Microeconomics Chapter 20 Elasticity Prep

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 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

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 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

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

a.lower, demand

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

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 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.

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.

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 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

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

Refer to the exhibit. The market is initially in equilibrium at $4.25. The government then places a per-unit tax on the production of the good which shifts the supply curve. As a result,

d.a and b (a.consumers end up paying $5.00 per unit, and producers/sellers end up receiving $5.00 per unit but they only get to keep $3.75 per unit. b.consumers end up paying 60 percent of the tax and producers/sellers end up paying 40 percent of the tax.)

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

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.

e.a and b (a.longer, higher b.shorter, lower)

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

e.a, b, and d (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.)

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.

e.c and d (c.higher, high, low d.lower, low, high)