Chapter 5 ECO (Elastic & Inelastic)

(Figure: Interpreting Elasticity of Supply) How would you describe supply as shown in the graph?

perfectly elastic

A tax in which the percentage of income tax rises as income falls is known as a:

regressive tax.

Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on waste disposal. The deadweight loss associated with the production of toxic waste disposal will be:

relatively large.

If price increases by 100% and quantity demanded decreases by 50%, then the price elasticity of demand will equal _____.

0.5

If a product's price rises by 6% and its quantity demanded falls by 8%, then its elasticity is equal to:

1.33.

The price of gold increases by 200%. If the price elasticity of demand for gold is 0.4, what will happen in the market?

Gold sales will decrease by 80%.

If a store sells a good that has a unitary elastic demand, what would be the net result on their total revenue from an increase in price?

There would be no change in total revenue.

If demand is inelastic, the tax burden falls primarily on the _____ and deadweight loss is _____.

buyer; small

If the price of a product falls by 15% and the quantity supplied falls by 25%, we can say that the elasticity of supply is:

elastic

Alvaro pays $40 in tax on a $120 item. Nurul pays $80 in tax on a $240 item. We can conclude that this tax is a:

flat tax.

Home heating gas tends to have _____ demand because _____.

inelastic; people do not have time to adjust their consumption patterns

In which period can firms decide to leave an industry?

long run

In general, the flatter the supply curve is, the:

more elastic is supply.

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n):

substitute for good B.

When moving down along a straight-line demand curve:

the elasticity of demand changes from elastic to inelastic.

The primary determinant of the elasticity of supply is:

time.

If a firm sells a product that has a perfectly inelastic demand curve, then, if price doubles, it can be expected that:

total revenue will double.

A gas station owner in a large city learned in his microeconomics class that buyers are relatively unresponsive to changes in the price of gasoline. If, based on that assumption, he increases the price of gas at his station:

total revenue will increase.