Exam #2 (Chapter 5)

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If the elasticity of supply of a product is 2.5, we know that supply is inelastic

False

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price would result in a 4.0 decrease in the quantity demanded

False

When a supply curve is relatively flat, the supply is relatively elastic

true

A good will have a more inelastic demand the greater the availability of close substitutes

False

Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because it must be eaten quickly

False

Demand is elastic if elasticity is less than 1

False

Demand is said to be elastic if the price of the good responds substantially to changes in demand

False

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to change in price, the demand curve will be steeper.

False

For a horizontal demand curve, slope is undefined and elasticity equal 0.

False

If sellers do not respond at all to a change in price, technological advancement must be great

False

If the elasticity of supply is zero, then supply is very elastic

False

If the quantity supplied is the same regardless of price, then the supply curve would be elastic

False

If the quantity supplied responds only slightly to changes in price, then supply is said to be elastic

False

In general, elasticity is the friction that develops between buyers and sellers in a market.

False

The elasticity of a perfectly elastic supply cure equals 0.

False

The greater the price elasticity of demand the more likely the product is a necessity

False

The price elasticity of supply measures how much the quantity supplied responds to changes in input prices

False

When quantity demanded responds only slightly to changes in price, demand is said to be unit elastic

False

A decrease in supply will cause the larges increase in price when both supply and demand are inelastic

True

Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth, Alice's demand for banana splits is perfectly inelastic

True

As elasticity rises, the supply curve gets flatter

True

As the elasticity of supply approaches infinity, very small changes in price will lead to very large changes in quantity supplied

True

Concerning a vertical supply curve, suppliers will not respond to a change in price

True

Demand for a good would tend to be more inelastic the fewer the available substitutes

True

Demand is inelastic if elasticity is less than 1

True

Demand is said to be unit elastic if quantity demanded changes by the same percent as the price

True

Demand is unit elastic if elasticity if elasticity is less than 1

True

If two supply curves pass through the same point and one is steep and the other is flat, the steeper supply curve is more inelastic

True

The difference between slope and elasticity is that slope measures actual changes and elasticity measures percentage changes

True

The main determinant of the price elasticity of supply is time.

True

The price elasticity of demand measures a buyer's responsiveness to a change in the price of a good

True

If a 15 percent increase in price causes a 30 percent decrease in quantity demanded, this product might have no close substitute.

False

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is 1/2 and supply is elastic

False


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