Chapter 5

In the short run, both the supply and demand for oil are relatively inelastic

true

The demand for Godiva mint chocolates is likely quite elastic because

-there are many close substitutes -this particular type of chocolate is viewed as a luxury by many chocolate lovers -the market is narrowly defined

When studying how some event or policy affects a market, elasticity provides information on the

direction and magnitude of the effect

According to data collected by economists from market outcomes, eggs have a price elasticity of demand of 0.1 which means eggs are elastic

false

If the cross-price elasticity of demand for two goods is negative, then the two goods are substitutes

false

In general, demand curves for necessities tend to be price elastic

false

Demand is elastic if the price elasticity of demand is

greater than 1

Goods with many close substitutes tend to have

more elastic demands

If the price elasticity of demand for Mountain Dew is 4.4 then

mountain dew has a high price elasticity of demand

The price elasticity of demand measures how much

quantity demanded responds to a change in price

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

reduce the number of acres they plant to decrease their output

When consumers face rising gasoline prices, they typically

reduce their quantity demanded more in the long run than in the short run.

For a good that is a luxury, demand

tends to be elastic

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

the availability of close substitutes in determining the price elasticity of demand

The value of the price elasticity of demand for a good will be relatively large when

the good is a luxury rather than a necessity

Demand is said to be inelastic if

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

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes

true

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes

true

If the price of gasoline rises by 10% and new car sales fall by 5%, this indicates that these 2 goods are complementary

true

The income elasticity of demand for a good is negative, then the good must be an inferior good

true