Econ test 2
If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is
-.75
Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is Correct Answer
-1
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 demanded 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.
Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about
1.2, and X and Y are substitutes.
What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
Price would fall, and the effect on quantity would be ambiguous.
What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and scientists discovered that coffee prevents heart attacks?
The equilibrium quantity would increase, and the effect on equilibrium price would be ambiguous.
When a tax is placed on the sellers of a product, buyers pay
When a tax is placed on the sellers of a product, buyers pay
A $2.00 tax levied on the sellers of birdhouses will shift the supply curve
upward by exactly $2.00.
Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?
New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy.
When quantity demanded responds strongly to changes in price, demand is said to be
Elastic
When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is
Elastic
Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is
Inelastic
Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is
assuming that the demand for university education is inelastic.
Suppose you make jewelry. If the price of gold falls, then we would expect you to
be willing and able to produce more jewelry than before at each possible price.
When a tax is levied on sellers of tea,
both sellers and buyers of tea are made worse off
If demand is price inelastic, then
buyers do not respond much to a change in price.
he demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on
buyers of salt and the sellers of caviar.
The price elasticity of demand measures
buyers' responsiveness to a change in the price of a good.
Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of
crystal to increase.
Suppose buyers of coffee and sugar regard the two goods as complements. Then an increase in the price of coffee will cause a(n)
decrease in the demand for sugar and a decrease in the quantity supplied of sugar.
When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is
elastic, and her demand curve would be relatively flat.
Which of the following is correct? A tax burden
falls more heavily on the side of the market that is less elastic.
Which of the following is not a determinant of the price elasticity of demand for a good?
he steepness or flatness of the supply curve for the good
Economists compute the price elasticity of demand as the
percentage change in quantity demanded divided by the percentage change in price.
The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should
raise the price of the cinnamon rolls.
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the
supply of bicycles will shift to the left.
For a good that is a necessity, demand
tends to be inelastic.
Today's supply curve for gasoline could shift in response to a change in
the expected future price of gasoline.
