Micro test 2

(Q2-Q1)/[(Q2+Q1/)/2] (P2-P1)/[(P2+P2)/2]

Mid point formula

Maximum amount that a buyer will pay for a good

Willingness to pay measures the...

analyze supply and demand with greater precision

the concept of elasticity is used to

greater the responsiveness of quantity demanded to price

the greater the price elasticity of demand the

increase the price

the local pizza restaurant makes such great bread sticks that consumers do not respond much to a change in price. if the owner is only interested in increasing revenue, he should?

consumers are to move away from the good as price rises.

the price elasticity of demand for a good measures how willing

Buyers are to a change in the price

the price elasticity of demand measures how responsive

a necessity

this is a good that is inelastic

price controls

usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers

how the allocation of resources affects economic well being

welfare economics is the study of

price

which of the following is not a determinant of the price elasticity of demand for a product

luxury

which of the following would you expect to have the highest income elasticity of demand

Percent change in quantity demanded divided by the percent change in the price

economist compute the price elasticity of demand as the

small income elasticities because consumers, regardless of their incomes, choose to buy these goods.

food and clothing tend to have

byeres tend to be much more sensitive to a change in the price when given more time to react

holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten year period because?

it first increases, then decreases

how does total revenue change as one moves down a linear demand curve

Inelastic

if a good is a necessity, demand for the good would tend to be?

below the ceiling

if a price ceiling is not binding the equilibrium price is

an inferior good

if an increase in income results in a decrease in the quantity demanded of a good, then the good is?

Price * Quantity

in any market, total revenue is what formula

OPEC raised the price of crude oil in world markets. Gov imposed price ceiling

in the 1970s long lines at gas stations in the US were primarily a result of the fact that

the quantity demanded changes as consumer income changes

income elasticity of demand measures how

Elasticity

A measure of how much buyers and sellers respond to changes in market conditions

Price ceiling

a legal maximum price at which a good can be sold is a

Price floor

a legal minimum on the price at which a good can be sold

horizontal

a perfectly elastic demand curve will be

vertical, because buyers purchase the same amount whether the price rises or falls

a perfectly inelastic demand curve will be

it is set below equilibrium price

a price ceiling will only be binding if

greater than 1

demand is elastic if elasticity is?

Less than 1

demand is inelastic if elasticity is

the quantity demanded respond substantially to the changes in the price of the good

demand is said to be elastic if

the quantity demanded changes slightly when the price of the good changes.

demand is said to be inelastic if

equal to 1

demand is unit elastic if elasticity is