ECON 142

The demand for which one of the following is likely to be the most price inelastic?

Transportation

If the income elasticity of demand for a good is negative, it must be

an Inferior good

Which of the following would cause a demand curve for a good to be price inelastic?

The good is necessity

A decrease in supply (shift to left) will increase total revenue in the market if

Demand is Price Elastic

T/F: An advance in technology that shifts the market supply curve to the right always increases total revenue by producers.

FALSE

T/F: If the quantity demanded of a good is sensitive to a change in the price of that good, demand is said to be price inelastic

FALSE elastic

T/F: The demand for a necessity such as insulin tends to be elastic

FALSE necessities are inelastic because they aren't sensitive to changes in price.

T/F: If a demand curve is linear, the price elasticity of demand is constant along it.

FALSE slope is same but elasticity changes (hence why we calculate midpoint)

T/F: The price elasticity of demand is defined as the percentage change in the price of that good divided by the percentage change in quantity demanded for that good.

FALSE %^Q/%^P

T/F: If the cross-price of demand between two goods is positive, the goods are likely to be compliments

FALSE substitutes

If a small percentage in the price of a good greatly reduces the quantity demanded for that good, the demand for the good is:

Price Elastic

In general, a flatter demand curve is more likely to be

Price Elastic

In general, a steeper supply curve is more likely to be

Price Inelastic

T/F: If the income elasticity of demand for a bus ride is negative, then a bus ride is an inferior good.

TRUE

T/F: If the price elasticity of supply for blue jeans is 1.3, an increase of 10% in the price of blue jeans would increase the quantity supplied of blue jeans by 13%

TRUE

T/F: The demand for aspirin this month should be more elastic than the demand for aspirin this year

TRUE

T/F: The demand for tires should be more inelastic than the demand for Goodyear brand tires.

TRUE

T/F: Using midpoint method to calculate elasticity, if an increase in the price of pencils from 10 cents to 20 cents reduces the quantity demanded from 1,000 pencils to 500 pencils, then the demand for pencils is Unit Price Elastic.

TRUE ((500-1000)/750)/((20-10)/15) = -1 unit elastic

T/F: If the demands for goods is price elastic, an increase in its price will increase total revenue in that market.

TRUE R=P*Q

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

Unit Price Elastic

If the cross-price elasticity between 2 goods is negative, the 2 goods are likely to be

compliments

If demand is linear, the price elasticity of demand is

inelastic in the upper portion and elastic in the lower portion

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to

reduce total revenue to farmers as a whole because the demand for food is inelastic

If consumers think that there are very few substitutes for a good, then

supply would tend o be price inelastic

The price elasticity of demand is defined as

the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good.

If a supply curve for a good is price elastic, then

the quantity supplied is sensitive to changes in the price of that good