Micro test 2 chp 5

negative; positive

At​ Frank's Delicatessen, Frank noticed that the elasticity of customers differed in the short and longer term. Frank also noticed that his increase in the price of sandwiches had other effects on his store. In​ particular, the number of sodas sold declined while the number of yogurts sold went up. How might you explain this​ pattern? If soda is a complement to​ sandwiches, then the​ cross-price elasticity is​ _______. Thus, as Frank loses sandwich sales from the price​ increase, he will lose soda sales as well. If​ yogurt, on the other​ hand, is a substitute for​ sandwiches, then the​ cross-price elasticity is​ _______. Thus, as the price of sandwiches​ increases, more yogurt is consumed.

inelastic; because revenue decreases as price decreases

Consider point A shown along the total revenue curve in the graph below. At this​ point, demand​ is:

True

Demand is likely to become more elastic as we move from the short run to the long run.

To the left of point​ A, a given percentage change in price results in a larger percentage change in quantity demanded.

If point A is at the midpoint of the demand​ curve, which of the following statements is​ correct?

​Disagree: When price increases and demand is relatively​ inelastic, total revenue will rise.

If the elasticity of demand for cocaine is −0.20 and the Drug Enforcement Administration succeeds in reducing supply​ substantially, causing the street price of the drug to rise by​ 50%, buyers will spend less on cocaine.

inelastic elastic

If total revenue increases as price​ increases, demand is If total revenue increases as price​ decreases, demand is

52.92% 50.40% if **** is 1.80 52.08% if **** is 1.86 51.24% if **** is 1.83 52.36% if ****1.87

In 2014​, the Spanish government passed a law to change a​ regulation, known as the "Beckham law"​, on foreign athletes. This new law will require foreign professional athletes to pay the standard Spanish tax rate of 5252 percent on earnings of more than 300,000 euros, up from the 24 percent rate they had been paying since 2005.For​ top-quality players, the elasticity of migration under the Beckham law was estimated to be 1.89 **** based on the average annual tax rate. Using this estimate of​ elasticity, the migration of top quality players to Spain should decrease by ________%. Round your response to the nearest two decimal places.

is likely to be​ positive; can be positive or negative

In output​ markets, elasticity of supply​ ________, and in labor​ markets, elasticity of supply​ _______.

get smaller False

In terms of absolute​ value, elasticity values​ ________ as price decreases along a​ downward-sloping demand curve. Every point along a linear demand curve has the same​ slope, and therefore has the same elasticity value.

can be positive or negative

Income elasticity of demand

False

In​ general, luxury items tend to have inelastic demands.

True

In​ general, the more of your income a product​ consumes, the more elastic is its demand.

False

Price elasticity of demand is calculated as the percentage change in price divided by the percentage change in quantity demanded.

Relaxing existing building regulations.

Prior to​ 2005, it seemed like house prices always rose and never fell. When the demand for housing​ increases, prices in the housing market rise but not always by very much. For prices to rise​ substantially, the supply of housing must be relatively inelastic. That​ is, if the quantity supplied increases rapidly whenever house prices​ rise, price increases will remain small. Many have suggested government policies to increase the elasticity of supply. What specific policies might hold prices down when demand​ increases?

$9 shortage

Studies have fixed the​ short-run price elasticity of demand for gasoline at the pump at minus−0.20. Suppose that international hostilities lead to a sudden​ cut-off of crude oil supplies. As a​ result, U.S. supplies of refined gasoline drop 40 percent. If gasoline were selling for ​$3.00 per gallon before the​ cut-off, what new price would you expect to see in the coming​ months? ​(​Hint: Use the absolute value of the gasoline elasticity coefficient and treat all values as positive.​) The price of gasoline will be ​_____ per gallon. Suppose that the government imposes a price ceiling on gas at ​$1.001.00 per gallon. How would the relationship between consumers and gas station owners​ change? It would cause a _____ of gasoline.

Total revenue will fall

Suppose price decreases and demand is inelastic. What happens to total​ revenue?

more elastic

Taxicab fares in most cities are regulated. Several years​ ago, taxicab drivers in Boston obtained permission to raise their fares 10​ percent, and they anticipated that revenues would increase by about 10 percent as a result. They were​ disappointed, however. When the commissioner granted the 10 percent​ increase, revenues increased by only about 5 percent. Taxicab rides are _______ than anticipated by taxicab drivers.

percentage change in quantity demanded given a percentage change in price

The best way to determine elasticity along a linear demand curve is to calculate the​ ____________.

Disagree. Only the top half of the demand curve is elastic. Disagree. Price elasticity varies along a linear demand curve.

The demand curve in Figure a is elastic. The demand curve in Figure b is inelastic.

True

The more substitutes that are available for a​ product, the more elastic is its demand.

quantity demanded; price

The price elasticity of demand measures the responsiveness of the ____ to changes in ____.

50% -25% -2.0 -1.4

The quantity of peanuts demanded increases from 6 pounds to 9 pounds when the price of peanuts decreases from​ $4 per pound to​ $3 per pound. The percentage change in the quantity of peanuts demanded is The quantity of peanuts demanded increases from 6 pounds to 9 pounds when the price of peanuts decreases from​ $4 per pound to​ $3 per pound. The percentage change in the price of peanuts is The quantity of peanuts demanded increases from 6 pounds to 9 pounds when the price of peanuts decreases from​ $4 per pound to​ $3 per pound. The price elasticity of demand for peanuts is The quantity of peanuts demanded increases from 6 pounds to 9 pounds when the price of peanuts decreases from​ $4 per pound to​ $3 per pound. In this price range and using the midpoint​ formula, the price elasticity of demand for peanuts is

perfectly inelastic

When quantity demanded does not respond at all to a change in​ price, demand is said to be

True

When the percentage change in quantity demanded is the same as the percentage change in​ price, demand is said to have unitary elasticity.

perfectly inelastic; perfectly elastic

When the quantity demanded does not respond at all to a change in​ price, the demand curve is_______. When the quantity demanded drops to zero at the slightest increase in​ price, the demand curve is_______.

the two goods are substitutes

When​ cross-price elasticity of demand is​ positive,

The equilibrium point shows the price where quantity demanded exactly equals quantity​ supplied, and the market is cleared.

Which of the following best describes the equilibrium point in the market for a given​ product?

It becomes more elastic as you move up and to the left along the curve.

Which of the following is true regarding elasticity along a linear demand​ curve?

increasing, and it is an inferior good

If income is falling and income elasticity of demand for a particular good is negative​, then demand for the good​ is:

Disagree: When price decreases and demand is relatively​ elastic, total revenue will rise.

Every year Christmas tree vendors bring tens of thousands of trees from the forests of New England to New York City and Boston. During the last two​ years, the market has been very​ competitive; as a​ result, price has fallen by 10 percent. If the price elasticity of demand was −​1.3, vendors would loose revenues altogether as a result of the price decline.

inelastic due to lack of close substitutes

Explain whether demand is likely to be elastic or inelastic for automobile tires.

income elasticity of demand is positive

For the following​ statement, state the relevant elasticity and state what its value should be​ (negative, positive, greater than​ one, zero, and so​ on). The demand for European vacations increases during times of rising incomes.

cross-price elasticity of demand is negative, since the items are complements

For the following​ statement, state the relevant elasticity and state what its value should be​ (negative, positive, greater than​ one, zero, and so​ on). The demand for hot dog buns rises when hot dog prices fall.The demand for hot dog buns rises when hot dog prices fall.

False

If an excise tax is imposed on a​ product, more tax revenue will be raised if demand for the product is relatively elastic instead of relatively inelastic.

20,000 15,000 40,000 0 -3.00 -26.33 $360,000 $270,000 $720,000

World famous Burpee Beer is brewed in the small town of West Burpee.​ Currently, the town of West Burpee levies a ​$22 ​per-case tax on all Burpee​ Beer, and the brewery sells 20 comma 00020,000 cases a year at a total price of ​$2020 per case. The mayor of West Burpee has decided to erect a statue of himself in the town square at a cost of ​$20 comma 00020,000​, and wants to raise the money from additional tax revenue from sales of Burpee Beer. He has asked each of the three town council members to come up with a plan to raise the additional ​$20 comma 00020,000. Council member Simpson advises increasing the percase tax by ​$11. Council member Milhouse advises raising the tax by ​$22 per case. Council member Flanders advises reducing the current tax by ​$0.500.50 per case. If the mayor chooses​ Simpson's plan, the total cases of beer that would need to be produced to increase tax revenue by exactly ​$20,000 is _____ cases. If the mayor chooses​ Milhouse's plan, the total cases of beer that would need to be produced to increase tax revenue by exactly $20,000 is _____cases. If the mayor chooses​ Flanders' plan, the total cases of beer that would need to be produced to increase tax revenue by exactly $20,000 is _____cases. Under​ Simpon's plan, the price elasticity of demand for Burpee Beer is _____ if the tax revenue increases by exactly $20,000 Under​ Milhouse's plan, the price elasticity of demand for Burpee Beer is _____ if the tax revenue increases by exactly $20,000. Round your response to the nearest two decimal places. Under​ Flanders' plan, the price elasticity of demand for Burpee Beer is ____ if the tax revenue increases by exactly $20,000. Round your response to the nearest two decimal places. Under​ Simpson's plan, Burpee Beer will receive a $______ of total revenue if the tax revenue increases exactly by ​$20,000. Under​ Milhouse's plan, Burpee Beer will receive a $______ of total revenue if the tax revenue increases exactly by ​$20,000. Under​ Flanders' plan, Burpee Beer will receive a $______ of total revenue if the tax revenue increases exactly by ​$20,000.