ch 4 economics

Which of the following would best exemplify the most inelastic demand?

A diabetic's demand for the life-saving drug insulin.

All of the following goods or services would most likely exhibit relatively price inelastic demand, except:

Airline travel (in the long run)

Which of the following is most likely to be elastic with respect to demand?

Airline travel in the long run.

Which one of the following best clarifies the ceteris paribus assumption?

All variables except those under immediate consideration are held constant for a particular analysis.

Which of the following exemplifies a product that is very elastic?

An ear of corn in Nebraska.

Why is the coefficient of price elasticity of demand technically a negative number?

Because price and quantity demanded are inversely related.

Smartphones and apps are what type of goods?

Complementary

The demand for lunch at a local restaurant is currently price elastic for college students but price inelastic for businesspeople. In order to increase total revenue, the restaurant should

Decrease the price to students but increase the price to businesspeople.

What type of demand is represented by a small change in price that leads to a large change in the quantity demanded?

Elastic

A price cut will increase the total revenue a firm receives, ceteris paribus, only if the demand for its product is:

Elastic.

Ceteris paribus, a price increase will cause total revenue to decrease for a firm if the demand for its product is:

Elastic.

True or false: If successive units of a good yield smaller and smaller amounts of marginal utility, then the consumer will buy additional units of the good only if its price rises.

False

The demand for _______ is relatively inelastic.

Gasoline in the short run

Which of the following is most likely to be inelastic with respect to demand?

Illegal drugs.

Ceteris paribus, when a firm increases the price of its product, total revenue will:

Increase if the price elasticity of demand is inelastic.

A good whose demand is not very responsive to a change in price is:

Inelastic.

Ceteris paribus, a price decrease will cause total revenue to decrease for a firm if the demand for its product is:

Inelastic.

If quantity demanded rises only slightly following a moderate price cut, then the response would be considered:

Inelastic.

When the percentage change in quantity demanded is numerically less than the percentage change in price, ceteris paribus, demand is:

Inelastic.

If product demand is relatively elastic, what will be the effect on the total revenue if the price is increased?

It decreases.

How will the price elasticity of a product that has few substitutes compare with one that has many substitutes?

It will be less elastic.

Which of the following are characteristics of goods with relatively elastic demand?

Luxuries High-priced goods relative to income

If the price elasticity of demand is 1.0 and a firm raises its price by 15 percent, then total revenue will:

Not change.

Which of the following is the correct formula for calculating the price elasticity of demand?

Percentage change in quantity demanded divided by percentage change in price = %ΔQD/%ΔP

The price elasticity of demand is defined as the:

Percentage change in quantity demanded divided by the percentage change in price.

Ceteris paribus, when the price elasticity of demand is unitary elastic, a decrease in:

Price results in no change to total revenue.

Ceteris paribus, in which of the following instances will total revenue decline?

Price rises and demand is elastic.

Price elasticity of demand indicates the consumer's response to changes in:

Price.

For which of the following is the price elasticity of demand most likely to be unitary elastic?

Private education.

If demand is inelastic, then:

Quantity demanded is not very responsive to changes in price.

If demand is elastic, then:

Quantity demanded is very responsive to changes in price.

Price elasticity of demand shows how:

Quantity demanded responds to price changes.

If the price elasticity of demand for Baja Fresh tacos is 2.5, then Baja Fresh can:

Reduce the price of tacos and total revenue will increase.

In economics, elasticity means ______.

Responsiveness

Which of these goods have relatively elastic demand?

Rib eye steak

Ceteris paribus, total revenue definitely declines when price:

Rises and demand is elastic.

Which of the following is the least likely to be inelastic?

Shell-brand gasoline.

Xbox and PlayStation are what type of goods?

Substitutes

Which of the following define ceteris paribus?

The idea that factors other than those being considered in a particular analysis do not change That other things remain unchanged (equal)

Which of the following is true when the demand is unitary elastic?

The percentage change in quantity demanded is equal to the percentage change in price.

The response of quantity demanded to price changes is shown by:

The price elasticity of demand.

Total revenue is:

The price of a product times the quantity sold in a given time period.

revenue is calculated by multiplying the product price by the quantity sold.

Total

What is the term that indicates the total amount the seller receives from the sale of a product in a particular time period?

Total revenue

Which of the following statements is NOT correct?

Total revenue will fall if consumer's response to a price cut is relatively smaller than the price cut.

When the price elasticity of demand is relatively price inelastic, a price increase will have what effect on total revenue?

Total revenue will rise

If a firm finds that at $5 its percentage change in price is 22.22% and its percentage change in quantity demanded is 22.22%, then demand in this price range is:

Unitary elastic

Ceteris paribus, a price increase will cause total revenue to stay the same for a producer only if the price elasticity demand for its product is:

Unitary elastic.

If the percentage change in quantity demanded is exactly equal to the percentage change in price, then demand is:

Unitary elastic.

The assumption that nothing else changes is known as

ceteris paribus

A consumer's choices are directly influenced by all of the following except:

costs of production

When an economy falls into recession and people are losing jobs, demand for most products, especially big-ticket items, _____ (increases/decreases).

deceases

According to the table, if the price of fresh fish increases by 20%, the quantity bought will

decrease by 44%.

According to the table, if price of coffee increases by 20%, the quantity bought will

decrease by 6%

According to the table, if price of coffee increases by 20%, the quantity bought will ___

decrease by 6%

If two goods are complements and the price of one good increases, then the demand for the other good will

decrease.

If demand is unitary elastic, then a price cut:

does not change total revenue

A relatively large percentage change in quantity demanded divided by a relatively smaller change in price yields relatively price ____ (elastic/inelastic) demand.

elastic

Suppose the local government decides to reduce traffic congestion on a bridge by imposing a toll. The toll will be most effective if the price elasticity of demand for the bridge is:

elastic

The price ____ of demand measures the responsiveness of consumers' quantity demanded to a price change.

elasticity

The response of consumers to a change in price is measured by the price ____ of demand.

elasticity

If successive units of a good yield smaller and smaller amounts of marginal utility, then the consumer will buy additional units of a product only if its price

falls

Which of these goods has relatively elastic demand?

fresh fish

The higher the price of a good relative to a consumer's income, the _____ (greater/lower) is the price elasticity of demand.

greater

The price elasticity of demand tends to be high for ______ priced goods relative to income.

higher

According to the table, if price of fresh fish decreases by 20%, the quantity bought will

increase by 44%

If two goods are complements and the price of one good decreases, then the demand for the other good will

increase.

Gasoline and milk are two goods that exhibit relatively price ____ (elastic/inelastic) demand.

inelastic

If a 6% decrease in the price of sugar leads to a 4% increase in the quantity demanded, the price elasticity of demand for sugar is relatively price

inelastic

If demand is relatively price ___ (elastic/inelastic), the firm can increase its total revenue by raising the price of the good.

inelastic

If demand is ___, a firm can increase total revenue by ___ prices.

inelastic, raising

If demand is ______, a firm can increase total revenue by ______ prices.

inelastic, raising

Along a typical demand curve, as price falls total revenue

initially increases then decreases

Along a typical demand curve, as price rises total revenue

initially increases then decreases

The inverse relationship between price and quantity demanded is called the

law of demand

Consumer choice is influenced not only by the Blank______ utility that extra units of a good will yield, but also by how much Blank______ must be given up to obtain extra units of the good.

marginal; income

With substitute goods, an increase in the price of one good will cause consumers to buy _____(more/less) of the other good.

more

A brand-name product has ______ substitutes than a product in general and is thus more ______.

more; elastic

Because price and quantity demanded are inversely related, the price elasticity of demand coefficient will technically be a ____ (positive/negative) number.

negative

We illustrate an income change with a ____ of the demand curve rather than a movement along the demand curve.

shift

Goods that can be used instead of other goods are called _______ (complementary/substitute) goods.

substitute

The percentage change in quantity demanded divided by the percentage change in price describes

the basic formula for price elasticity of demand.

If successive units of a good yield smaller and smaller amounts of marginal utility, then

the consumer will buy additional units of a product only if its price falls

The relationship between price and quantity demanded is exemplified by

the demand curve

Consider the relationship between the price of gas and the quantity of gas consumed by drivers. If we are to consider the price of gas as the only factor affecting the quantity of gas consumed, while holding other factors such as drivers' incomes and tastes and preferences irrelevant, then we are applying

the other-things-equal assumption.

If a 2% decrease in the price of a good causes a 2% increase in the quantity demanded, the demand is

unitary elastic.

The percentage change in quantity demanded is equal to the percentage change in price when demand is

unitary elastic.

The demand for _______ is relatively elastic.

vacation travel

Evian water and Dasani water are substitute goods. If the price of Evian water increases, the demand for Dasani water

will increase.