ECON 5-6
How does the concept of elasticity allow us to improve upon our understanding of supply and demand?
Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept
Which of the following statements is correct?
The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.
A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?
The number of firms in a market tends to be more variable over long periods of time than over short periods of time.
Elasticity is
a measure of how much buyers and sellers respond to changes in prices.
Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of
a necessity versus a luxury in determining the price elasticity of demand.
A surplus results when a
binding price floor is imposed on a market
A good will have a more inelastic demand, the
broader the definition of the market
The price elasticity of demand measures
buyers' responsiveness to a change in the price of a good.
Minimum-wage laws dictate
c. a minimum wage that firms may pay workers.
Price controls
can generate inequities of their own.
Whether the good is a necessity or a luxury
depends on the buyer
Which of the following is not an example of a public policy?
equilibrium laws
If the government removes a binding price ceiling from a market, then the price paid by buyers will
increase, and the quantity sold in the market will increase.
Demand is inelastic if the price elasticity of demand is
less than 1
Demand is said to be inelastic if the
quantity demanded changes proportionately less than price
The price elasticity of demand measures how much
quantity demanded responds to a change in price
When consumers face rising gasoline prices, they typically
reduce their quantity demand more in the long run than in the short run
The smaller the price elasticity of demand, the
smaller the responsiveness of quantity demanded to a change in price
When a binding price ceiling is imposed on a market to benefit buyers,
some buyers will not be able to buy any amount of the good.
A tax on sellers will shift the
supply curve upward ( left) by the amount of the tax.
For a good that is a luxury, demand
tends to be elastic
Generally, a firm is more willing and able to increase quantity supplied in response to a price change when
the relevant time period is long rather than short
Price controls are usually enacted
when policymakers believe that the market price of a good or service is unfair to buyers or sellers