Economics - Test 1

If the percent rise in price is smaller than the percent decline in quantity, then a price _____ will lead to _____ in your total revenue.

increase; a decline

When buyers are not very responsive to price changes, economists describe their demand as _____.

inelastic

Supply is elastic if the price elasticity of supply is:

larger than 1

Easy entry into and exit from a market makes the supply _____.

more elastic

If you rearrange the formula for price elasticity of demand mathematically (in order to express the equation in terms of another variable), the percent change in quantity demanded is equal to:

prices elasticity of demand * percent change in price

The price elasticity of demand measures by what percent the _____ will change following a 1% price increase.

quantity demanded

The quantity of parking permits demanded drops from 12,774 down to 7,265; use the midpoint formula to calculate the percentage change in quantity.

-55%

If the price of windmills rises by 20%, and the quantity supplied rises by 2%, what is the price elasticity of supply of windmills?

0.1

If cutting the price of automobiles by 20% leads to an increase in the quantity demanded by 5%, what is the absolute value of the price elasticity of demand for automobiles?

0.25

When the government increased the minimum wage by 50%, it led to a 75% increase in workers providing labor. Based on the information given, what is the price elasticity of supply for labor?

1.50

On weeknights an Uber driver can expect to earn $110 driving a six-hour shift. Surge pricing on Saturday nights mean that Uber drivers can expect to earn $140 driving a six-hour shift. On weeknights, there are 200 drivers on the road, which rises to 300 on Saturdays. Calculate the price elasticity of supply of Uber drivers using the midpoint formula.

1.67

If increasing the price of watches by 6% leads to a decrease in the quantity demanded by 15%, what is the absolute value of the price elasticity of demand for watches?

2.5

If the quantity changed from Q1 to Q2, using the midpoint formula, what is the percentage change in quantity?

= ((Q2 − Q1) ÷ (Q2 + Q1)/2) × 100

If the price of eggs were to rise by 15%, and if the price elasticity of demand for eggs is around −0.2, will the quantity demanded for eggs increase or decrease, and by what percent?

decrease by 3%

Whenever two demand curves pass through the same point, the _____ demand curve is the _____ elastic demand curve.

flatter; more

As a manager, you will want to use the price elasticity of demand for your product to:

forecast the likely consequences of any change in price

When the percent change in price is _____ than the percent change in quantity demanded, demand is _____.

smaller; elastic

The cross-price elasticity of demand measures all of the following EXCEPT:

the ratio of the percent change in the price of another good to the percent change in quantity demanded.

What does the shaded area in the graph below represent?

total revenue