Test #2

If the price elasticity of demand for a good is 1.2, then a 3 percent decrease in price results in a

3.6 percent increase in the quantity demanded.

What will happen in the market for shotgun-shell ammunition now if buyers expect higher shotgun-shell prices in the near future?

The demand for shotgun-shell ammunition will increase

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a luxury

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The market for the good is broadly defined.

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

If toast and butter are complements, then which of the following would increase the demand for toast?

a decrease in the price of butter

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

A perfectly elastic demand implies that

any rise in price above that represented by the demand curve will result in a quantity demanded of zero

Two goods are substitutes when a decrease in the price of one good

decreases the demand for the other good.

In general, elasticity is a measure of

how much buyers and sellers respond to changes in market conditions

"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

A decrease in supply is represented by a

leftward shift of a supply curve

Goods with many close substitutes tend to have

more elastic demands.

Demand is said to be inelastic if the

quantity demanded changes proportionately less than price

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.

For a good that is a necessity, demand

tends to be inelastic

A very hot summer in Atlanta will cause

the demand for jackets to decrease

A decrease in the number of sellers in the market causes

the supply curve to shift to the left