Econ Quiz 5

If the supply of tennis balls, a complement to tennis racquets, decreases, what will happen to the equilibrium price of tennis balls and to the equilibrium price of tennis racquets?

Price for balls will rise, Price for racquets will fall.

If the price of steel, an input into the production of automobiles, rises and at the same time the price of gasoline rises, what will happen to the equilibrium price and quantity of automobiles?

Price is ambiguous and Quantity falls.

In this market for iPhones, the technology improves while all other factors remain constant. Explain the change(s) in the equilibrium price and quantity.

Price will DECREASE and quantity will INCREASE

If the demand for a good increases at the same time as the supply of the same good decreases, what will happen to the equilibrium quantity and price of the good?

Price will rise, quantity is ambiguous.

At a price of $, how large of a surplus will there be in this market?

50 units

suppose a market has the demand function Qd=20-0.5P. Between which of the following price ranges is demand most inelastic?

A) $0-$10

as price falls from Pa to Pb, which demand curve represents the most elastic demand?

A) D1

the section of the demand curve from A to B represent the

A) elastic section of the demand curve

Suppose the number of buyers in a market decreases and a technological advancement occurs also. What would we expect to happen in the market?

A) equilibrium price would decrease, but impact on equilibrium quantity would be ambiguous

if price increase from $10 to $20, total revenue will

A) increase by $120, so demand must be inelastic in this price range

when the price of candy bars is $1, quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded is 600. Given this and using midpoint method, we know that the demand for candy bars is

A) inelastic

Demand is inelastic if the price elasticity of demand is

A) less than 1

the price elasticity of demand measures the

A) magnitude of the response in quantity demanded to a change in price

Goods with many close substitutes tend to have,

A) more elastic demands

when consumers face rising gasoline prices, they typically

A) reduce their quantity demanded more in the long run than in the short run

if the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people wold have difficulty purchasing something to use in its place. These examples illustrate the importance of

A) the availability of close substitutes in determining the price elasticity of demand

for a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

A) there are many substitutes for this good

Which combination would produce an increase in equilibrium price and an indeterminate change in equilibrium quantity?

B) B (increase in demand, decrease in supply)

Another term for equilibrium price is

B) Market-Clearing Price

New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls , public transport becomes cheaper and more comfy, auto-workers accept lower wages, and automobile insurance become more expensive?

B) Price will fall

when demand is elastic, an increase in price will cause

B) a decrease in total revenue

when demand is inelastic, a decrease in price will cause

B) a decrease in total revenue

for a good that is a necessity

B) demand tends to be inelastic

suppose that quantity demanded falls by 30% as a result of a 5% increase in price. the price elasticity of demand for this good is

B) elastic and equal to 6

suppose the point labeled B is the halfway point on the demand curve and it corresponds to a price of $5. Then, between $4.99 and $5.01, the price elasticity of demand is

B) equal to 1

the section of the demand curve from B to C represents the

B) inelastic section of demand curve

the smaller the price elasticity of demand, the

B) smaller the responsiveness of quantity demanded to a change in price

At a price of $24, there is a

B) surplus of 8 units

suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,

B) the equilibrium price increases, and the equilibrium quantity is unchanged

the law of supply and demand asserts that

B) the price of a good will eventually rise in response to an excess demand for that god

when demand is perfectly inelastic, the demand curve will be

B) vertical, because buyers purchase the same amount as before whenever the price rises or falls

when the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded falls to 400 units. Using midpoint method, the price elasticity of demand for good A is

C) .67, and in increase in price will result in an increase in total revenue for good A

suppose the price of a bag of tortilla chips decreases from $3 to $2.50 and the quantity of tortilla chips demanded increases from 200 bags to 300 bags. Using midpoint, the price elasticity of demand for tortilla chips in the give price range is

C) 2.20

using the midpoint method, what is the price elasticity of demand when the price rises from $12 to $16?

C) 2.33

if the price elasticity of demand for a good is .5, then a 5 percent increase in price results in a

C) 2.5 percent decrease in the quantity demanded

if the price elasticity of demand for a good is 2, then a 10 percent increase in price results in a

C) 20 percent decrease in the quantity demanded

if the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by

C) 3.48% and aluminum foil sellers' total revenue will INCREASE as a result

Suppose that demand for a good decreases and, at the same time, supply of the good decreases. What would happen in the market for the good?

C) Equilibrium quantity would decrease, but the impact on price would be ambiguous

Which of the following would cause price to decrease?

C) a surplus of the good

economists compute the price elasticity of demand as the

C) percent change in Q demanded divided by the percent change in price

A surplus exists in a market if

C) the current price is above equilibrium price

if a change in the price of a good results in no change in total revenue, then

C) the demand for the good must be unit elastic

Demand is said to be inelastic if

C) the quantity demanded changes only slightly when the price of the good changes

at a price of $50 per unit, sellers' total revenue equals

D) 1250

Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?

D) Equilibrium quantity would increase, but impact on equilibrium price would be ambiguous

if rectangle D is larger than rectangle A, then

D) all of the above are correct

demand is said to be price elastic if

D) buyers respond substantially to changes in the price of a good

demand is elastic if the price elasticity of demand is

D) greater than 1

In general, elasticity is a measure of

D) how much buyers and sellers respond to changes in market conditions

When supply and demand both increase, equilibrium

D) price may increase, decrease, or remain unchanged

At a price of $12, there is a

D) shortage of 4 units

What would happen to the equilibrium price and quantity of lattes if coffee shops began using a machine that reduced the amount of labor necessary to produce them?

D) the equilibrium price would decrease, and the equilibrium quantity would increase

using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. which of the following events is consistent with a 0.1 percent increase in the price of the good?

D) the quantity of the good demanded DECREASES by 0.2 percent

If the four families listed are the only demanders in this market and the price of a gallon of milk increases from $4 to $5, what is the change in the market quantity demanded?

Decreases by 10 gallons

If income rises in the market for a normal good, will the demand curve for the normal good shift to the right or to the left?

To the right

The unique point at which the supply and demand curves intersect is called

d) Equilibrium

Suppose goods A and B are substitutes. If the price of good A increases, will the demand for good B increase or decrease?

the demand for good B will increase