Micro Econ Chap 6

Which of the following would be beneficial for electric vehicle sales in the United States? (Select all that apply.)

advances in battery technology higher gasoline prices

Because of the law of supply, we know that the price elasticity of supply is

always positive.

If the quantity supplied by producers is relatively insensitive to price changes, supply is ______.

relatively price inelastic

When a product is unitary elastic and price increases or decreases, the total revenue will ______.

remain constant

___________ revenue is calculated by multiplying the product price by the quantity sold.

Total

The price elasticity of demand for big-ticket items (e.g., refrigerators) tends to be _____ the elasticity of relatively inexpensive items.

greater than

When demand is elastic, price elasticity of demand will be

greater than one.

The price elasticity of demand tends to be high for _____ priced goods relative to income.

higher

The ______________ elasticity of demand measures the degree to which consumers respond to a change in their earnings by buying more or less of a particular good.

income

The percentage change in quantity demanded divided by the percentage change in income is the formula for the ______ elasticity of demand.

income

An increase in price will increase total revenue if the price elasticity of demand is relatively price ___________

inelastic

Suppose the price of a handbag is reduced from $100 to $90. The quantity demanded increases from 50 units to 60 units. The price elasticity of demand for handbags in this price range ______.

is elastic

How will the price elasticity of a product that has few substitutes compare with one that has many substitutes?

it will be less elastic

The inverse relationship between price and quantity demanded is called the

law of demand

When calculating the price elasticity of demand, the % change in quantity demanded is calculated as

(change in quantity)/(average quantity).

Suppose the price of a pair of premium socks falls from $2.00 to $1.90 and the quantity of the socks demanded increases from 110 to 118. Rounded, the price elasticity of demand is ______.

1.4

Suppose the price of a handbag is reduced from $100 to $90. The quantity demanded increases from 50 units to 60 units. The price elasticity of demand for handbags in this price range is _____.

1.73

Suppose the coefficient of elasticity (E) for good X is 2.5. If the price of X were to be decreased by 10 percent, we can project that sales will increase by __________ percent. (insert a number.)

25

Suppose that the price elasticity of demand (E) for good Z is 0.5. If the price of Z is increased by 8 percent, we can project that the sales of Z will fall by _______ percent

4

Digital cameras and memory sticks are what type of goods?

Complementary

When calculating the price elasticity of demand, the % change in quantity __________________ is calculated as (change in quantity)/(average quantity). (Enter one word in the blank.)

Demand

Which of the following would be considered a luxury and thus exhibit a high price elasticity of demand?

Dining out

The more a good or service is considered to be a "luxury" rather than a "necessity," the more ______ the price elasticity of demand.

Elastic

Which type of elasticity shows how responsive demand is to a change in earnings?

Income elasticity of demand

What type of demand is represented by a relatively small percentage change in quantity demanded divided by a relatively larger percentage change in price?

Inelastic

The _________ ___________ of demand measures the responsiveness of consumers' quantity demanded to a price change. (Enter one word in each blank, and be careful with your spelling.)

Price elasticity

How is total revenue calculated?

Price × Quantity

When the price elasticity of demand is relatively price inelastic, a price increase will have what effect on total revenue?

Total revenue will rise.

True or false: When the underlying determinants of demand change, the entire demand curve shifts.

True

How is a consumer's responsiveness to price changes measured?

Using the price elasticity of demand

If the demand curve for a product is shifting, then we know that

a non-price determinant is changing

Bagels and cream cheese are _______________ (complements/substitutes).

complements

The _____________-price elasticity of demand measures the sensitivity of the demand for one product to a change in the price of another product. (Insert one word in the blank.)

cross

While considering whether to lower the price of Sprite, the Coca-Cola Company would be interested in knowing the value of the _____ elasticity of demand between Sprite and Coke.

cross-price

The cross-price elasticity of demand is equal to the percentage change in the quantity demanded of one product _____ the percentage change in the price of another product.

divided by

The income elasticity of demand shows the responsiveness of demand for a good or service when an individual's ____________ changes.

earnings or income

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

earnings.

A particular brand of coffee has a lot of substitutes that are available in the market; therefore the demand for that brand of coffee is more ______.

elastic

If a 4% decline in the price of cut flowers results in an 8% increase in the quantity demanded, the price elasticity of demand for cut flowers is

elastic

When demand is unitary elastic, the percentage change in quantity demanded is _____ the percentage change in price

equal to

Electric vehicle sales presently constitute a _____ share of the U.S. auto market.

negligible

When confronted with a higher price, consumers typically adjust their behavior

only after the passage of some time.

The sign of the cross-price elasticity of demand coefficient when two goods are substitutes is

positive

To calculate the cross-price elasticity of demand, take the percentage change in quantity demanded of product X and divide by the percentage change in the __________ of product Y.

price

Suppose an increase in the price of good X resulted in a rightward shift in the demand for good Y. From this we can conclude that X and Y are _____ goods.

substitute

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

substitute goods

If the cross-price elasticity between two goods is positive, then we know that the goods in question are __________

substitutes

The relationship between price and quantity demanded is exemplified by Multiple choice question.

the demand curve

When the underlying determinants of demand change,

the entire demand curve shifts.

True or false: Consumers often need time to adjust to changes in prices

true

If a 2% decrease in the price of a good causes a 2% increase in the quantity demanded, the demand is

unitary elastic

The percentage change in quantity demanded is equal to the percentage change in price when demand is

unitary elastic

If the price of Evian water increases, the demand for Dasani water ______.

will increase