ECON CHAPTER 6

The price of a given good rises by 12 percent and the quantity demanded of that good then falls by 5 percent. The coefficient of price elasticity of demand (Ed) is __________, indicating that the demand for this good in its current price range is ______________.

a.0.4, inelastic

If the price of good X falls by 8 percent and as a result the quantity demanded of good X rises by 4 percent, the absolute value of the coefficient of price elasticity of demand for good X is _____________ and good X is price _______________ in demand in the current price range.

a.0.50, inelastic

Suppose that the price of good X rises from $12.00 to $12.90, and as a result the quantity demanded of good X falls from 5,000 units to 4,600 units. The (absolute value of) price elasticity of demand for good X is ___________________, indicating that good X is price ___________________. This increase in price caused total revenue to ________.

a.1.15, elastic, fall

If the demand curve is perfectly inelastic, it follows that the consumer will pay _______ percent of a tax that is placed on the seller of a good.

a.100

For a certain good, with a price elasticity of demand coefficient (Ed) of 0.75, quantity demanded falls from 8,500 to 7,500. The percentage change in price here is approximately

a.16.7 percent.

Mary spends the following percentages of her budget on goods A, B, C, and D: 29 percent on good A, 15 percent on good B, 10 percent on good C, and 6 percent on good D. Ceteris paribus, for which good is price elasticity of demand the highest, ceteris paribus?

a.good A

If the price of good XYZ falls and the demand for good XYZ is elastic, then the percentage increase in quantity demanded is __________ the percentage decrease in price, and total revenue __________.

a.greater than, rises

If good ABC has an income elasticity of 1.0, then the demand for good Z is __________ and the good is __________ good.

a.income unit elastic, a normal

If the price of good X rises and the demand for good X is inelastic, then the percentage fall in quantity demanded is ____________ the percentage change in price, and total revenue _________.

a.less than, rises

Assuming that the quantity supplied of a good can change over time, the ____________ the period of adjustment to a price change the _______________ the price elasticity of supply will be.

a.longer, higher b.shorter, lower

As we move from lower to higher prices along a straight-line demand curve, price elasticity of demand becomes _____________.

a.lower

The shorter the period of time consumers have to adjust to a price change, the _____________ will be the price elasticity of ______________.

a.lower, demand

Price elasticity of demand is equal to the ____________ change in the quantity demanded of a good divided by the __________change in the price of the good and slope and price elasticity of demand ____________.

a.percentage, percentage, are not the same

The sellers of a good will pay the full tax that is placed on the sale of that good if demand is _________________ or supply is ______________________.

a.perfectly elastic, perfectly inelastic

If the demand for a good is inelastic, and price rises, total revenue ________________; if the demand for a good is elastic, and price falls, total revenue will ______________; if the demand for a good is unit elastic, and price rises, total revenue will ______________.

a.rise, rise, remain unchanged

The price elasticity of demand for a good is 1.7. This implies that if price

a.rises by 1 percent, quantity demanded falls by 1.7 percent. b.rises by 10 percent, quantity demanded falls by 17 percent. d.falls by 15 percent, quantity demanded rises by 25.5 percent.

If the price of good X falls by 5 percent and as a result the quantity demanded of good Y rises by 4 percent, the cross elasticity of demand for goods X and Y is _____________ and goods X and Y are _______________________.

b.- 0.80, complements

If price rises from $12 to $14 and the quantity demanded falls from 100 units to 90 units, then what is the price elasticity of demand equal to?

b.0.68

At a price of $8, quantity supplied is 100 units. At a price of $9, quantity supplied is 126 units. Price elasticity of supply for the good is approximately

b.1.96

If price elasticity of demand is 0.5, it follows that a ______________ percent increase in price must cause a ____________ percent decrease in quantity demanded.

b.2.00, 1.00

The price of good Y rises from $8.00 to $8.60 as the quantity supplied rises from 2,000 to 2,400 units. The price elasticity of supply for good Y is ________________ and good Y is price ____________ in supply.

b.2.52, elastic

If the price elasticity of demand for ketchup is 0.50, then the price elasticity of demand for _____________ is likely to be ____________.

b.brand A ketchup, higher

If, as the price of good A decreases by 10 percent, the quantity demanded of good B increases by 8 percent, then goods A and B are likely to be

b.complements.

If the supply curve of a good is perfectly elastic, and a per-unit tax is placed on the production of the good, it follows that

b.consumers will end up paying the entire tax.

Cross elasticity of demand measures the responsiveness of changes in the quantity __________ of one good to changes in __________.

b.demanded, the price of another good

Suppose that a buyer's income rises by some percentage, and as a result her quantity demanded of good X rises by a smaller percentage. An economist would describe good X as being

b.income inelastic.

When the demand for a good is perfectly elastic, then the coefficient of price elasticity of demand (Ed) is equal to _______________, and when demand is elastic, Ed is ____________.

b.infinity, greater than one

The _________ substitutes for a good, the ___________ the price elasticity of demand; the _____ time that passes since a price change, the ___________ the price elasticity of demand.

b.more, higher, more, higher

If the price of good X falls and the demand for good X is elastic, the percentage ____________ in quantity demanded is _______________ the percentage change in price, and total revenue __________.

b.rise, greater than, rises

The supply of housing in city X is highly elastic while the supply of housing in city Y is highly inelastic. The demand for houses in both cities is the same and the price of housing in both cities is the same. In time, though, the demand for houses in both cities increases by the same amount. It follows that

b.the dollar price of houses will rise by more in city Y than city X.

Suppose that the price of good X rises from $2.00 to $2.50, and as a result the quantity demanded of good Y rises from 370 units to 390 units. The cross elasticity of demand for good Y with respect to the price change in good X is ___________________, indicating that goods X and Y are ___________________.

c.0.24, substitutes

A car dealer raises the price of one of its most popular models from $25,000 to $28,000 and sales of that model fall from 120,000 to 110,500 units. The (absolute value of) price elasticity of demand for this car model is _______________ and in this price range the car is price_________________.

c.0.73, inelastic

Suppose a tax is imposed on the rental price of land. If the quantity supplied of land is constant regardless of price, who will pay the greater share of such a tax: buyers or sellers?

c.The sellers will pay the entire share of the tax.

Which of the following would lead to lower price elasticity of demand for good Y?

c.a reduction in the number of substitutes available for good Y

In city A there is a lower elasticity of supply of houses than in city B and currently house prices are the same in both cities. If demand increases by the same amount in each city, the price of houses will rise ____________ in city A than in city B.

c.by more

Suppose that good X is a normal, income inelastic good. It follows that an 8 percent decrease in income will _____________ quantity demanded by _______________ than 8 percent.

c.decrease, less

If the demand for a good is perfectly inelastic, then a $1 per unit tax placed on the sellers of the good will

c.end up raising the price of the good by $1 and the entire tax will be paid for by the consumers of the good.

If the price of good ABC rises and the demand for good ABC is unit elastic, then the percentage decrease in quantity demanded is __________ the percentage increase in price, and total revenue __________.

c.equal to, remains constant

The demand curve for good X is a straight line that slopes downward. It follows that price elasticity of demand is _______________ at ____________prices than at ______________ prices.

c.higher, high, low d.lower, low, high

Which of the follow would lead to higher price elasticity of demand?

c.more substitutes for the good

Price elasticity of supply measures the responsiveness of quantity ________________ of a good to changes in __________________.

c.supplied, the price of that good

When demand is perfectly inelastic, then the coefficient of price elasticity of demand is equal to _______________, and when demand is inelastic the coefficient of price elasticity of demand is ________________.

c.zero, less than one

Suppose the price of a cup of coffee is $5, and at this price, the quantity supplied is 300 cups of coffee. Now suppose the price of coffee is raised to $7, where at this price, the quantity supplied is 400 cups of coffee. The price elasticity of supply is _________________ and the supply is price _________________.

d.0.83, inelastic

Suppose the demand for good Y is perfectly inelastic and the government decides to impose a tax on the production of good Y. Who will pay the greater share of such a tax, the buyers or sellers of good Y?

d.The buyers will pay the entire share of the tax.

If the demand for good Z is inelastic and the price of good Z falls, the percentage increase in the quantity demanded of good Z will be _______________ the percentage change in its price, and total revenue from the sale of this good will ___________________.

d.less than, fall

Along a straight-line downward-sloping demand curve, if the price of the good falls then total revenue

d.may rise, fall, or remain the same.

The quantity demanded of good Z rises from 230 units to 250 units as income increases from $50,000 to $55,000. The income elasticity of demand for good Z is _____________ and good Z is a(n) ___________ good.

e.+ 0.875, normal

If the percentage change in quantity demanded is 20 percent and the percentage change in price is 5 percent, then demand is ________ between the two prices.

e.elastic