Micro

A price ceiling is

A legal maximum on the price at which a good can be sold

A good in the presence of many close substitutes is predicted to have relatively ____ demand, since consumers can easily purchase one of the close substitutes if the price of the good were to increase

Elastic

The price elasticity of demand of a good depends in part on its relative necessity in comparison to other goods. Assume the following goods all have approximately the same price. Which good has the least elasticity?

Insulin for people with diabetes

All else equal, the demand for natural gas will tend to be ______ elastic in the short run than in the long run.

Less

If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

Lower equilibrium= $70, 20units Higher price floor equilibrium= $110, 10 units ($110-$70)x10= $400 Answer: $600

Compared to the short run demand for oil, the demand for oil in the long run will tend to be ______ elastic

More

Rent control requires that landlords set apartment prices below the equilibrium price level. An immediate effect is an apartment rental shortage (excess demand for apartments), because at the regulated price the quantity of apartments demanded is greater than the quantity supplied. When landlords are prevented by cities from charging market rents, which of the following listed outcomes are common in the long run?

No price methods of rationing emerge The quality of rental housing units falls

The price elasticity of demand for a good also depends on how the good is defined

Produce- In between Food- Least elastic Strawberries- Most elastic

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

may increase, decrease, or remain unchanged.

The federal government uses the revenue from the FICA (Federal Insurance Contribution Act) tax to pay for

Social Security and Medicare

The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the hood successfully lobby Congress to impose a price flood $2 above the equilibrium price in this market. How many units of the good are purchased after the imposition of the price floor?

To find this, find where the quantity denanded and quantity supplied are the same. The price here is the equilibrium price. The number of units demanded are the number of goods purchases

A shortage results when a

binding price ceiling is imposed on a market

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both Janine and Henry experience an increase in consumer surplus.

A tax on the buyers of cameras encourages

buyers to demand a smaller quantity at every price

A survey taken by residents from the imaginary town of Cardsburgh tells economists that the following changes result from a 17% rise in income: •a 30% increase in the quantity of clubs demanded •A 13% decrease in the quantity of hearts demanded •a 12% increase in the quantity of cheques demanded Which of the following is likely to be classified as a luxury good?

clubs- income elasticity of demand: .30/.17= 1.76 normal or inferior good: normal as it is positive hearts- income elasticity of demand: -.13/.17= -.76 normal or inferior good: inferior as it is negative cheques- income elasticity of demand: .12/.17= .71 normal or inferior good: normal as it is positive Clubs is likely to be the luxury good, because the elasticity is above 1

A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve

downward by exactly $1.50

Run of the Mills provides your market girl with the following data: when the price of guppy gumdrops increases by 10%, the quantity of flopcicles sold increases by 11% and the quantity of mookies decreases by 5%. If they are looking for 2 products consumers will most likely consume together, which should they pick?

flopsicles- crossprice elasticity of demand: .11/.10 = 1.10 complement or substitute: substitute as it is positive reconnect marketing with guppy gumdrops: no mookies- cross price elasticity of demand: -0.05/.10= -.5 complement or substitute: complement as it is negative recommended marketing with guppy gumdrops: yes

The price elasticity of demand of a good depends in part on its relative necessity in comparison to other goods. Assume the following foods have approximately the same price. Which of the goods has the most elastic demand?

gold jewelry

A good with no close substitutes is predicted to have relatively _______ demand, since consumers cannot easily switch to a substitute good if the price of the good were to increase

inelastic

If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is ______ elastic in the short run than in the long run

less

Which of the following is not a rationing mechanism used by landlords in cities with rent control?

price

The imposition of a binding price ceiling on a market causes

quantity demanded to be greater than quantity supplied.

Moving production from a high cost producer to a low cost producer will

raise total surplus

A supply curve can be used to measure producer surplus because it reflects

sellers' costs

producer surplus is

the amount a seller is paid minus the cost of production

In the market for apartments, rent control causes the quantity supplied

to fall and quantity demanded to rise.