Exam 2 Homework Questions
demand for cigarettes is perfectly inelastic
Marcus says that he would smoke one pack of cigarettes per day regardless of the price, if he is telling the truth Marcus's
cause a labor surplus, cause unemployment, have the greatest impact in the market for teenage labor
a binding minimum wage tends to
the greater the availability of close substitutes
a good will have a more elastic demand
the broader the definition of the market
a good will have a more inelastic demand
broader the definition of the market
a good will have a more inelastic demand, the
elasticity
a measure of how much buyers and sellers respond to changes in market conditions
supply of labor, that is, unemployment
a minimum wage that is set above a markets equilibrium wage will result in an excess
inelastic
a person that takes a prescription drug to control high cholesterol most likely has a demand for that drug that is
below the equilibrium price, causing a shortage
a price ceiling is binding when it is set
above the equilibrium price, causing a surplus
a price floor is binding when it is set
binding price floor is imposed on a market
a surplus results when
is more inelastic
a tax burden falls more heavily on the side of the market that
perfectly inelastic supply
an increase in price leaves the quantity supplied unchanged
price ceilings and price floors that are binding
cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price
% change in quantity demanded of good 1/ % change in the price of good 2
cross-price elasticity of demand equation
elastic demand
demand curve is more horizontal
reduces the price and reduces the quantity sold
drug education reduces the demand for drugs which
raises the price and reduces the quantity sold
drug interdiction reduces the supply of drugs which
tends to be elastic
for a good that is a luxury, demand
demand tends to be inelastic
for a good that is a necessity
Tommy Hilfiger jeans
for which of the following goods would demand be most elastic
more elastic demands
goods with many close substitutes tend to have
there will be no effect on the market price or quantity sold
if a price floor is not binding, then
sellers will bear most of the burden of the tax
if a tax is imposed on a market with inelastic supply and elastic demand, then
infinity, and the supply curve is horizontal
if sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches
the demand for the good must be unit elastic
if the change in the price of a good results in no change in total revenue, then
decrease by less than $500
if the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would
elastic, and the demand curve is something other than a straight, downward sloping line
if the price elasticity of demand is 1.5 regardless of which two points on the demand curve are used to compute elasticity, then demand is
immediately after the price increase
if the price of milk rises, when is the price elasticity likely to be the lowest
one year after the price increase
if the price of natural gas rises, when is the price elasticity of demand likely to be the highest
a decrease in price of 2% causes an increase in quantity demanded of 0%
in which of these instances is demand said to be perfectly inelastic?
% change in quantity demanded/ % change in income
income elasticity of demand equation
the tax incidence
is the manner in which the burden of a tax is shared among participants in a market
% change in quantity demanded/% change in price
price elasticity of demand equation
% change in quantity supplied/ % change in price
price elasticity of supply equation
demand is more inelastic than the supply
suppose that a tax is placed on books, if the buyers pay a majority of the tax then we know that the
reduce the number of acres on which they plant corn
suppose that corn farmers want to increase their total revenue, knowing that the demand for corn is inelastic corn farmers should
the number of firms selling laptops computers decreases
suppose the government has imposed a price ceiling on laptop computers, which event could transform the price ceiling from one that is not binding into one that is binding?
other flavors of ice cream are good substitutes for this particular flavor
the demand for Neapolitan ice cream is likely quite elastic because
when the demand curve is elastic
the extra revenue from selling at a higher price is less than the lost revenue from selling fewer units
greater the responsiveness of quantity demanded to a change in price
the greater the price elasticity of demand, the
quantity demanded responds to a change in price
the price elasticity of demand measures how much
inelastic in the short run and elastic in the long run
the supply of oil is likely to be
the good is a luxury as opposed to a necessity
the value of the price elasticity of demand for a good will be relatively large when
the demand for motor oil would tend to be inelastic
there are very few if any good substitutes for motor oil therefore
when the demand curve is inelastic
there extra revenue from selling at a higher price is greater than the lost revenue from selling fewer units
causes quantity supplied to exceed quantity demanded
to say that a price floor is binding is to say that the price floor
reduce their quantity demanded more in the long run than in the short run
when consumers face rising gasoline prices they typically
an increase in total revenue
when demand is elastic, a decrease in price will cause
an increase in total revenue
when demand is inelastic, an increase in price will cause
magnitude of the effect on the market
when studying how some event or policy affects a market, elasticity provides information on the
the preferences of the buyer
whether a good is a luxury or necessity depends on
salt, toothpaste, cookies
which of the following is likely to have the most price inelastic demand?
the steepness or flatness of the supply curve for the good
which of the following is not a determinant of the price elasticity of demand for a good