mirco test

Refer to Figure 4-18. At what price would there be an excess demand of 200 units of the good?

$20

Figure 5-20 When supply curve is most likely relevant over a long period of time

$3, Horizontal

Holding all other factors constant, if the price elasticity of supply of a beer producer is 16.7 and the price increased by 91%. Then, what would be the percentage change in the quantity supplied? (note: if the quantity supplied increases then input the number as positive, if it decreases then input the number a negative).

1,519.70

Figure 5-1 Between A and B price elasticity of demand is equal to

1.5

Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about

2.33, and Jim regards tickets to sporting events as normal goods.

Assume that you studied the market for heroin and you find that the demand for heroin is perfectly inelastic. Consumers will always buy 458 kilos of heroin. Then you estimate that the supply for heroin is QS of Heroin = 13.4 P + 66.2 What is the market equilibrium price of Heroin?

29.24 ± 5%

Assume that after a lot of work you have estimated the demand and supply of Vodka. The demand for Vodka is the following: QD of Vodka = - 9.6 P + 126.7 The supply of Vodka is the following: QS of Vodka = 11.2 P + 13.4 What is the market equilibrium price of Vodka?

5.45 ± 5%

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

9% in the short run and 21% in the long run

Assume the you have the following market demand and supply equations: QD = - 57.7 P + 162.1 QS = 84 P + 6 What is the market equilibrium quantity?

98.54 ± 5%

Which would cause a movement along supply curve for cupcakes

A decrease in price of cupcakes

Demand curve to shift from C to A in market for tennis balls in the US

A decrease in the number of people in US under the age 70.

Butter and toast are compliments, an increase in demand for toast

A decrease in the price of butter

The current price of blue jeans is $30 per pair, but the equilibrium price is $25 per pair, as a result

All of the above are correct

Figure 4-7 movement from Db to Da caused by

An increase in the price of a compliment

Consumers purchase muffins to eat while they drink their lattes at local coffee shops, what would happen to the equilibrium price and quantity of lattes if the price of muffins rises

Both equilibrium price and quantity would decrease

Figure 5-3 demand curve representing the demand for a luxury good with several close substitutes is

C

Saddle shoes are not popular right now, so very few are being produced. If they become popular then how will affect the market

Demand curve will shift right and create a shortage at current price. Price will increase and will decrease quantity demanded and increase quantity supplied. Equilibrium will be higher price and quantity.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

Demand for Snickers decreases, and supply of Snickers increases.

Which of the following events must result in a higher price in the market for cigars?

Demand for cigars increases, and supply of cigars decreases.

Demand for a good increases and at the same time supply of the good decreases; market good?

Equilibrium price would increase but the impact on equal would be ambiguous

our younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Lower the price to increase total revenue.

The price elasticity of demanded measures the

Magnitude of the response in quantity demanded to a change in price

Suppose good X has a positive income elasticity of demand. This implies good X could be

Normal, Necessity, or a Luxury

Which pair of goods is the cross-price elasticity most likely to be negative

Peanut butter & Jelly

Figure 4-26 Illustrate the effect in the market for fences of a decrease in the price of wood

Point A to B

Go green advertising encouraging people to use cloth napkins instead of paper napkins

Point C to B

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?

Price would fall, and the effect on quantity would be ambiguous.

The price elasticity of demand measures

Quantity demanded responds to a charge in price

Figure 4-25 all else equal sellers expecting the price of paper to decrease next month when many college students leave campuses for the semester would cause a move from

Sa to Sb

A decrease in the number of sellers in the market causes

The supply curve shift to the left

Vertical demand curve the slope is

Undefined and the price elasticity of demand is equal to 0

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income elasticity of demand for Ramen noodles, yours would

be negative and your roommate's would be positive.

Suppose you make jewelry. If the price of gold falls, then we would expect you to

be willing and able to produce more jewelry than before at each possible price.

A good will have a more inelastic demand, the

broader the definition of the market.

The midpoint method for calculating elasticities is convenient in that it allows us to

calculate the same value for the elasticity, regardless of whether the price increases or decreases.

In the long run, the quantity supplied of most goods

can respond substantially to a change in price.

Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would

decrease

If the demand for textbooks is inelastic, then a decrease in the price of textbooks will

decrease total revenue of textbook sellers.

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a bakery. The first step you would take would be to

determine the price elasticity of demand for the bakery's products.

At the equilibrium price, the quantity of the good that buyers are willing and able to buy

exactly equals the quantity that sellers are willing and able to sell.

Equilibrium quantity must increase when demand

increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase.

You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter

increases today.

For which pairs of goods is the cross-price elasticity most likely to be negative?

peanut butter and jelly

Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is

positive, and dog biscuits are a normal good.

The law of supply states that, other things equal, an increase in

price causes quantity supplied to increase

A decrease in quantity supplied

results in a movement downward and to the left along a fixed supply curve.

Refer to Figure 4-18. At a price of $15, there would be a

shortage of 400 units.

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are

substitutes, and have a cross-price elasticity of 1.67.

If the cross-price elasticity of two goods is positive, then the two goods are

substitutes.

A key determinant of the price elasticity of supply is

the ability of sellers to change the amount of the good they produce.

Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

the equilibrium price increases, and the equilibrium quantity is unchanged.

The price elasticity of supply measures how much

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

Key determinant of the price of elasticity of demand is the

time horizon