Econ 5 Chapter 6

The larger the number of substitute goods available, the (lower/higher) the coefficient for the price elasticity of demand.

higher

The price elasticity of demand tends to be high for _____ priced goods relative to income. equally lower higher fairly

higher

If a 4% decrease in the price of coffee leads to a 2% increase in the quantity demanded, the price elasticity of demand for coffee is relatively price [].

inelastic

The inverse relationship between price and quantity demanded is called the law of demand. income effect law of supply substitution effect

law of demand.

The inverse relationship between price and quantity demanded is called the law of demand. income effect substitution effect law of supply

law of demand.

If goods X and Y are complements and the price of Y increases, then we expect to see the demand for X shift to the (right/left).

left

Cross-price elasticity is calculated as: Multiple choice question. (% change in the quantity demanded of X)/(% change in the price of Y). (average quantity demanded of X) x (average price of Y). (% change in the quantity demanded of X) x (% change in the price of Y). (average quantity demanded of X)/(average price of Y).

(% change in the quantity demanded of X)/(% change in the price of Y).

True or false: A product that has many substitutes is less elastic than a product that has few substitutes. True False

False : A narrowly defined product is more elastic.

Which of the following is the correct formula for calculating the price elasticity of demand? Change in quantity/average quantity divided by change in price/average price. Percentage change in quantity divided by average change in price.

Change in quantity/average quantity divided by change in price/average price.

Digital cameras and memory sticks are what type of goods? Substitute Inferior Complementary Independent

Complementary

Which of the following would be considered a luxury and thus exhibit a high price elasticity of demand? Electricity Sugar Dining out Gasoline

Dining out

How is total revenue calculated? Price - Quantity Price × Quantity Price ÷ Quantity Price + Quantity

Price × Quantity

True or false: The price elasticity of demand for a product depends on how many substitutes are available. True False

True

While considering whether to lower the price of Sprite, the Coca-Cola Company would be interested in knowing the value of the _____ elasticity of demand between Sprite and Coke. price cross income cross-price income supply

cross-price

The percentage change in quantity demanded of good X divided by the percentage change in the price of product Y is known as the: price elasticity of demand income elasticity of demand cross-price elasticity of demand price elasticity of supply

cross-price elasticity of demand

If two goods are complements, an increase in the price of one will ______ the demand for the other good. increase not affect decrease

decrease

When the cross-price elasticity is _____, the goods are complementary. negative positive equal to zero

negative

When the price elasticity of demand for a product is elastic a modest change in price causes _____ change in the quantity demanded. no change a lower an equal a larger

a larger Reason: Whether a price increase or decrease, the change in price will cause a larger change in quantity demanded.

Electric vehicle sales presently constitute a _____ share of the U.S. auto market. dominant sizable negligible

negligible

Consumers often need _____ to adjust to changes in prices. Multiple choice question. time energy permission

time

Suppose that the price elasticity of demand (E) for good Z is 0.5. If the price of Z is increased by 8 percent, we can project that the sales of Z will fall by [] percent.

(.5 x 8%=)4

Suppose the price of a handbag is reduced from $100 to $90. The quantity demanded increases from 50 units to 60 units. The price elasticity of demand for handbags in this price range is _____. d 1.73 0.58 -2.00 1.64

1.73 Reason: Price elasticity of demand = Change in quantity/average quantity divided by change in price/average price.

Assume that at an initial price of $100, a bookstore will purchase 10,000 college textbooks, and at an increased price of $110, it will purchase only 8,000 textbooks. What is the price elasticity of demand for the textbooks? (Use the average price and quantity method for calculation.) 1.5 4.1 2.33 0.7

2.33 The formula for the price elasticity of demand is: percentage change in Qd divided by the percentage change in price. In this case, (2,000/9,000) divided by .(10/105) equals 2.33.

If two goods are substitutes, an increase in the price of one will do what to the demand for the other good? Increase it. Not change it. Decrease it.

Increase it.

What type of demand is represented by a relatively small percentage change in quantity demanded divided by a relatively larger percentage change in price? Unitary elastic Elastic Inelastic

Inelastic

How will the price elasticity of demand for a good that is considered to be a luxury compare to one that is a necessity? It will exhibit a price elasticity coefficient very close to zero. It will exhibit a price elasticity coefficient less than one. It will exhibit a price elasticity coefficient equal to one. It will exhibit a price elasticity coefficient greater than one.

It will exhibit a price elasticity coefficient greater than one.

Select all that apply Which of the following would be beneficial for electric vehicle sales in the United States? (Select all that apply.) advances in battery technology the emergence of alternative technologies (for example, fuel cells and natural gas-powered cars) higher gasoline prices the discontinuation of subsidies for EV buyers

advances in battery technology higher gasoline prices

When calculating the price elasticity of demand, the % change in quantity [demand] is calculated as (change in quantity)/(average quantity). (Enter one word in the blank.)

demanded or demand

The cross-price elasticity of demand is equal to the percentage change in the quantity demanded of one product _____ the percentage change in the price of another product. added to multiplied by divided by subtracted from

divided by

The income elasticity of demand shows the responsiveness of demand for a good or service when an individual's [] changes.

earnings or income

A particular brand of coffee has a lot of substitutes that are available in the market; therefore the demand for that brand of coffee is more ______. inelastic elastic

elastic

If demand is relatively price (elastic/inelastic), a decrease in price will increase total revenue.

elastic

If the quantity supplied by producers is relatively responsive to price changes, supply is relatively price [elastic].

elastic

If a 4% decline in the price of cut flowers results in an 8% increase in the quantity demanded, the price elasticity of demand for cut flowers is unitary elastic. inelastic. elastic. dependent on the quantity.

elastic.

The price elasticity of demand for big-ticket items (e.g., refrigerators) tends to be _____ the elasticity of relatively inexpensive items. about the same as greater than lower than

greater than

When demand is elastic, price elasticity of demand will be Multiple choice question. less than one. equal to one. greater than one.

greater than one.

If the percentage change in quantity demanded is less than the percentage change in price, then the price elasticity of demand is: elastic unitary elastic inelastic

inelastic

When the underlying determinants of demand change, there is a movement along the demand curve. the entire demand curve shifts.

the entire demand curve shifts.

Suppose the coefficient of elasticity (E) for good X is 2.5. If the price of X were to be decreased by 10 percent, we can project that sales will increase by [25] percent. (insert a number.)

(2.5 x 10% =) 25

When calculating the price elasticity of demand, the % change in quantity demanded is calculated as (change in quantity)/(quantity). (change in quantity)×(quantity). (change in quantity)/(average quantity). (change in quantity)×(average quantity).

(change in quantity)/(average quantity).

Suppose the price of a pair of premium socks falls from $2.00 to $1.90 and the quantity of the socks demanded increases from 110 to 118. Rounded, the price elasticity of demand is ______. 0.71 3.9 1.4 0.10

1.4 Reason: Price elasticity of demand = Change in quantity/average quantity divided by change in price/average price.

Which type of elasticity shows how responsive demand is to a change in earnings? Multiple choice question. Income elasticity of demand Price elasticity of supply Cross elasticity of demand Price elasticity of demand

Income elasticity of demand

The cross-price elasticity of demand measures which of the following? The responsiveness of consumer purchases of one product due to a change in the price of some other product The change in the price of one product due to a change in consumer responsiveness for another product The responsiveness of consumer purchases of one product due to a change in consumer income The responsiveness of consumer purchases of one product due to a change in its price

The responsiveness of consumer purchases of one product due to a change in the price of some other product

What is the term for the total amount the seller receives from the sale of a product in a particular time period? Marginal revenue Total revenue Economic revenue Average revenue

Total revenue

When the price elasticity of demand is relatively price inelastic, a price increase will have what effect on total revenue? Multiple choice question. Total revenue will be equal to the change in price. Total revenue remains unchanged. Total revenue will fall. Total revenue will rise.

Total revenue will rise.

True or false: When the underlying determinants of demand change, the entire demand curve shifts. True False

True

When an increase in the price of one good decreases the demand for another good, then the goods are called complementary goods. True False

True When an increase in the price of one good decreases the demand for another good, then the goods are called complementary goods.

How is a consumer's responsiveness to price changes measured? Using the price elasticity of supply coefficient Using the behavior of firms' production Using the level to which demand shifts as incomes changes Using the price elasticity of demand

Using the price elasticity of demand

If a 6% decrease in the price of sugar leads to a 4% increase in the quantity demanded, the price elasticity of demand for sugar is relatively price _____. unitary elastic elasticity dependent inelastic elastic

inelastic

When confronted with a higher price, consumers typically adjust their behavior only after the passage of some time. instantaneously and without hesitation.

only after the passage of some time.

The [price] [elasticity] of demand measures the responsiveness of consumers' quantity demanded to a price change. (Enter one word in each blank, and be careful with your spelling.)

price elasticity

If the quantity supplied by producers is relatively insensitive to price changes, supply is ______. perfectly price elastic relatively price inelastic unit price elastic relatively price elastic

relatively price inelastic

When a product is unitary elastic and price increases or decreases, the total revenue will ______. fall remain constant disappear rise rise, then fall

remain constant

Coca-Cola and Pepsi would be classified as [substitute].

substitute

If the cross-price elasticity between two goods is positive, then we know that the goods in question are . (Choose between complements or substitutes.)

substitutes

If the cross-price elasticity of demand between two goods is positive, then the pair must be ______. unrelated inelastic substitutes complements

substitutes

The percentage change in quantity supplied divided by the percentage change in price measures the price elasticity of [supply].

supply

The relationship between price and quantity demanded is exemplified by the demand curve. the monetary income of the consumer. changes in the wants of the consumer. the supply curve

the demand curve.

True or false: The price elasticity of demand for a product depends on how many substitutes are available. True False

true Consider the market for breakfast foods versus the market for breakfast cereals. There are more substitutes within the cereal market (more elastic) than there are in the breakfast foods market.