economics unit 3

the demand for a product is unit elastic. at the price of $10, 20 units of a product are sold. if the price increased to $20, then one would expect sales to equal:

10 units

ryans auto care knows that a 5 percent increase in the price of their oil changes results in a 15 percent decrease of number of oil changes purchased. what is the elasticity of demand facing ryans auto care?

3.0

refer to the budget line shown in the diagram above. at point U, _

P1/P2= MU1/MU2

refer to the diagram above. what is the significance of the point at the top of the backward bending of the supply curve marked L3?

as wages increase over this range, the quantity of hours worked actually decreases

refer to the diagram above. which of the following statements is true

backward bending supply curves for labor are not typical in the short run

which of the following is true when demand is inelastic?

buyers are not very responsive to changes in price

how can total utility be determined

by summing up the marginal utilities of each unit consumed

which of the following medical services is likely to have the largest income elasticity of demand?

cosmetic surgery

the shorter the time considered, the more the elasticity of supply of a good tends to:

decrease

of the following factors, which is most likely to cause variation in american household spending patterns

each of the above will cause a variation

___ demand is when the quantity demanded is very responsive to the price changes

elastic

a price reduction will increase the total revenue a firm receives when demand for its product is which of the following

elastic

Taxes on goods with __________ demand curves will tend to raise less tax revenue for the government than taxes on goods with __________ demand curves.

elastic; inelastic

to graph a perfectly elastic supply curve, draw a line which is

horizontal

what does price elasticity of demand measure?

how responsive a quantity demanded is to a change in price

the term __ describes a situation where a __ causes a reduction in the buying power of income, even though actual income has not changed

income effect; higher price

the price elasticity of demand for tickets to local concerts is estimated to be at 0.78. in order to boost ticket revenues, an economist would advise:

increasing the price of game tickets because demand is inelastic

if the managers of a restaurant plan to raise drink prices to increase revenues, then they must believe that demand is

inelastic

for which of the following products is demand most likely to be perfectly inelastic

insulin

the additional utility provided by one additional unit of consumption is referred to as

marginal utility

demand in the graph above (straight up) is

perfectly inelastic

the definition of price elasticity of demand is best stated as:

price elasticity of demand is the percentage change in quantity demanded divided by the percent change in price

youre in charge of sales at a food company. company wants to earn as much revenue as possible. if the elasticity of demand for your company's product is at 0.6 would you advise the company to raise the price, lower the price, or keep it the same

raise the price

if the supply curve an essential good is perfectly inelastic, then a reduction in demand will cause the equilibrium price of that good to

rise and the equilibrium quantity to fall

if the demand curse for an essential good is perfectly inelastic, a reduction in supply will cause the equilibrium price of that good to:

rise and the equilibrium quantity to stay the same

the substitution and income effects that result from a change in the price of a good or service help to explain:

the direct relationship between income and demand

if the demand for a product were completely elastic, on whom would the burden of increased costs fall?

the manufacturer

this often occurs simultaneously with the income effect

the substitution effect

if frozen tacos and iced frozen burritos are good substitutes for consumers, then it is likely that:

their cross price elasticities are greater than zero.

under what circumstances can manufacturers of goods pass increased costs along to the consumers

when the demand for the product is inelastic