ECON Mirco Elasticity

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A horizontal straight line is

A perfectly elastic supply curve

The price elasticity of demand is

always negative

Two items which have a positive cross price elasticity of demand are referred to as

substitutes

Supply is more elastic in the long run

than in short run

A perfectly elastic demand curve exhibits

that quantity demanded will decrease to zero when there is a slight increase in the price level

When the supply curve slopes upward

the price elasticity of supply is positive

Substitute goods

the price of one good increases and the demand for another good increases

The slope of the perfectly inelastic demand curve is

undefined

If a good has an absolute price elasticity of 1, the demand for the good is

unit elastic

If the absolute value of the price elasticity of demand for a product is 1.5, and the price of a product increased 30 percent, then the quantity demanded will decline by

45 percent

Total revenue is

Price x Quantity

Demand is elastic

Whenever the absolute value of the price elasticity of demand is greater than 1, but less than infinite

Demand is said to be inelastic when

a given percentage change in price will result in a less than proportionate percentage change in the quantity demanded

A perfectly inelastic demand curve is

a vertical straight line

When demand is elastic

changes in price and changes in total revenue move in opposite directions

If the price of one good increases, and as a result the demand for another related good falls, the goods are

complements

If the price elasticity of demand for a product is less than 1, then

consumers are relatively insensitive to price change

Moving downward on a downward‐sloping linear demand curve, the absolute value of the price elasticity of demand

decreases continuously

If a good has an absolute price elasticity of 2, the demand for the good is

elastic

No matter what the price of coffee is in the cafeteria, Jack spends $20 a week on coffee. We can conclude that the absolute value of the price elasticity of demand for coffee for Jack is

equal to 1

Vincent Van Gogh paintings

have a price elasticity of supply close to 0.0

A perfectly elastic demand curve is

horizontal

The price elasticity of demand measures

how responsive consumers are to a change in price

The cross-price elasticity of demand of products ʺMʺ and ʺNʺ is zero. This implies that ʺMʺ and ʺNʺ are

independent products

If your income rises by 25 percent and, as a result, you buy fewer packages of Ramen Noodles, then Ramen Noodles are a(n)

inferior good

A movie theater raises ticket prices from $8 to $10 in order to raise revenues. The theaterʹs management is assuming the absolute value of the price elasticity of demand for tickets is

less than 1

If your income rises by 15 percent and, as a result, you buy more steak, then steak is a(n)

normal good

Price elasticity of demand is the responsiveness

of the quantity demanded to a change in price

A perfectly inelastic supply curve is

parallel to the price axis

A perfectly elastic supply curve is

parallel to the quantity axis

If a good has an absolute price elasticity of 0, the demand for the good is

perfectly inelastic

The price change of a good elicited no change in quantity demanded means the items is

perfectly inelastic

For most goods and services the income elasticity of demand is

positive

The price elasticity of supply is higher when

producers have more time to adjust to price changes

Another term for elasticity is

responsiveness

If demand is elastic and the price of a product decreases by 10 percent, then

the change in quantity demanded is greater than 10 percent

The cross price elasticity of demand is defined as

the percentage change in the demand for one good (a shift in the demand curve) divided by the percentage change in price of a related good

Along a downward-sloping straight-line demand curve, as the price of the product goes up

the price elasticity of demand goes from being inelastic to being elastic

When demand is unit elastic, a 10 percent change in the price of the good

will cause a change in quantity demanded equal to 10 percent

The slope of the perfectly elastic demand curve is

zero

A perfectly inelastic demand curve exhibit

zero responsiveness to changes in price


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