ECON 5-6

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept

Which of the following statements is correct?

The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

The number of firms in a market tends to be more variable over long periods of time than over short periods of time.

Elasticity is

a measure of how much buyers and sellers respond to changes in prices.

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoys gourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumption by only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot. These examples illustrate the importance of

a necessity versus a luxury in determining the price elasticity of demand.

A surplus results when a

binding price floor is imposed on a market

A good will have a more inelastic demand, the

broader the definition of the market

The price elasticity of demand measures

buyers' responsiveness to a change in the price of a good.

Minimum-wage laws dictate

c. a minimum wage that firms may pay workers.

Price controls

can generate inequities of their own.

Whether the good is a necessity or a luxury

depends on the buyer

Which of the following is not an example of a public policy?

equilibrium laws

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase.

Demand is inelastic if the price elasticity of demand is

less than 1

Demand is said to be inelastic if the

quantity demanded changes proportionately less than price

The price elasticity of demand measures how much

quantity demanded responds to a change in price

When consumers face rising gasoline prices, they typically

reduce their quantity demand more in the long run than in the short run

The smaller the price elasticity of demand, the

smaller the responsiveness of quantity demanded to a change in price

When a binding price ceiling is imposed on a market to benefit buyers,

some buyers will not be able to buy any amount of the good.

A tax on sellers will shift the

supply curve upward ( left) by the amount of the tax.

For a good that is a luxury, demand

tends to be elastic

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when

the relevant time period is long rather than short

Price controls are usually enacted

when policymakers believe that the market price of a good or service is unfair to buyers or sellers