Micro, Chapter 6 Reading
When quantity demanded is completely unresponsive to price, what is the value of price elasticity of demand?
0
For most products, the supply curve becomes increasingly inelastic the longer the period of time over which it is measured.
False
The demand curve for a luxury is less elastic than the demand curve for a necessity.
False
The more time that passes, the more inelastic the demand for a product becomes.
False
When demand curves intersect, the curve with the larger slope in absolute value (the steeper demand curve) is more elastic.
False
For which of the following products is the price elasticity of demand (in absolute value) the largest?
Tide liquid detergent
Firms often rely on market experiments to calculate the price elasticity of demand for a new product.
True
The more substitutes available for a product, the greater the price elasticity of demand.
True
If demand is perfectly elastic, then what is the effect of an increase in price?
a decrease in quantity demanded to zero
If the income elasticity of SUVs is greater than 1, what is the good considered?
a luxury
The price elasticity of supply always has
a positive value.
An increase in the price of a substitute for iPads will lead to __________ in the quantity of iPads demanded, so the cross-price elasticity of demand will be _________.
an increase; positive
How is the price elasticity of demand measured?
by dividing the percentage change in the quantity demanded of a product by the percentage change in the product's price
If Amazon.com raises its prices by 10 percent and, as a result, the quantity of books demanded on Barnesandnoble.com increases by 35 percent, what do consumers consider the two Web sites to be?
close substitutes
If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25 percent, demand for Red Bull is _______ in this range.
elastic
What happens when the quantity demanded is very responsive to changes in price? The percentage change in quantity demanded will be
greater than the percentage change in price.
As you move up a linear demand curve, the price elasticity of demand in absolute value
increases.
The price elasticity of demand for a particular brand of raisin bran is, in absolute value,
larger than the price elasticity of demand for all breakfast cereals.
If a supply curve is a vertical line, it is ________, and if it is a horizontal line, it is ________.
perfectly inelastic and has an elasticity value of zero; perfectly elastic and has an elasticity value of infinity
From 1950 to 2012, wheat production in the United States increased dramatically, resulting in a substantial decline in wheat prices. Two key factors explaining this decline in prices are that the demand for wheat is ________, and the income elasticity of demand for wheat is ________.
price inelastic; low
On the lower part of a linear demand curve below the midpoint, the demand is ________ and raising the price causes total revenue to _________.
inelastic; increase
In general, the demand for a good will be _________ elastic the ___________ the share of the good in the average consumer's budget.
less; smaller
When demand increases, equilibrium price will rise ____________ when supply is _________ elastic.
more; less
The income elasticity of demand for a normal good is _____ and for an inferior good is ______.
positive; negative