Microeconomics Ch. 5

When demand is inelastic the price of elasticity of demand is

Less than 1, and price and total revenue will move in the same direction

When the price of a good is $5, the quantity demanded is 100 units per month, when P is $7, Qd is 80 per month. Price elasticity of demand is:

.67

If sellers don't adjust their quantities supplied at all in response to a change in price,

Supply is perfectly inelastic

If the price elasticity of demand for a good is 4.0, then a 10% increase in price results in a:

40% decrease in quantity demanded

If the quantity supplied responds only slightly to changes in price, then

Supply is said to be inelastic

University is thinking about increasing tuition to enhance revenue. if they feel that will increase revenue they are:

Assuming that the demand for university education is inelastic

Demand is said to be elastic if

Buyers respond substantially to changes in the price of the good

When quantity demanded responds strongly to changes in price, demand is said to be

Elastic

When small changes in price lead to infinite changes in quantity demanded, demand is perfectly

Elastic and the demand curve will be horizontal

The main reason for using the midpoint method to calculate elasticity is that it

Gives the same answer regardless of whether the price increases or decreases

Demand is elastic if elasticity is

Greater than 1

For which of the following goods is demand probably most inelastic?

Insulin

The price elasticity of demand changes as we move along a

Linear, downward-sloping demand curve

Economists compute the price of elasticity of demand as the

Percentage change in quantity demanded divided by the percentage change in price.

Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms:

Supply is more elastic at low levels of output and less elastic at high levels of output

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the U.S.:

Supply decreases, demand is unaffected and price increases.

There are very few, if any, good substitutes for motor oil. Therefore,

The demand for motor oil would tend to be inelastic

You need to increase revenue. Mayor advises you to increase the price of a round of golf, Manager advises you to reduce the price. You realize that:

The mayor thinks demand is inelastic & the manager thinks demand is elastic

Total revenue will be at its largest value on a linear demand curve at:

The midpoint of the curve

The price elasticity of supply measures how much

The quantity supplied responds to changes in the price of the good.

Which of the following statements is NOT valid when supply is perfectly elastic?

The time period under consideration is more likely short rather than long