Exam 2 Homework Questions

demand for cigarettes is perfectly inelastic

Marcus says that he would smoke one pack of cigarettes per day regardless of the price, if he is telling the truth Marcus's

cause a labor surplus, cause unemployment, have the greatest impact in the market for teenage labor

a binding minimum wage tends to

the greater the availability of close substitutes

a good will have a more elastic demand

the broader the definition of the market

a good will have a more inelastic demand

broader the definition of the market

a good will have a more inelastic demand, the

elasticity

a measure of how much buyers and sellers respond to changes in market conditions

supply of labor, that is, unemployment

a minimum wage that is set above a markets equilibrium wage will result in an excess

inelastic

a person that takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

below the equilibrium price, causing a shortage

a price ceiling is binding when it is set

above the equilibrium price, causing a surplus

a price floor is binding when it is set

binding price floor is imposed on a market

a surplus results when

is more inelastic

a tax burden falls more heavily on the side of the market that

perfectly inelastic supply

an increase in price leaves the quantity supplied unchanged

price ceilings and price floors that are binding

cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price

% change in quantity demanded of good 1/ % change in the price of good 2

cross-price elasticity of demand equation

elastic demand

demand curve is more horizontal

reduces the price and reduces the quantity sold

drug education reduces the demand for drugs which

raises the price and reduces the quantity sold

drug interdiction reduces the supply of drugs which

tends to be elastic

for a good that is a luxury, demand

demand tends to be inelastic

for a good that is a necessity

Tommy Hilfiger jeans

for which of the following goods would demand be most elastic

more elastic demands

goods with many close substitutes tend to have

there will be no effect on the market price or quantity sold

if a price floor is not binding, then

sellers will bear most of the burden of the tax

if a tax is imposed on a market with inelastic supply and elastic demand, then

infinity, and the supply curve is horizontal

if sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

the demand for the good must be unit elastic

if the change in the price of a good results in no change in total revenue, then

decrease by less than $500

if the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would

elastic, and the demand curve is something other than a straight, downward sloping line

if the price elasticity of demand is 1.5 regardless of which two points on the demand curve are used to compute elasticity, then demand is

immediately after the price increase

if the price of milk rises, when is the price elasticity likely to be the lowest

one year after the price increase

if the price of natural gas rises, when is the price elasticity of demand likely to be the highest

a decrease in price of 2% causes an increase in quantity demanded of 0%

in which of these instances is demand said to be perfectly inelastic?

% change in quantity demanded/ % change in income

income elasticity of demand equation

the tax incidence

is the manner in which the burden of a tax is shared among participants in a market

% change in quantity demanded/% change in price

price elasticity of demand equation

% change in quantity supplied/ % change in price

price elasticity of supply equation

demand is more inelastic than the supply

suppose that a tax is placed on books, if the buyers pay a majority of the tax then we know that the

reduce the number of acres on which they plant corn

suppose that corn farmers want to increase their total revenue, knowing that the demand for corn is inelastic corn farmers should

the number of firms selling laptops computers decreases

suppose the government has imposed a price ceiling on laptop computers, which event could transform the price ceiling from one that is not binding into one that is binding?

other flavors of ice cream are good substitutes for this particular flavor

the demand for Neapolitan ice cream is likely quite elastic because

when the demand curve is elastic

the extra revenue from selling at a higher price is less than the lost revenue from selling fewer units

greater the responsiveness of quantity demanded to a change in price

the greater the price elasticity of demand, the

quantity demanded responds to a change in price

the price elasticity of demand measures how much

inelastic in the short run and elastic in the long run

the supply of oil is likely to be

the good is a luxury as opposed to a necessity

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

the demand for motor oil would tend to be inelastic

there are very few if any good substitutes for motor oil therefore

when the demand curve is inelastic

there extra revenue from selling at a higher price is greater than the lost revenue from selling fewer units

causes quantity supplied to exceed quantity demanded

to say that a price floor is binding is to say that the price floor

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

when consumers face rising gasoline prices they typically

an increase in total revenue

when demand is elastic, a decrease in price will cause

an increase in total revenue

when demand is inelastic, an increase in price will cause

magnitude of the effect on the market

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

the preferences of the buyer

whether a good is a luxury or necessity depends on

salt, toothpaste, cookies

which of the following is likely to have the most price inelastic demand?

the steepness or flatness of the supply curve for the good

which of the following is not a determinant of the price elasticity of demand for a good