eco2301

Suppose the market demand curve is given by Qd = 80 - 10P, and the market supply curve is given by Qs = 10 + 15P. What is the equilibrium price and quantity?

P* = $2.80 and Q* = 52

A change in consumers' income causes a change in:

demand

If the demand for a good decreases as income decreases, then the good is a(n):

normal good.

A decrease in the price of pizza will lead to a(n):

increase in the quantity of pizza demanded.

The price elasticity of supply at a point is the:

% change in quantity supplied divided by the % change in price

If the quantity demanded of a good is Q when the price for the good is P, the price of demand for that good at that point is:

(P/Q) x (1/slope)

If the price elasticity of demand for food is 0.03, then a 6% increase in the price of food will lead to a _______ decrease in quantity demanded

0.18%

When the price of hotdogs is $1.50 each, 500 hotdogs are sold every day. After the price falls to $1.35, 510 hotdogs are sold. At the original price, what is the price elasticity of demand for hotdogs?

0.2

If the price of textbooks increases by 1% and the quantity demanded falls by 1%, then the price elasticity of demand is equal to:

0.5

If the price elasticity of demand for pineapples is 0.75, then a 4% increase in the price of pineapples will lead to a

3% decrease in the quantity demanded

What might cause a demand curve to shift to the right?

An increase in the price of a substitute

The price elasticity of demand equals 1 when:

At the midpoint of a straight line demand curve.

Which of following is NOT true of the equilibrium price?

It is fair in the sense that everyone can afford basic goods and services.

Suppose you bought a concert ticket from Ticketmaster for $50, but when you get to the concert, there are a large number of people waiting outside who offer to pay you more than $50 for your ticket. What is probably true?

There is an excess demand for tickets at the Ticketmaster price

Suppose we observe an increase in both the equilibrium price and quantity of bread. This is best explained by:

a decrease in the price of butter, a complement to bread.

"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:

a falling price of personal computers increases the quantity demanded, not demand.

Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see:

an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price.

Suppose that the equilibrium price of pickles falls while the equilibrium quantity rises. The most likely explanation for these changes is:

an increase in the supply of pickles.

It is likely that for most people:

coffee and tea are substitutes.

If the demand for cucumbers falls when the price of tomatoes rises, then we know that tomatoes and cucumbers are:

complements

If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1%, quantity demanded would

decrease by 3%

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case:

excess demand will lead the price of oranges to rise.

Perfectly elastic

horizontal line/vertical line

Refer to the accompanying figure. Moving from demand curve D1 to demand curve D2 (rightward) could be caused by a(n):

increase in the price of a close substitute.

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be:

inelastic

Suppose a 10% increase of aspirin leads to a 5% decrease in the quantity demanded. The demand for aspirin is:

inelastic

Suppose the company that owns the vending machines on your campus has doubled the price of a can of soda. They then notice that they are selling approximately 15% fewer sodas. The price elasticity of demand for sodas is:

inelastic

Suppose that the short-run price elasticity of demand for electricity is 0.03, and the long-run price elasticity of demand is 1.2. One would classify the short-run elasticity as being ___________ and the long-run elasticity as being ___________

inelastic; elastic

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n):

inferior good.

The demand for a good is inelastic with respect to price of the price elasticity of demand is:

less than 1

Suppose you have one hour to catch a flight to miami for spring break and it takes 45min to get to the airport. Your car is low on gas and the price of the closest gas station is higher than others. To you, the price elasticity of demand for gas is likely to be:

lower

When calculating price elasticity of demand, of the percentage change in price is negative, then the percentage change in quantity demanded is typically:

positive

The price elasticity of demand for a good measures the responsiveness of:

quantity demanded to a 1% change in price of that good

If the supply curve and the demand curve both shift to the left, then the new equilibrium:

quantity will be lower, but the direction of the price change is uncertain.

Suppose one knows two facts: first, the market for prescription drugs experiences chronic shortages and second, the government sets the price for prescription drugs. One can conclude that the government has:

set the price below the equilibrium price.

If the cross-price elasticity of two goods is positive, then the two goods are

substitutes

If supply and demand both decrease, the new equilibrium price will be ______ and the new equilibrium quantity will be ______.

uncertain; lower

Excess demand occurs

when price is below the equilibrium price.