity of demand is elastic, then:
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Which of the following statements is not true?
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In differentiating between the short- and long-run elasticities, when economists talk about short-run elasticities,
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A lower price elasticity of demand coefficient occurs when:
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The price elasticity of demand coefficient for a good will be greater:
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The price elasticity of demand coefficient for a good will be lower:
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Which of the following is true for a lower price elasticity of demand coefficient?
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The number of CDs purchased increased by 50 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as:
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A study of consumers in an area found that as family income increased from $25,000 per year to $35, 000 per year, other factors held constant, the number of houses purchased increased from 7,000 per year to 11,000 per year. This finding indicates an income elasticity of demand coefficient for housing over this family income range of:
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If bus travel is an inferior good, then its income elasticity of demand will be:
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For which of the following medical goods or services is the income elasticity of demand largest?
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The income elasticity of demand for shoes is estimated to be 1.50. We can conclude that shoes:
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The number of CDs purchased increased by 50 percent when consumer income increased by 10 percent. Assuming other factors are held constant, CDs would be classified as:
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A good is classified as inferior if:
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If a good is inferior in an economic sense, income elasticity will:
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If we measure the income elasticity of a good as –1.8, this means this good is a(n):
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If a consumer’s purchases of a product increases as income increases, this good is classified as a(n):
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When economists look at the percentage change in quantity demanded generated by a change in income, they are looking at:
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If a 1 percent change in income generates a greater than 1 percent change in quantity demanded of boating expenditures, then boating is an:
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Suppose the value of income elasticity of demand for a private college education is equal to 1.5. This means that:
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If the income elasticity of demand for a good is .59, then it is what type of good?
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The Smith family buys much more macaroni when someone in the family is laid off. This means that the Smiths’ ___________ is negative.
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If the income elasticity for a particular good is 0.8, we would expect to see more of that good:
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The number of satellite dishes increased by 50 percent when the average monthly price of cable TV increased by 10 percent. Assuming that other factors are held constant, satellite dishes and cable TV are classified as:
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The number of cases of Coca-Cola bought increased by 50 percent when the price of pretzels declined by 10 percent. Assuming other factors are held constant, Coca-Cola and pretzels are classified as:
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The number of computers bought increased by 20 percent when the price of on-line services declined by 10 percent. Assuming other factors are held constant, computers and on-line services are classified as:
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To determine whether two goods are substitutes or complements, an economist would estimate the:
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If automobiles and gasoline are complements, then their cross-elasticity coefficient will be:
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The cross elasticity of demand for substitute products must:
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The cross elasticity of demand for complementary products must:
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If a 1 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:
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If a 10 percent decrease in the price of product A brings about a 3 percent increase in the sales of product B, then:
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Two goods are complementary if:
If a good is inferior in an economic sense:
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If John purchases 10 percent more compact discs when his income increases 5 percent, then:
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If Coke and Pepsi are close substitutes, then if:
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If Jackie needs special film to go with her new camera, then for her these two goods have what type of relationship?
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The cross elasticity between Rolaids and Tums is expected to be:
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We would expect the cross elasticity between tennis racquets and tennis balls to be:
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The cross elasticity between two goods, X and Y, is positive. From this, we can conclude that goods X and Y are:
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If two goods were to become even stronger substitutes than before, an economist would expect the cross elasticity to become:
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When the price of bread increases by 3 percent, the quantity demanded of crackers increases by 2 percent. The cross elasticity of demand between crackers and bread is:
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Which of the following pairs is most likely to represent substitute goods?
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Which of the following pairs is most likely to represent complementary goods?
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An increase in the price of good X causes the demand for good Y to shift inward. One can conclude that X and Y are:
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The cross elasticity between two goods is 2.5. These goods are:
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There are three goods you are interested in purchasing, X, Y and Z. You notice that the price of Z has fallen. Given that the cross price elasticity between Z and Y is –1.5 and the cross price elasticity between Y and X is 3.0, it would make sense that:
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If goods X and Y are such that the cross price elasticity between them is negative, and if the income elasticity of X is negative, then these goods are:
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The cross price elasticities among substitute goods will be extremely high when:
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Inferior goods have an income elasticity of demand that is:
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An inferior good is:
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As cities prospered and per-capita incomes increased, the demand for bus travel diminished. This suggests that:
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If the economy is in recession and the number of used baby clothing stores increases, then:
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As the economy recovers from a recession, we should expect that demand for:
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The value of cross elasticity of demand between orange soda and grape soda is:
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The price elasticity of demand between rifles and bullets is likely to be:
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The price elasticity of demand between milk and soda is likely to be:
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Computers and software programs are:
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In order to prove that Dr. Pepper and 7-Up are substitutes, the FTC should test the __________ and get a __________.
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Suppose that the quantity of apples sold increases by 30 percent after the price of pears increases by 15 percent. What is the coefficient of cross elasticity of demand?
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In the very short-run period,
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If the price elasticity of supply equals zero, this implies that:
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The responsiveness of suppliers to changing prices is called the:
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Suppose that when price is $10, quantity supplied is 20. When price is $6, quantity supplied is 12. The price elasticity of supply is:
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Price elasticities of supply are always:
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If a tripling of price triples the quantity of a good supplied, the price elasticity of supply for this good is:
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As shown in Exhibit 8, the price elasticity of demand for good X between points E and Z is:
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As shown in Exhibit 8, the price elasticity of supply for good X between points E and X is:
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As shown in Exhibit 8, assuming good X is a normal good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:
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As shown in Exhibit 8, assuming good X is an inferior good, a decrease in consumer income, other factors held constant, will move the equilibrium from point E to point:
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As shown in Exhibit 8, assuming goods X and Y are substitutes, a decrease in the price of Y, other factors held constant, will move the equilibrium from point E to point:
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In Exhibit 8, the price elasticity of supply for good X between points Y and E is:
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In Exhibit 8, the price elasticity of supply for good X between points E and X is:
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If the quantity of rental units increases by 10 percent when the monthly rental price doubles, the supply of rental units, other factors held constant, is:
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Assume 300 billion pounds of Ostrich meat is produced per year when the price is 50 cents per pound, and 500 billion pounds when the price is 60 cents per pound. The supply of Ostrich meat, other factors held constant, is:
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Exhibit 9 Supply and demand curves for good X
As shown in Exhibit 9, the price elasticity of demand for good X between points E and B is:
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As shown in Exhibit 9, the price elasticity of demand for good X between points E and D is:
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As shown in Exhibit 9, assuming good X is a normal good, an increase in consumer income, other factors held constant, could move the equilibrium from point E to point:
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As shown in Exhibit 9, assuming good X is an inferior good, an increase in consumer income, other factors held constant, could move the equilibrium from point E to point:
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As shown in Exhibit 9, assuming goods X and Y are substitutes, an increase in the price of Y, other factors held constant, could move the equilibrium from point E to point:
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In Exhibit 9, the price elasticity of supply for good X between points A and E is:
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In Exhibit 9, the price elasticity of supply for good X between points E and C is:
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Using supply and demand analysis, which of the following is true?
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If the government wants to raise tax revenue and shift most of the tax burden to the consumers, it would impose a tax on a good with a:
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If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a:
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A law requiring sellers to pay the government a tax per pack on cigarettes has the effect of:
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Assuming the demand curve is more elastic (flatter) than the supply curve, which of the following is true?
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If the government wants to raise tax revenue and shift most of the tax burden to the sellers, it would impose a tax on a good with a:
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If a government tax has as its purpose the raising of revenue, it would be best to place the tax on a product which:
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To raise the most tax revenue, governments should consider taxing goods with:
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Good A has a price elasticity of demand of .27, while good B has a price elasticity of demand of 2.9. To raise the most tax revenue, the government should:
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In the country of Bora Bora, consumers buy large quantities of alcohol, tobacco, and coffee. Last year, the prices of these goods each increased by 10 percent. The quantities demanded for these goods fell by 10, 3, and 8 percent, respectively. If the government is thinking about imposing a unit tax on one of these goods, which good should they choose to tax to raise the most tax revenue, and why?
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Per-unit taxes have which effect on the equilibrium price of a good?
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Imagine the government would like to increase revenues by taxing the people. If they place a unit tax on certain goods, this is equivalent to:
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Governments seeking to maximize total tax revenue will place unit taxes on goods with the:
Full: 129 Mic: 129
If an excise tax is placed on a product that has a perfectly inelastic demand, then:
Full: 129 Mic: 129
As shown in Exhibit 10, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by consumers of a pack of cigarettes is:
Full: 129 Mic: 129
As shown in Exhibit 10, assume the government places a $1 per pack sales tax on cigarettes. The percentage of the burden of taxation paid by tobacco sellers is:
Full: 129 Mic: 129
As shown in Exhibit 10, the $1 per pack tax on cigarettes raises tax revenue per day totaling:
Full: 129 Mic: 129
TRUE OR FALSE
The price elasticity of demand measures consumer responsiveness to a price change.
Full: 114 Mic: 114
If the price elasticity of demand for a good is elastic, then consumers are relatively unresponsive with respect to the quantity purchased when the price changes.
Full: 114 Mic: 114
If the price elasticity of demand coefficient equals 2, this means a 10 percent increase in price will result in a 20 percent decrease in the quantity demanded.
Full: 114 Mic: 114
If the managers of the bus system found that revenues increase when fares are raised, they would conclude that price elasticity demand for subway service is inelastic.
Full: 114 Mic: 114
A horizontal demand curve indicates perfectly elastic demand.
Full: 114 Mic: 114
The price elasticity of demand measures consumer responsiveness to a price change.
Full: 114 Mic: 114
If the price elasticity of demand for a good is elastic, then consumers are relatively unresponsive with respect to the quantity purchased when the price changes.
Full: 114 Mic: 114
If the price elasticity of demand coefficient equals 2, this means a 10 percent increase in price will result in a 20% decrease in the quantity demanded.
Full: 114 Mic: 114
Price elasticity remains constant along a straight-line demand curve.
Full: 114 Mic: 114
If demand is perfectly inelastic, then the demand curve will be vertical.
Full: 114 Mic: 114
If a 10 percent price increase causes the quantity demanded for a good to decrease by 20 percent, demand is elastic.
Full: 116 Mic: 116
If a 10 percent price increase causes the quantity demanded for a good to decrease by 5 percent, demand is elastic.
Full: 116 Mic: 116
If a 10 percent price increase causes the quantity demanded for a good to decrease by 10 percent, demand is unitary elastic.
Full: 118 Mic: 118
If the demand curve for a good is elastic, consumers will spend more on that good when its price increases.
Full: 117 Mic: 117
Suppose an economist found that total revenues increase for the bus system when fares were raised, the conclusion is that the price elasticity demand for subway services over the range of fare increase is inelastic.
Full: 117 Mic: 117
A horizontal demand curve is perfectly elastic.
Full: 118 Mic: 118
If a good has a price elasticity of demand coefficient greater than 1, total revenue can be increased by raising the price.
Full: 117 Mic: 117
Other factors held constant, if there are few close substitutes for a good, demand is more elastic for it.
Full: 122 Mic: 122
If the demand for a product is inelastic, then a price increase will result in a decrease in total revenue.
Full: 117 Mic: 117
The fewer the substitutes for a good the greater will be the value of the price elasticity of demand coefficient.
Full: 122 Mic: 122
Goods with few available substitutes tend to have inelastic demand curves.
Full: 122 Mic: 122
If demand for a good is price elastic, it must also be income elastic.
Full: 124 Mic: 124
If the income elasticity of demand for a good is negative, the good is an inferior good.
Full: 124 Mic: 124
If the income elasticity of demand for a good is positive, the good is a normal good.
Full: 124 Mic: 124
If demand for a good is price elastic, it must also be income elastic.
Full: 124 Mic: 124
For an inferior good, the income elasticity of demand is negative.
Full: 124 Mic: 124
In response to a price change for good Y, if the cross-elasticity of demand for good Y is negative, good X and good Y are substitutes.
Full: 126 Mic: 126
In response to a price change for good Y, if the cross-elasticity of demand for good Y is positive, good X and good Y are complements.
Full: 126 Mic: 126
If a supply curve has a constant slope throughout its length, it must have a constant price elasticity throughout its length.
Full: 127 Mic: 127
If the supply of a good is inelastic, a decrease in price must increase total revenue.
Full: 128 Mic: 128
Applying supply and demand analysis, other factors held constant, the steeper the supply curve (more inelastic), the larger the burden of a sales tax that is borne by the sellers.
Full: 129 Mic: 129
When the government imposes a tax, sellers raise their price by the full amount of the tax.
Full: 129 Mic: 129
Supply-demand analysis shows that a tax collected from sellers is always fully shifted to buyers.
Full: 129 Mic: 129
Applying supply and demand analysis, other factors held constant, the steeper the supply curve (more elastic), the larger the burden of a sales tax that is borne by the sellers.
Full: 129 Mic: 129
ESSAY QUESTIONS
ANS:
The price elasticity of demand measures buyer responsiveness to a price change. If the price elasticity of demand coefficient equals 1.2, this means that for every 1 percent change in price there will be a 1.2 percent change in the quantity demanded in the opposite direction. This implies that consumers are relatively responsive to a change in the price and therefore the demand for this product is elastic.
Full: 116 Mic: 116
ANS:
Total revenue will rise if the price rises and demand is inelastic. This is because the percentage increase in the price exceeds the percentage decrease in the quantity demanded. Indeed, whenever, the demand is inelastic this means buyers are relatively unresponsive to a change in the price. Therefore, total revenue rises when price rises.
Full: 117 Mic: 117
ANS:
A product that has an inelastic demand has few substitutes, accounts for a relatively small share of buyers’ budget, and there is a relatively short time frame under consideration.
Full: 123 Mic: 123
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
