ECN 212 CH. 5
Perfectly inelastic, the curve is _______
vertical
Which of the following could describe a good for which a decrease in price would decrease revenue?
The good is a necessity.
Manufactured goods, such as books, cars, and televisions, have _______ supplies because firms that produce them can run their factories longer in response to a higher price.
elastic
Narrowly defined markets have more __________ demands
elastic
Supply is usually more _______ in the long run than in the short run
elastic
Supply of a good is said to be _______ if the quantity supplied responds substantially to changes in the price
elastic
Perfectly inelastic supply
elasticity = 0
Unit elastic supply
elasticity = 1
Perfectly elastic
elasticity = infinity
Inelastic supply
elasticity is > 1
As the elasticity rises, the supply curve gets ______
flatter
When demand is elastic (a price elasticity greater than 1), price and total revenue move in _______ directions
opposite
When demand is inelastic (a price elasticity less than 1), price and total revenue move in the _______ direction
same
Suppose that when the price of good X falls from $60 to $48, the quantity demanded of good Y falls from 10 units to 8 units. Using the midpoint method, the cross-price elasticity of demand is
1.0, and X and Y are substitutes.
When the price of a sweater was $40, the store sold 150 sweaters per month. When it raised the price to $50 each, it sold 120 sweaters per month. Using the midpoint method, the price elasticity of demand for sweaters is
1.00
Suppose the price of memory foam pillows decreases from $100 to $75 and, as a result, the quantity of memory foam pillows demanded increases from 500 to 800 Using the midpoint method, the price elasticity of demand for memory foam pillows in the given price range is about
1.62
If the price elasticity of demand for a good is 2.0, then a 5 percent increase in price results in a
10 % decrease in the quantity demanded.
Joseph's income elasticity of demand for fried chicken meals is -2. All else equal, this means that if his income increases by 5 percent, he will buy
10 % fewer fried chicken meals
When the price of good A is $14, the quantity demanded of good A is 100 units. When the price of good A falls to $12, the quantity demanded of good A rises to 150 units. Using the midpoint method, the price elasticity of demand for good A is
2.60, and a decrease in price will result in an increase in total revenue for good A.
If the price elasticity of demand for gift wrap is 0.8, then a 5% increase in the price of gift wrap will decrease the quantity demanded of gift wrap by
4%, and gift wrap sellers' total revenue will increase as a result.
If the price elasticity of demand for a good is 0.75, then an 8 percent decrease in price results in a
6 % increase in the quantity demanded.
Beachfront land has an _______ supply because it is almost impossible to produce more of it
inelastic
Necessities have _________ demands
inelastic
Supply is said to be _______ if the quantity supplied responds only slightly to changes in the price
inelastic
The price elasticity of demand for lightbulbs is relatively _______ because there are very few substitutes for lightbulbs.
inelastic
Inelasticity demonstrated at the _______ of curve
top
percentage change in quantity demanded of good 1/ percentage change in the price of good 2
Cross-price elasticity of demand
Which of the following is likely to have the most price elastic demand?
Dove® moisturizing body wash
Elastic supply
Elasticity < 1
percentage change in quantity demanded/percentage change in income
Income elasticity of demand equation
(Q2-Q1)/[(Q2+Q1)/2] / (P2-P1)/[(P2+P1)/2]
Midpoint method
percentage change in quantity demanded/percentage change in price
Price Elasticity of Demand
percentage change in the quantity supplied divided by the percentage change in the price times 100
Price elasticity of supply
If the price elasticity of demand for a good is 0.45, then which of the following events is consistent with a 9 percent decrease in the quantity of the good demanded?
a 20 percent increase in the price of the good
Law of Demand
a fall in the price of a good raises the quantity demanded
Elasticity demonstrated at the ______ of curve
bottom
Katerina teaches harp lessons. If the demand for harp lessons is elastic, Katerina could increase her total revenue by ________ the price of her harp lessons.
decreasing
If demand is unit elastic (a price elasticity exactly equal to 1), total revenue remains _________ when the price changes.
constant
Goods with close substitutes
have more elastic demand (easy to switch)
Perfectly elastic curve is ______
horizontal
Cross-price elasticity of demand
how the quantity demanded of one good responds to a change in the price of another good
Goods tend to have more elastic demand over __________ time horizons
longer
Elasticity
measure of how much buyers and sellers respond to changes in market conditions
Price Elasticity of Demand
measures how much the quantity demanded responds to a change in price
Income elasticity of demand
measures how the quantity demanded changes as consumer income changes
Inelastic
the quantity demanded responds only slightly to changes in the price
Elastic
the quantity demanded responds substantially to changes in the price
The key determinant of the price elasticity of supply is the ______ being considered
time period
Demand is price elastic for the ______ half of the curve
top
Inelastic for the ________ half of the curve
top
