Econ Chapter 6

What are two inferior goods?

Hamburger is inferior in comparison to steak and a bus ticket from LA to NY is inferior to a plane ticket from LA to NY

What are the main sources of gold price fluctuations?

Highly inelastic supply and shifts in demand

If you compute the price elasticity of demand using a quantity of tickets from 1 to 8 and using a quantity of tickets from 1,000 to 8,000, the value of the price elasticity of demand is

the same because the percentage change in quantity will remain the same.

What is the term that indicates the total amount the seller receives from the sale of a product in a particular time period?

Total Revenue

The % change in quantity demanded divided by the % change in income is the formula for the

income elasticity of demand

A firm charges different groups of customers different prices in order to

increase revenue and profit. Lower afternoon movie prices are an example of this type of pricing.

Walnuts and screwdrivers would be classified as what type of goods?

independent

When two goods are unrelated, they are called _____ goods

independent

A decrease in price will lead to a decrease in total revenue if demand is

inelastic

The price elasticity of demand for most farm products is relatively price ____.

inelastic

When demand is relatively price ______, the coefficient for the price elasticity of demand will be less than one

inelastic

An _______ good has a negative income elasticity coefficient

inferior

When demand is unit elastic, the % change in quantity demanded ______ the % change in price

is equal to

Substitutability

is the ease of switching from one good to another

The ______ the negative cross elasticity coefficient, the greater is the complementary relationship between the two goods

larger

The % change in quantity demanded of good X divided by the % change in the price of product Y is known as the:

Cross elasticity of Demand

What type of price elasticity of demand results from a relatively small % change in quantity demanded by a relatively larger % change in price?

Inelastic

According to McConnell, which of the following are viable arguments in favor of legalizing illegal drugs?

Legalization would reduce drug trafficking, Drugs should be treated like alcohol and regulated for purity, the current war on drugs has been unsuccessful

What goods would likely be affected the most by falling incomes during a recession?

Movie tickets, Flat screen TVs, cruise vacations

Luxuries vs _____ is one of the determinants of the price elasticity of demand

Necessitites

What is the term for a good that, as income rises, more of it is demanded?

Normal good

Which of the following reasons explain the high prices of antiques?

Relatively inelastic supply, strong demand, limited supply

What are viable arguments against the legalization of illegal drugs?

Removal of prohibitions will make drug use more socially acceptable, and overall demand for cocaine and heroin is more elastic than proponents think.

How many products (goods and services) are considered when referring to the cross elasticity of demand formula?

Two

The midpoint formula for calculating elasticity ____ the two prices and the two quantities

averages

Digital cameras and memory sticks are what type of goods?

complementary

As you move from higher to lower prices, the price elasticity of demand

declines

The income elasticity of demand measures the responsiveness of demand to a change in

earnings

If the quantity supplied by producers is relatively responsive to price changes, supply is relatively price _____

elastic

Restaurant meals, filet mignon, and cadillacs are all examples of goods that have relatively price _____ demand

elastic

Supply is _______ if the price elasticity coefficient of supply is greater than 1.

elastic

The ______ formula is used for calculating the price elasticity of demand

midpoint

The change in quantity, divided by the average quantity one and quantity two, divided by the change in price divided by the average of price one and price two is known as the ________ formula or approach for the price elasticity of demand.

midpoint

With substitute goods, an increase in the price of one good will cause consumers to buy ________ of the other good

more

Total revenue is calculated by ______ the product price by the quantity sold

multiplying

Research has found that an increase in the price of beer would reduce the amount of marijuana consumed. This research indicates that the cross elasticity of the two products is

negative so that beer and marijuana are complements

A ______ good is one that is demanded more as income rises

normal

When the price elasticity of demand is ______ ______, a change in prices causes no change in the quantity demanded.

perfectly inelastic

If two goods are substitutes, the cross elasticity of demand will be

positive

The ______ _______ of demand measures the responsiveness or sensitivity of consumers to a price change.

price elasticity

In the market period, the _____ curve is vertical

supply

The % change in quantity supplied divided by the % change in price measures the price elasticity of ______

supply

The proportion of income allocated to a particular good or service is a determinant of

the price elasticity of demand

The passage of _________ involved in making a decision is one determinant of the price elasticity of demand.

time

The price elasticity of demand and _______ revenue are inversely related

total

For all down-sloping demand curves, the price elasticity of demand is more elastic

toward the upper left

Total revenue will rise

when the price falls on a good/service with an elastic price elasticity of demand