Microeconomics Chapter 5 Study Guide

If the cross-price elasticity between two goods is negative, the two goods are likely to be:

Complements

A decrease in supply (shift to the left) will increase total revenue in that market if:

Demand is price inelastic

If consumers think there are very few substitutes for a good, then:

Demand would tend to be price inelastic

If demand is linear, then price elasticity of demand is:

Elastic in the upper portion and inelastic in the lower portion

If supply is price inelastic, the value of the price elasticity of supply must be:

Less than 1

If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is:

Price elastic

If there is an excess capacity in a production facility, it is likely that the firm's supply curve is:

Price elastic

In general, a flatter demand curve is more likely to be:

Price elastic

In general, a steeper supple curve is more likely to be:

Price inelastic

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to:

Reduce total revenue to farmers as a whole, because demand for food is inelastic

If the supply curve for a good is price elastic, then:

The Qs is sensitive to changes in the price of that good

The price elasticity of demand is defined as:

The percentage change in the Qd of a good divided by the percentage change in the price of that good

If an increase in the price of a good has no impact on the total revenue in that market, demand must be:

Unit price elastic