Economics ch. 4
If the price of jelly goes up by 10 percent, we observe a decrease in the quantity demanded of peanut butter of 20 percent. The cross-price elasticity of these goods is:
-2
If the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. The price elasticity of demand is:
-5.
Suppose that when the price of coffee beans goes from $1 to $1.20 per pound, production increases from 90 million pounds of coffee beans per year to 100 million pounds. Using the mid-point method, the percentage change in quantity supplied would be:
11 percent.
Suppose that when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples per year to 2,000 pineapples. Using the mid-point method, the percentage change in price would be:
50 percent.
A good is inelastic if:
A. total revenue decreases as a result of a price increase. B. the quantity effect outweighs the price effect of a price increase. C. the measured elasticity is greater than 1. D. None of these is true. ANSWER-D
A cup of coffee is ______________ than dinner out at a fancy restaurant because _________________.
less price elastic; it is a smaller portion of one's income
A good that has an income elasticity of 2.3 is:
a luxury good.
A good that has an income elasticity of 0.4 is:
a normal good.
If a good has a highly elastic demand, then:
a small percentage change in price will cause a large percentage change in quantity demanded.
When two goods are substitutes, we expect their cross-price elasticity of demand to:
be positive.
Shoes are ___________________ than sneakers because __________________.
less price elastic; the scope of the market is more broadly defined
A determinant of the price elasticity of supply that is also a determinant of the price elasticity of demand is:
adjustment time.
Income elasticity will be positive for:
all normal goods.
Assuming elasticity is reported in absolute value, a measured price elasticity of demand of 0.4 would indicate:
an inelastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price.
Some determinants of the price elasticity of supply are:
availability of inputs, adjustment time.
Elasticity is a measure of
how much consumers and producers will respond to a change in market conditions.
Income elasticity of demand describes:
how much the quantity demanded changes in response to a change in consumers' incomes.
If supply and demand analysis is a measure of how, then elasticity is a measure of:
how much.
When a large percentage change in price leads to a smaller percentage change in demand in a given market, we define this result as:
less elastic demand.
A tavern is likely to have a ______________________ price elasticity of supply than an antiques dealer due to ______________________.
more elastic; availability of inputs
Assuming elasticity is reported in absolute value, an inelastic demand has a measured elasticity:
of less than one.
A good whose demand is unitary elastic refers to:
one in which the absolute value of the percentage change in the quantity demanded exactly equals the absolute value of the corresponding percentage change in price.
The percentage change in the quantity demanded of a good or service when its price changes by one percent is:
price elasticity of demand.
The size of the percentage change in the quantity supplied of a good or service when its price changes is called by one percent is called:
price elasticity of supply.
Economists use the percentage change in quantity rather than the absolute change in quantity because:
the measured elasticity is the same regardless of the unit of measurement for quantity.
The price elasticity of supply tells us:
the percentage change in quantity supplied as we change the price of the good by one percent.
Price elasticity of demand describes:
the size of the percentage change in the quantity demanded of a good or service when its price changes by one percent.
If a manager were to multiply the quantity sold by the price paid for each unit, he would calculate:
total revenue.
A box of corn flakes cereal is likely to be:
very price elastic, since there are many close substitutes available.
Demand tends to be more elastic:
when price is high and more inelastic when price is low.