Unit Two
The equilibrium price of a dozen roses is _____ and the equilibrium quantity of roses is _____ dozen.
$50; 300
There will be a surplus of 400 units of X at a price of _____.
$8
Perfectly inelastic demand is represented by graph _____, and perfectly elastic demand is represented by graph _____.
(d); (c)
If a 10 percent increase in the price of good X reduces consumption of good Y by 5 percent, the cross elasticity of demand is:
-1/2 so goods X and Y are complements.
When the price of a hotdog at the ballpark is $2.00, quantity demanded is 1,000. When the price of a hotdog at the ballpark is $2.50, quantity demanded is 850. The price elasticity of demand coefficient is approximately _____ and the demand for hotdogs at the ballpark is _____.
0.7; inelastic
If a 10 percent increase in the price of a commodity results in no change in the quantity demanded of the commodity, the absolute value of the price elasticity of demand coefficient is _____ and the demand for it is said to be _____.
0; perfectly inelastic
What is the price elasticity of demand coefficient for a product if quantity demanded is 30 when price is $28 and quantity demanded is 50 when price is $20?
1.5
A decrease in the price of a fashion magazine fro $2.75 to $2.25 results in an increase in the quantity demanded from 2000 to 2800 per month.
1.67
If a 10% increase in the price of a product results in a 5% decrease in the quantity demanded of the product, then the absolute value of the price elasticity of demand coefficient is _____, and demand is said to be _____.
1/2; inelastic
An increase in the price of a small town newspaper form $0.70 to $0.90 results in a decrease in sales from 5,000 to 3,000 per day. The price elasticity of demand coefficient (using the midpoint formula) is _____ for this newspaper.
2
If the quantity demanded of good X decreases by 8% when the price of good X increased by 4%, the price elasticity of demand for good X is _____, and the demand for good X is said to be _____.
2; elastic
Which of the following would be expected to cause a decrease in the demand for textbooks?
A decrease in financial assistance to college students.
Which of the following would be expected to cause an increase in the supply of copy machines?
A decrease in the cost of manufacturing copy machines.
Technological improvement that reduce the cost of manufacturing personal computers combined with a decrease in the demand for personal computers results in:
A decrease in the equilibrium price of personal computers but the change in equilibrium quantity cannot be determined from the information given.
Which of the following best explains a decrease in the supply of video games?
All of the above
If demand is represented by D1 and supply is represented by So, at a price of P1:
All of the above.
Which of the following would cause the rightward shift of the demand curve from Do to D1 in the current period?
An expectation by consumers that the price of this good will rise in the future.
If demand increases from Do to D1, and supply is represented by So, then there will be:
An increase in quantity supplied from Qo to Q1.
Which of the following is most likely to cause a leftward shift from S2 to S1?
An increase in the costs of production
An increase in the supply of housing accompanied by an increase in the demand for housing leads to:
An increase in the equilibrium quantity of housing but the change in equilibrium price cannot be determined from the information given.
Which of the following events would cause the demand for baseball gloves to decrease?
Answers a. and c. only
Assume a wireless company has hired you as a consultant to help determine what price to charge for local weekday airtime. You establish that the price elasticity of demand for local weekday airtime is 0.62. If the goal of the company is to increase the revenue generated from the sale of weekday airtime, you should advise the company to:
raise the price of weekday air time because demand is inelastic.
If demand increases from D1 to D2 but price remains at P2, then there will be a:
shortage equal to the distance q4 - q2.
A price of $25 per dozen roses results in a _____ of _____ dozen roses.
shortage; 200
At a price of $5, there is a _____ of _____ units of X.
shortage; 200
If the demand for a magazine is elastic at a price of $2.50 and the goal of selling the magazine is to maximize total revenue, the price of the magazine:
should be lowered below $2.50
If suppliers decrease the amount of output they are willing and able to make available for sale at all prices, then:
supply decreases and the supply curve shifts left.
If a 15% increase in price leads to a 10% increase in quantity supplied, then:
supply is inelastic.
A price of $75 per dozen roses results in a _____ of _____ dozen roses.
surplus; 200
Regarding the above graphs, it is true that:
the demand curve in graph (a) is more elastic than the demand curve in graph (b).
If the cost of producing good Z decreases at the same time good Z becomes more popular, then the graphing model of supply and demand predicts that:
the equilibrium quantity of good Z will increase but the equilibrium price of good Z could increase, decrease, or stay the same.
For normal goods:
the income elasticity coefficient is positive.
Price elasticity of demand is calculated as:
the percentage change in quantity demanded divided by the percentage change in price.
If the supply of housing is fixed (i.e., the supply curve is a vertical line) and the demand for housing increases, then supply and demand analysis predicts that:
the price of housing will rise.
Ceteris paribus, the demand for a product will be more price-elastic when:
the price of the product is large relative to income.
According to the law of supply, an increase in the price of smart phones will cause:
the quantity supplied of smart phones to increase, ceteris paribus.
Ceteris paribus, advancements (increases) in production technology causes.
the supply curve to shift rightward.
The demand for a product tends to be more price-elastic if:
there are many close substitutes for the product.
Ceteris paribus, the demand for a product will be more price-inelastic when:
there are very few close substitutes available.
If a 10 percent increase in the price of a commodity results in a 10 percent decrease in the quantity demanded of the commodity, the demand for it is said to be:
unit elastic.
Ceteris paribus, an increase in the supply of perfume causes the price of perfume to:
Decrease and the quantity demanded to increase.
Ceteris paribus, what will happen to the equilibrium price and quantity of orange juice if a winter freeze destroys half of Florida's orange crop?
Equilibrium price rises and equilibrium quantity falls.
What will happen to the equilibrium price and quantity of widgets if the supply of widgets decreases and the demand for widgets decreases at the same time?
Equilibrium quantity will decrease but the change in equilibrium price cannot be determined from the information given.
If this market is represented by D1 and S1, then equilibrium price is _____ and equilibrium quantity is _____.
P2; q2
Assume this market is initially in equilibrium on So and Do. As a result of an increase in the number of consumers in this market, equilibrium would be expected to change from:
Point A to point B.
If people increase their preferences for dining in restaurants versus dining at home, what will happen to the equilibrium price and quantity of restaurant meals, ceteris paribus?`
Price and quantity both increase
A decrease in the demand for apples, ceteris paribus, leads to:
a decrease in both the equilibrium price and quantity of apples.
A movement from point a to point b along D1 is caused by:
a decrease in the price of the product.
The law of demand states that an increase in the price of a haircut, ceteris paribus, leads to:
a decrease in the quantity demanded of haircuts.
Ceteris paribus, a decrease in the price of coats leads to:
a decrease in the quantity supplied of coats.
The relationship between price and the amount of a good or service consumers are willing and able to buy is given by:
a demand curve.
Ceteris paribus, an increase in the wages paid to autoworkers leads to:
a leftward shift (decrease) in the supply of autos.
When the price of a product is above the equilibrium price and prices are flexible:
a surplus exists and price will fall.
If the supply of land is perfectly inelastic, then the graph of the supply curve for land is:
a vertical line.
If the demand function is linear and downward-sloping, demand is:
all of the above are true.
If the supply of land is perfectly inelastic, then:
all of the above are true.
The shift from D1 to D2 might have come about due to:
an increase in consumer income if this good is a normal good.
A movement from point e to point c along S2 is caused by:
an increase in the price of the product.
Ceteris paribus, an increase in the number of camera manufacturers leads to:
an increase in the supply of cameras.
An increase in supply would be shown by moving from point:
b to point c.
Which of the following pairs of good is most likely to have a cross elasticity coefficient of 1.2?
chicken and fish
When the cross elasticity between good X and good Y is negative, goods X and Y are:
complements.
The effect of a change in the price of good X on the quantity demanded of good Y is measured by:
cross elasticity.
Assuming tomato juice is a normal good, an increase in consumer income will cause an increase in the _____ tomato juice and a(n) _____ in the price of tomato juice.
demand for; increase
If a 10 percent increase in price causes quantity supplied to increase by 12 percent, then supply is:
elastic
If the absolute value of the price elasticity of demand coefficient for fresh flowers is 1.8, then the demand for fresh flowers is _____ and a(n) _____ in price will lead to an increase in total revenue.
elastic; decrease
If the absolute value of the price elasticity of demand coefficient for movie tickets is 1.2, then the demand for movie tickets is _____, and a(n) _____ in the price of movie tickets will lead to an increase in total revenue for movie theaters.
elastic; decrease
Ceteris paribus, when an increase in consumer income causes demand to increase:
equilibrium price and quantity both rise.
A decrease in the number of sellers in a market that occurs at the same time that there is an increase in the number of buyers in that market will cause:
equilibrium price to increase, but the change in equilibrium quantity cannot be determined without further information.
A decrease in demand would be shown by a movement:
from point f on D2 to point b on D1.
Demand that is perfectly elastic graphs as a:
horizontal line.
Markets tend toward equilibrium:
if prices are able to fall to clear surpluses and prices are able to rise to eliminate shortages.
For inferior goods:
income elasticity is negative.
The responsiveness of sales with respect to a change in consumer income is measured by:
income elasticity.
Commodities that are necessities with no close substitutes have demand curves that tend to be:
inelastic.
If a 10 percent reduction in the price of a commodity results in a 5 percent increase in the quantity demanded of the commodity, the demand for it is said to be:
inelastic.
If the absolute value of the price elasticity of demand coefficient for milk is 0.6, the demand for milk is:
inelastic.
If the public transit system raises it fares and experiences an increase in total revenue as a result, the demand for public transportation in this price range is:
inelastic.
If the income elasticity coefficient for Good A is -2, then Good A is a(n):
inferior good.
If the income elasticity of demand for canned beans is -0.8, then it can be concluded that canned beans are a(n):
inferior good.
The law of demand illustrates the:
inverse (negative) relationship between price and quantity demanded.
If the income elasticity coefficient for restaurant meals is 1.4, then restaurant meals are:
normal goods.
If a 10 percent increase in consumer income results in a 5 percent increase in the quantity of potato chips sold, then it can be concluded that, ceteris paribus:
potato chips are a normal good.
The law of supply states that, everything else constant:
price and quantity supplied move in the same direction.
The responsiveness of consumers to changes in the price of a product is measured by:
price elasticity of demand.