ECON 150
When demand is inelastic, a decrease in price will cause
a decrease in total revenue
A movement upward and to the left along a demand curve is called a(n)
decrease in quantity demanded
If the demand for bananas is elastic, then an increase in the price of bananas will
decrease total revenue of banana sellers.
Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?
0.2
Barb's Bakery earned $200 in total revenue last month when it sold 100 loaves of bread. This month it earned $300 in total revenue when it sold 60 loaves of bread. The price elasticity of demand for Barb's bread is
0.58
Soup is an inferior good if the demand
for soup falls when income rises
The midpoint method is used to compute elasticity because it
gives the same answer regardless of the direction of change
If a firm is facing inelastic demand, then the firm should decrease price to increase revenue.
False
If a firm is facing elastic demand, then the firm should decrease price to increase revenue.
True
Demand is inelastic if the price elasticity of demand is
less than 1
If the price of a good is low,
the quantity supplied of the good could be zero.
For most students, the earnings they give up to attend college are
the single largest cost of their education
When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about
0.67
Harry's Barber Shop increased its total monthly revenue from $1,500 to $1,800 when it raised the price of a haircut from $5 to $9. The price elasticity of demand for Harry's Haircuts is
0.700
Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease revenue?
1.5
If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is
2
In which of these instances is demand said to be perfectly inelastic?
A decrease in price of 2% causes an increase in quantity demanded of 0%
When demand is inelastic, a decrease in price increases total revenue.
False
Which of the following events could shift the demand curve for gasoline to the left?
Public service announcements run on television encourage people to walk or ride bicycles instead of driving cars.
Which of the following events would cause the price of oranges to fall?
The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges.
The term price takers refers to buyers and sellers in
The term price takers refers to buyers and sellers in
A likely example of substitute goods for most people would be
apple juice and orange juice.
If a surplus exists in a market, then we know that the actual price is
above the equilibrium price, and quantity supplied is greater than quantity demanded.
A supply curve slopes upward because
an increase in price gives producers an incentive to supply a larger quantity.
When demand is elastic, a decrease in price will cause
an increase in total revenue
Demand is said to be unit elastic if quantity demanded
changes by the same percent as the price
Making rational decisions "at the margin" means that people
compare the marginal costs and marginal benefits of each decision.
Rational people make decisions at the margin by
comparing marginal costs and marginal benefits.
If the price elasticity of demand is 1.5, regardless of which two points on the demand curve are used to compute the elasticity, then demand is
elastic, and the demand curve is something other than a straight, downward-sloping line.
Demand is said to have unit elasticity if the price elasticity of demand is
equal to 1
The law of demand states that, other things equal, when the price of a good
falls, the quantity demanded of the good rises.
A decrease in the price of a good will
increase quantity demanded
An increase in the price of a good will
increase quantity supplied.
An increase in the number of college scholarships issued by private foundations would
increase the demand for education.
A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is
inelastic.
If a increase in income decreases the demand for a good, then the good is a(n)
inferior good
Suppose there are six bait and tackle shops that sell worms in a lakeside resort town in Minnesota. If we add the respective quantities that each shop would produce and sell at each of the six bait and tackle shops when the price of worms is $2 per bucket, $2.50 per bucket, and $3 per bucket, and so forth, we have found the
market supply curve
Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that
people face trade-offs
John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that
people face trade-offs.
The adage, "There is no such thing as a free lunch," means
people face tradeoffs
Other things equal, when the price of a good falls, the
quantity supplied of the good decreases
Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs
shifts to the left.
A improvement in production technology will shift the
supply curve to the right.
A rational decision maker takes an action if and only if
the marginal benefit of the action exceeds the marginal cost.
When quantity moves proportionately the same amount as price, demand is
unit elastic, and the price elasticity of demand is 1
The opportunity cost of an item is
what you give up to get that item.