Quiz 3

Compared to coffee, we would expect the cross elasticity of demand for:

tea to be positive; but negative for cream

The more time consumers have to adjust to a change in price:

the greater will be the price elasticity of demand

An increase in demand will increase equilibrium price to a greater extent

the less elastic the supply curve

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that

the price elasticity of demand for farm products is less than 1

Cross elasticity of demand measure how sensitive purchases of a specific product are to changes in:

the price of some other product

It takes a considerable amount of time to increase the production of pork. This implies that:

the short-run supply curve for pork is less elastic than the long-run supply curve for pork

Which of the following goods(with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?

Plasma screen and LCD TVs (+4.2)

In which of the following instances will total revenue decline?

Price rises and demand is elastic

When the percentage change in price is greater than the resulting percentage change in quantity demanded:

an increase in price will increase total revenue

For a linear demand curve

demand is elastic at high prices

If the supply of product X is perfectly elastic, an increase in the demand for it will increase:

equilibrium quantity but equilibrium price will be unchanged

Price elasticity of demand is generally

greater in the long run than in the short run

Which of the following is correct?

If demand is elastic, a decrease in price will increase total revenue

We would expect the cross elasticity of demand between dress shirts and ties to be:

negative, indicating complementary goods

a demand curve which is parallel to the horizontal axis is

perfectly elastic

We would expect the cross elasticity of demand between Pepsi and Coke to be:

positive, indicating substitute goods