Econ 101

Elasticity's independence from units is useful:

Because it enables us to compare the price sensitivities of various markets.

Why is it important to utilize the end-point problem elasticity formula when calculating elasticity along a demand or supply curve? Group of answer choices

Because you will get differing quantity figures depending on whether you are analyzing a price increase or price decrease.

The price elasticity of demand (NOT SUPPLY) is defined as the:

Percentage change in quantity demanded divided by percentage change in price.

The price elasticity of supply (NOT DEMAND) is defined as the:

Percentage change in quantity supplied divided by percentage change in price.

If a supply curve is horizontal, it is:

Perfectly elastic

If a supply curve is vertical, it is: Group of answer choices

Perfectly ineleastic

Elasticity of supply is lower the shorter the time period considered because the shorter the time period: Group of answer choices

The fewer options that are available for producers to change production.

Suppose we have the following information for the following markets: Luxury Watches: ED=5 Coffee: ED=0.3 Question: Suppose that the supply curves increase and shift to the right in both markets. Which market's equilibrium price will change by the greatest amount?

The luxury watch market's equilibrium price will drop by a greater amount, in percentage terms, relative to the coffee market.

As you move down a demand curve and drop the price further and further:

The price elasticity of demand moves toward being inelastic.

If an economist estimated the price elasticity of demand for new cars to be 0.93. If the price of cars rose by 20%, one would expect the quantity of new cars demanded to: Group of answer choices

fall 18.6%.-Response: Price elasticity of demand = % change in quantity ÷ % change in price = x ÷ 20. Set x ÷ 20 = 0.93 and solve for x (20 x .93 = 18.6). If the price rises, quantity demanded will fall according to the law of demand.

A price elasticity of demand of 0.6 means that: Group of answer choices

quantity demanded changes .6 units for every $1 change in price.