Micro Economics Chapter 5
The more substitutes that exist for a particular good, the __________ the price elasticity of demand.
Larger
Which of these demand curves shows a perfectly inelastic demand?
The demand curve on the left
For goods such as computer game consoles, if the price rises the quantity supplied will be greater:
The longer the time that elapses
What is the cross-price elasticity of demand for two goods that are unrelated?
Zero
Prior to the 1997 federal tobacco settlement a pack of cigarettes sold for $2.48. The terms of the settlement required a decrease in teenage smoking of 60 percent. If the elasticity of cigarette demand for teenagers is about 1.3 then the price of cigarettes should rise to __________ in order to achieve the target reduction of 60 percent.
$3.62
If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25 percent, the price elasticity of demand is:
1.25
The current price of wheat is $1.00 per bushel, and the price elasticity of demand for wheat is known to be 0.50. A bad harvest causes the supply of wheat to decrease and as a result the price of wheat rises by 20 percent. What will be the percentage change in quantity demanded for wheat and will farm revenues rise or fall?
10 percent and the total revenue of farmers will rise
An increase in the price of a substitute for iPads will lead to __________ in the quantity demanded of iPads so the cross-price elasticity of demand will be __________.
An increase, positive
Personal computers and computer display monitors are:
Complements
If the cross-price elasticity of demand between two products is -3.0, then the two products are:
Compliments
If the price elasticity of demand is 0.33 then demand is __________ .
Inelastic
The demand for a highly addictive drug is likely
Inelastic
If the supply of Good B is perfectly elastic and price falls the quantity supplied will:
Decrease to zero
If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in quantity demanded of 25 percent, we say the demand for Red Bull is __________ in this range.
Elastic
If the price elasticity of supply is 0.4, then a 20 percent increase in price will __________ the quantity supplied by __________ percent.
Increase, 8.0
A perfectly inelastic supply curve:
Indicates the quantity supplied does not respond to a change in price
The price elasticity of supply always has a:
Positive value
The __________ is a measure of responsiveness of the change in quantity demanded of a good to the change in its price.
Price elasticity of demand
Which of the following goods is probably the most highly income elastic?
Private education
The income elasticity for peanut butter is -3. This defines peanut butter as what type of good?
An inferior good
If the income elasticity of SUVs is greater than 1, what is the good considered?
A luxury
Along a linear, downward sloping demand curve, the slope __________ while the price elasticity of demand __________.
is constant, changes from one point to another