Econ ch4 hw

If a 5 percent fall in the price of a product causes the quantity demanded of the product to increase by 10 percent, the demand is:

elastic.

A positive income elasticity of demand coefficient indicates that:

a product is a normal good.

If a product has a short-run elasticity of supply equal to zero, then an increase in the demand for the product will:

increase price and leave quantity sold unchanged.

Refer to the above graphs. Which shows a perfectly elastic demand curve?

Graph A

Refer to the adjacent graphs. For which graph is the supply perfectly inelastic?

Graph C

In some markets consumers may buy many different brands of a product. Which of the statements below best represents a situation where demand for a particular brand would be very elastic?

"The different brands are almost identical so I always buy the cheapest."

Which of the following pairs of goods is most likely to have a positive cross-elasticity of demand? 1. Steak and hamburger. 2. College professors and textbooks. 3. Fighter jets and pencils. 4. Hamburgers and hamburger buns.

1. Steak and hamburger.

For which product is the income elasticity of demand most likely to be negative? 1. Used clothing 2. Computer software 3. Bread 5. Golf balls

1. Used clothing

Which product is most likely to be most price elastic? 1. Clothing 2. Automobiles 3. Milk 4. Gasoline

2. Automobiles

In which instances will total revenues decline? 1. Price rises and demand is of unit elasticity. 2. Price rises and Ed equals 2.47. 3. Price falls and demand is elastic. 4. Price rises and Ed equals 0.41.

2. Price rises and Ed equals 2.47.

A negative cross-elasticity of demand for two products indicates that they are: 1. normal goods. 2. substitutes. 3. complements. 4. independent goods.

3. complements.

Which is not characteristic of a product with relatively inelastic demand? 1. Consumers have had only a short time period to adjust to changes in price. 2. The good is regarded by consumers as a necessity. 3. Buyers spend a small percentage of their total income on the product. 4. There are a large number of good substitutes for the good.

4. There are a large number of good substitutes for the good.

You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1. To increase total revenues, you should: 1. increase the supply of the software. 2. hold the price of the software constant. 3. decrease the price of the software. 4. increase the price of the software.

4. increase the price of the software.

Refer to the figure above. Which demand curve above is relatively more elastic between P1 and P2?

D1

Based on the information in the table, which product would be an inferior good?

Product C

If a 10 percent increase in the price of product X causes the demand for product Y to decrease by 15 percent, then:

X and Y are complements.

If a 2 percent increase in the price of product X causes the demand for product Y to increase by 6 percent, then:

X and Y are substitutes.

Refer to the figure above. The elasticity of supply for a product will be 2 when:

a 1 percent decrease in price causes a 2 percent decrease in quantity supplied.

If the price elasticity of demand for automobiles is 2:

a 10 percent decrease in price would result in a 20 percent increase in quantity demanded.

The price elasticity of demand increases with the length of the period to which the demand curve pertains because:

consumers will be better able to find substitutes.

An increase in the price of a good will cause total revenue to fall if price elasticity of demand is:

elastic.

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is:

elastic.

To economists, the main differences between "the short run" and "the long run" are that:

in the long run all resources are variable, while in the short run at least one resource is fixed.

If the cross-elasticity of goods X and Y is positive, then the sales of X move:

in the same direction as the price of Y, and X and Y are substitute goods.

The income elasticity of demand for jewelry is 2. Other things equal, a 10 percent increase in consumer income will:

increase the quantity of jewelry purchased by 20 percent.

If the price elasticity of demand for a good is .75, the demand for the good can be described as:

inelastic.

State government wants to increase the taxes on cigarettes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of demand is:

inelastic.

The price elasticity of demand is a measure of the:

responsiveness of quantity demanded to a change in price.

Sony is considering a 10 percent price reduction on its LCD television sets. If the demand for sets in this price range is inelastic:

revenues from LCD sets will decrease.

A study of mass transit systems in American cities revealed that long-run revenues generally decline after substantial fare increases. This suggests that:

the demand for mass transit is price-elastic in the long run.