ECON 2305 EXAM 2
If the quantity demanded of a certain good responds only slightly to a change in the price of the good , then the
demand for the good is said to be inelastic
In a market, to find the total amount supplied at a particular price, we must
demand in that market will increase
When quantity demanded responds strongly to changes in price, demand is said to be
elastic
Suppose that quantity demand falls by 30% as a result of a 5% increase in price. The elasticity demand for this good is
elastic and equal to 6.
Demand is said to have unit elasticity if the price elasticity demand is
equal to 1
The unique point at which the supply and demand curves intersect is called
equilibrium
Marcus says that he would smoke one packet of cigarettes each day regardless of the price. If he is telling the truth, Marcus's demand
demand for cigarettes is perfectly inelastic
Good X and good Y are substitutes. If the price of Good Y increases, then the
demand for good X will increase
At the equilibrium price, the quantity of the good that buyers are willing and able to buy
exactly equals the quantity that sellers are willing and able to sell
Recent forrest fires in the western states are expected to cause the price of lumber to rise in the next six months. As a result we can expect the price of lumber to
fall now
The law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of a good rises
Which of the following is an example of a market?
gas station,garage sale and barber shop
A market demand curve shows
how much of a good all buyers are willing and able to buy at each possible price
To determine whether a good is considered normal or inferior , one could examine the value of
income elasticity demand for that good
A movement downward and to the right along the demand curve is called an
increase in quantity demanded
A decrease in the price of a good will
increase quantity demanded
Two goods are complements when a decrease in the price of one good
increases the demand for the other good
A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug is
inelastic
If the price elasticity of supply for wheat is less than 1, then the supply of wheat
inelastic
Suppose that quantity demanded rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for the good is
inelastic and equal to 0.67
Kara receives a promotion at work which increases her income, we would expect Karas demand for
inferior goods to decrease
The difference between a supply schedule and a supply curve is that a supply schedule
is a table and a supply curve is drawn on a graph
When demand is perfectly inelastic, the price elasticity of demand
is zero, and the demand curve is vertical
A key determinant of the price elasticity supply is the
length of the time period
When a surplus exists in the market, sellers
lower price which increases quantity demanded and decreases quantity supplied until the surplus is eliminated.
A group of buyers and sellers of a particular good or service is called a(an)
market
Goods with many close substitutes tend to have a
more elastic demands
If two goods are complements, their cross price elasticity would be
negative
A competitive market is a market in which
no individual buyer or seller has any significant impact on the market price
If the demand for a good falls when income falls, then the good is called
normal good
You lose your job and as a result, you buy fewer iTunes music downloads. This shows that you consider music downloads to be a
normal good
When small changes in price lead to infinite changes in quantity demanded, demand is (know absolute value)**
perfectly elastic
Whether a good is a luxury or necessity depends on the
preferences of the buyer
Which of the following is not held constant in a demand schedule
price
The demand curve for a good is a line that relates
price and quantity demanded
The supply curve for a good is a line that relates
price and quantity supplied.
When drawing a demand curve,
price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis.
The price elasticity of demand measures how much
quantity demanded responds to a change in income
When a shortage exists in the market, sellers
raises price which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.
Suppose the American Medical Association announces that men who shave their heads are less likely to die of hear failure, we could expect the current demand for
razors to increase
Which of the following event would cause a movement upward and to the left along the demand curve for olives?
the price of olives rises
Which of the following is not held constant in a supply schedule?
the price of the good
A movement along the supply curve might be caused by a change in
the price of the good or service that is being supplied.
If the price elasticity of supply is zero, then
the quantity supplied is the same, regardless of price
If something happens to alter the quantity supplied at any given price then,
the supply curve shifts
The demand for a good or service is determined by:
those who buy the good or service
Elasticity measures how responsive quantity is to changes in price.
true
The cross price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.
true
The quantity demanded of a good is the amount that buyers are
willing and able to purchase
If a 30% change in price causes a 15% change in quantity supplied , then the price elasticity of supply is about
0.5 supply is inelastic
Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is 2$ per pound. She purchases one pound of beans and 4 pounds of rice per month when the price of beans is 3$ per pound. Maddys cross price elasticity of demand for beans and rice is
0.71 they are substitutes
Suppose that when the price of good x increases from $800 to $850, the quantity demanded for good y increases from 65 to 70. Using the midpoint method the cross price elasticity of demand is about
1.2 x and y are substitutes
If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about
1.60 supply is elastic
A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price of elasticity of supply of bagels about
1.63
Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 , and as a result the quantity of bags increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is
2.33
Last year tess bought 5 handbags when her income was $54,00. This year her income is $60,000 and she purchased 7 handbags. Hold others factors constant it follows That test's income elasticity of demand is about
3.17 handbags=normal goods
The line that relates the price of a good and the quantity demanded of that good is called
curve usually slopes downward
Which of the following characteristics is required for a perfectly competitive market?
Goods offered for sale are exactly the same and it is difficult for new sellers to enter the market
Which of the following is likely to have the most price elastic demand?
Haagen daaz ice cream
What will happen in the market for shot-gun shell ammunition now if buyers expect higher shotgun shell prices in the near future?
The demand of shot gun shell ammunition will increase
Suppose that two supply curves pass through the same point. One is steep and the other is flat. Which of the following statements is correct?
The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter steeper curve.
Which of the following changes would not shift the supply curve for a good or service?
a change in the price of the good or service
Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see,
a decrease in the demand for energy drinks
Which of the following would cause a movement along the supply curve for cupcakes?
a decrease in the price of cupcakes
A table that shows the relationship between the price of a good and the quantity demanded of that good is called
a demand schedule
Elasticity is
a measure of how much buyers and sellers respond to changes in market conditions
A decrease in the price of oranges would lead to a (an)
a movement down and to the left along the supply curve for oranges
Suppose that Sarah enjoys diet coke so much that she consumes one everyday. Although she enjoys gourmet cheese she consumes it sporadically. If the price of diet coke rises Jane decreases her consumption by only a very small. But if the price of gourmet cheese rises Jane decreases her consumption by a lot. These example illustrate the importance of
a necessity versus a luxury in determining the price of elasticy demand
A supply curve slopes upward because
an increase in price gives producers an incentive to supply a larger quantity.
If Mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?
an increase in the price of mayonnaise
"Other things equal , when the price of a good rises the quantity demanded of the good, falls and when the price falls the quantity demanded rises. the relationship between price and quantity demanded
applies to most goods in the economy, represented by a downward sloping demand curve, law of demand
Which of the following is most likely to have the most price inelastic demand?
chocolate
If the cross price elasticity of two goods is positive then the two goods are
complements
A leftward shift of the demand curve is called a(an)
decrease in demand
A higher price for batteries would result in a(an)
decrease in the demand for flashlights
A decrease in the price of a good will
decrease quantity supplied
Kari downloads 7 songs per month when the price is $1.29 per song and 10 songs per month when the price is $0.99 per song. Kari's behavior demonstrates the law of,
demand
An increase in demand is represented by
rightward shift of a demand curve
An increase in supply is represented by a
rightward shift of a supply curve
The price elasticity of supply measures how responsive
sellers are to a change in price
The quantity supplied of a good is the amount that
sellers are willing and able to sell.
Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to
shift rightward
When quantity demanded decreases at every possible price, the demand curve has
shifted to the left
When quantity supplied decreases at every possible price, we know that the supply curve has
shifted to the left
When quantity demanded increases at every possible price, the demand curve has
shifted to the right
If the price elasticity of supply is equal to infinity, then the (know midpoint method)
supply curve is horizontal
If the number of sellers in a market increases then,
supply in that market will increase
If sellers do not adjust their quantities supplied at all in response to change in price,
supply is perfectly inelastic
For a good that is a necessity, demand
tends to be elastic
In the case of perfectly inelastic demand,
the change in quantity demanded equals the change in price.
A surplus exists in a market if
the current price is above the equilibrium price.
Buyers are able to buy all the want to buy and sellers are able to sell all they want to sell at
the equilibrium price but not above or below the equilibrium price
The value of the price elasticity of demand for a good will be relatively large when
the good is a luxury rather than a necessity
"Other things equal, when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well." This relationship between price and quantity supplied is referred to as
the law of supply
If, at the current price, there is a shortage of a good then
the price is below the equilibrium price
Which of the following events would cause a movement upward and to the right along the supply curve for mangos?
the price of mango rises
