Econ 202 Test #2

If we know that when price increases by 5%, quantity demanded falls by 30%, then we know the demand for this good is

Elastic, and has price elasticity equal to 6

Based on the information and calculation in question 8, for Sami, tacos are a normal good.

False

if one cannot live without morning coffee then this person demand is

perfectly inelastic

many movie theaters and restaurants offer discounted prices to senior citizens. According to Economic principles, the best explanation for this is that senior citizens tend to be

price elastic

When Sami makes $100 a week she buys 10 tacos, and when she makes $300 a week she buys 6 Based on this (and using the midpoint method) we know that her income elasticity is

-0.5

which of the following income elasticities would indicate a good that could be considered inferior?

-1.38 (inferior goods are negative)

Which value for price elasticity of supply would be most likely in the case where the company is running out of resources to produce this good

.15

At a price of $10 per pony, Dan is willing to offer 6 pony rides a week. When the price increases to $20 each, he is willing to offer 10 rides per week. what is dans elasticity of supply?

.75

Which of the following income elasticities would indicate a good that could be considered a necessity?

0.35

Suppose that the price (per jar) of Jif peanut butter increases from $4 to $6, and the quantity demanded of Jif falls from 400 to 240. The price of Skippy peanut butter remained the same, but the demand for Skippy increases from 200 to 280. Based of: on the information above, we can conclude that Jif and Skippy have a cross-price elasticity

0.83

Price of good Y increases from $2 to $3 and Q demanded of good Y falls from 60 to 40. As price of Y changed, price of good X stayed the same, but the demand for good X increases from 20 to 40. What is the price elasticity of demand for good Y

1.0

Suppose that the price (per jar) of Jif peanut butter increases from $4 to $6, and the quantity demanded of Jif falls from 400 to 240. The price of Skippy peanut butter remained the same, but the demand for Skippy increases from 200 to 280. Based Jif is: on the information above, the price elasticity of demand (using the midpoint formula) for

1.25

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price must have increased by:

2.0%

when the price of tacos decreases by 4% your quantity demanded of tacos increases y 10%. Based on this info, your price elasticity of demand for tacos would be _____, and would be characterized as _________.

2.5, elastic

Which of the following income elasticities would indicate a good that could be considered a luxury good

3.09

If the price elasticity of demand for a good is 0.5, then a 10 percent increase in the price results in a:

5 percent decrease in quantity demanded

Spencer will only drink Coca-Cola, while Aria will drink either Coca-Cola or Pepsi without really noticing the difference. Based on this information, we know that:

Aria's demand for Coca-Cola is more elastic than Spencer's

Whichofthefollowinggoodsislikelytohavethesmallestvalueforelasticityofsupply?

Beachfront property

Based on our discussion in class, according to economic theory the best way to decrease the amount of drug related crime in an area would be to:

Decrease the demand for drugs

Which of the following would lead to the case where the sellers of a good feel more of the incidence from a sales tax (bear the larger share of the burden)?

Demand for the good is elastic and supply is inelastic

In Economics, elasticity is generally considered a measure of

How strongly buyers and sellers will respond to changes in market conditions

Suppose a firm is able to separate customers into two groups. One having inelastic demand and one having elastic demand. If the firm's objective is to increase total revenue, they should:

Increase the price charged to customers with inelastic demand and decrease the price charged to customers with elastic demand

Holding other things constant, the demand for a good tends to be more elastic, the

More the good is considered a luxury

Suppose the government decides to place a large per-unit sales tax on a good that they would like people to consumer less of, such as cigarettes. These kinds of goods typically have demand that is highly price inelastic. In these cases, the tax will be likely to:

Raise a large amount of tax revenue, as people will mostly still consume the good

Consider a market that is in equilibrium and that has demand that is highly price inelastic. Based on this information, an increase in the supply should cause a larger change in:

The equilibrium price

15

d

I am interested in the relationship between two goods, so during my free time I collect some data and compute a cross-price elasticity of demand of -2.0. Based on this, I can say that

The two goods are complements

T or F - if demand for a certain good is highly inelastic, and supply of the good is relatively elastic, then the burden of a tax on this good will fall almost entirely on the buyers in the market

True

What makes a buyer price inelastic

a good that is considered a necessity

Supply in a market is highly price elastic, and the market is initially in equilibrium. If demand in tis market decreases, what outcomes should we expect?

both price and quantity will decrease, but the decrease in Q will be the greater change

Price of good Y increases from $2 to $3 and Q demanded of good Y falls from 60 to 40. As price of Y changed, price of good X stayed the same, but the demand for good X increases from 20 to 40. Are the substitutes or compliments and what is the cross-price elasticity?

subs & 1.67

which of the following is the single biggest determinant in how sensitive sellers in a market will be to a price change?

the ability to adjust the level of production

the optimal policy to reduce drug-related crime is to find a way to decrease demand in the market. This theory is primarily based on what two facts about this market?

the demand for illegal drugs is inelastic and the amount of crime increases as the price of drugs increases