econ midterm quizlet
What Are Price Ceiling Examples?
Rent controls, which limit how much landlords can charge monthly for residences (and often by how much they can increase rents) are an example of a price ceiling. Caps on the costs of prescription drugs and lab tests are another example of a common price ceiling.
a reduction in price and increases in total revenue
price elastic
an increase in price and reduces total revenue
price elastic
a reduction in price and reduces total revenue
price inelastic
an increase in price and increase in total revenue
price inelastic
A binding minimum wage will MOST likely lead to a situation where:
some unskilled workers have a difficult time finding a job.
What is the midpoint method?
(Q2-Q1)/((Q1+Q2)/2) / (P2-P1)/((P1+P2)/2)
price floors create
-Surpluses -Lost gains from trade (deadweight loss) -Wasteful increases in quality -A misallocation of resources
The state of Texas recently saw a gasoline price increase of 5%, which brought about a fall in the quantity of gasoline purchased of 1%. The price elasticity of demand is equal to _____, and demand is described as _____.
0.2; inelastic
what is the formula for the price elasticity of demand?
% change in quantity demanded/% change in price
In connection with the demand curve below, calculate the price elasticity of demand between $3 and $4 (that is, when the price rises from $3 to $4) using the mid-point method. It is approximately:
0.54
When the price of fountain pens decreases from $3 to $1, the quantity of fountain pens demanded increases from 100 to 200 pens. What is the price elasticity of demand, obtained using the midpoint method?
0.67
Each month, Evelyn spends exactly $50 on frappuccinos, regardless of the price. Evelyn's price elasticity of demand for frappuccinos is:
1.
price ceilings create
1. Shortages 2. Reductions in product quality 3. Wasteful lines and other search costs 4. A loss of gains from trade 5. A misallocation of resources DEADWEIGHT LOSS
Which statement(s) is/are FALSE? I. Quantity controls set below the market equilibrium quantity drive a wedge between the demand price and the supply price of the good. II. The difference between the demand price and the supply price at the quota limit is consumer surplus. III. Quantity controls have no undesirable side effects. II only II and III I, II, and III I only
II and III
example of price floor
Minimum wage law and Agricultural price supports
A price floor or a price ceiling is an example of:
a price control
A price floor often results in:
black markets, or underground transactions in the good.
If the cross elasticity of demand between cheese and yogurt is positive, then:
cheese and yogurt are complements.
The price of matcha tea increases by 10%, and as a result, Cassandra purchases fewer biscotti. For Cassandra, matcha tea and biscotti are:
complements.
the something is unit price elastic, total revenue...
does not change as price changes
The price elasticity of demand for snowboarding lessons at Jay Peak resort in Vermont is greater than 1. This means that the demand for snowboarding lessons is _____.
elastic
It is very easy for Evelyn to find inexpensive inputs for her business. Evelyn's supply is therefore likely to be:
elastic.
If the income elasticity of electric cars is positive:
electric cars are a normal good.
A perfectly elastic supply curve is:
horizontal.
Given the Demand for e-Books below, if the price of e-Books increases from $4 to $6, total revenue _____, which means that demand is _____.
increases; inelastic
when something is price inelastic, total revenue moves in the direction of?
the price change
when something is price elastic, where does total revenue move in the direction of?
the quantity change
when the price is maintained above the equilibrium price (price floor) what happens to the quantity demanded and the quantity supplied?
the quantity demanded is decreased and the quantity supplied is increased compared to the equilibrium quantity
when the price is maintained below the equilibrium price (price ceiling), what happens to the quantity demanded and the quantity supplied?
the quantity demanded is increased and the quantity supplied is increased compared to the equilibrium quantity
Which factor does NOT determine the price elasticity of demand?
the slope of the supply curve
explicit costs + implicit costs =?
total opportunity costs
a reduction in price and no change in total revenue
unit price elastic
an increase in price and no change in total revenue
unit price elastic
A demand curve that is perfectly inelastic is:
vertical.