Economics Chapter 5
If supply is perfectly elastic, the supply curve is:
horizontal
Luxury goods are:
income elastic
Elasticity is always _____.
independent of the units of measurement for price and quantity
Figure 5.3 shows a linear demand curve. Between points C and D, the demand is:
inelastic
Demand for a necessity, such as food, is:
both income and price inelastic.
inelastic demand/supply
change in p has relatively little effect on quantity demanded/supplied (%change in q<%change in p), lies between 0 & 1
elastic demand/supply
change in price has a relatively large effect on quantity demanded/supplied (% change in quantity >%change in price
A good that takes up a very large percentage of a consumer's budget will tend to have:
an elastic demand
Linear demand curve
constant slope demand becomes less elastic as we move down the curve.
perfectly elastic demand/supply curve
consumers demand all that is offered at said price, but anything above it will not be demanded. (horizontal line, and price raise of demand and price lowering of supply would make quantity 0)elasticity=infinity
If city officials expect that an increase in bus fares will raise mass transit revenues, they must think that the demand for bus travel is _____.
inelastic
lower half of linear demand curve
inelastic
price elasticity of demand
measures how responsive quantity demanded is to a price change (=%change in quantity/%change in price)
inferior goods
negative income elasticity
An inferior good is:
one that consumers buy less of as their income rises
normal goods
positive income elasticity
perfectly inelastic demand/supply curve
price is no object (vertical line, and change in price has no effect on quantity demanded or supplied)Elasticity=0
elasticity
responsiveness
income elasticity of demand
responsiveness of demand to change in consumer income, % change in demand / % change in income
The price elasticity of demand helps determine the effect of price changes on a firm's:
revenue
Both the income elasticity of demand and the cross-price elasticity of demand coefficients can take on negative, zero, or positive value
true
If demand is inelastic, the percentage change in price is greater than the resulting percentage change in quantity demanded.
true
Substitutes are pairs of goods that have a positive cross-price elasticity of demand.
true
The cross-price elasticity of demand is used to determine whether:
two products are substitutes or complements
mid-unit linear demand curve
unit elastic
cross-price elasticity demand
% change in the demand for one good/ % change of a price in another good
unit-elastic demand/supply
%change in price is equal to percent change in quantity
Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $20 and $40 on the supply curve S' is _____.
1
Figure 5.3 shows a linear demand curve. As you move from point A to point B along the demand curve, total revenue _____ and the demand is _____.
Increases; elastic
For which of the following goods is the value of income elasticity most likely to be negative?
Macaroni and cheese
Which of the following goods will have a higher price elasticity of demand?
a good with many substitutes
As the economy recovers from a recession, we should expect that the:
demand for inferior goods will fall and the demand for normal goods will rise
A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if _____.
demand is inelastic
A university administration's decision to raise tuition in order to increase revenue will be successful if:
demand is inelastic
upper half of linear demand curve
elastic
constant elasticity demand curve
elasticity value is unchanged
If demand is elastic, a decrease in price leads to a decrease in total revenue.
false
unit-elastic demand/supply curve
straight line, percent change in price is equal to the percent change in quantity demanded/supplied
The percentage change in the demand for film divided by the percentage change in the price of cameras indicates:
the cross-price elasticity of demand between film and cameras
If an increase in the price of peanut butter causes a decline in the demand for jelly, then:
the goods are complements
The price elasticity of demand for milk when quantity is measured in gallons will be _____ the price elasticity when quantity is measured in quarts.
the same as
Suppose the price elasticity of demand for your economics textbook is −1. If the publisher raises the price by 5 percent:
total revenue will not change
are price and quantity inversely related?
yes
does demand/supply become more elastic over time?
yes