Econ midterm 2

if the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

0.6 percent increase in the quantity demanded

for a good that is a necessity, demand

tends to be inelastic

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

the demand for the good must be unit elastic

a binding price floor will reduce a firm's total revenue

when demand is elastic

if demand is price inelastic, then when price rises, total revenue

will rise

Which of the following observations would indicate that demand for a good is price-inelastic?

(A: all or any of the above) The good in question is more of a necessity than a luxury for most people, good substitutes do not exist for this good, the time period allowed for responding to a change in price is very small

at a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

2.20

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity supplied of cheese will increase by

9% in the short run and 21% in the long run

if the price of elasticity of demand for a good is 2, then a 10 precent decrease in the quantity demanded must be the result of

a 5 percent increase in the price

if the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

a 5 percent increase in the price of the good

economists generally believe that rent control is

a highly inefficient way to help the poor raise their standard of living

a decrease in supply will cause the largest increase in price when

both supply and demand are inelastic

policymakers use taxes

both to raise revenue for public purposes and to influence market outcomes

A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve

downward by exactly $1.50

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

flatter the demand curve will be

a minimum wage that is set below a market's equilibrium wage will

have no impact on employment

Elasticity is a measure of

how much buyers and sellers respond to changes in market conditions

if the demand for donuts is elastic, then a decrease in the price of donuts will

increase total revenue of donut sellers

if the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase

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

inelastic

if a 10 percent reduction in price causes a 5 percent increase in the quantity of a commodity that people buy, then in this region of the demand curve, price elasticity of demand is

inelastic, although not perfectly so

the price of elasticity demand equals the

percentage change in quantity demanded divided by percentage change in price

A tax imposed on the sellers of a good will

raise the price buyers pay and lower the effective price sellers receive

Buyers of a good bear the larger share of the tax burden when the

supply is more elastic than the demand for the product

if the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

the availability of close substitutes in determining the price elasticity of demand

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

the mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic

an alternative to rent-control laws that would not reduce the quantity of housing supplied is

the payment by government of a fraction of a poor family's rent

if a binding price ceiling is imposed on the baby formula market, then

the quantity of baby formula demanded will increase, the quantity of baby formula supplied will decrease, a shortage of baby formula will develop

if the minimum wage exceeds the equilibrium wage then

the quantity supplied of labor will exceed the quantity demanded

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

there are many substitutes for this good