ch.5 SA

Refer to Figure 5-2. The elasticity of demand from point A to point B, using the midpoint method would be _______________. Figure 5-2.png 1 1.5 2 2.5

2.5

Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth, ___________. Alice's demand for banana splits is perfectly inelastic Alice's price elasticity of demand for banana splits is 1 Alice's income elasticity of demand for banana splits is negative None of the above answers is correct.

Alice's demand for banana splits is perfectly inelastic

Refer to Figure 5-12. Which supply curve is perfectly inelastic? Figure 5-12.png S1 S2 S3 It is impossible to tell without more information.

S1

Suppose that when the price of corn is $2 per bushel, farmers can sell 10 million bushels. When the price of corn is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for corn is income inelastic, and so an increase in the price of corn will increase the income of corn farmers. The demand for corn is income elastic, and so an increase in the price of corn will increase the income of corn farmers. The demand for corn is price inelastic, and so an increase in the price of corn will increase the income of corn farmers. The demand for corn is price elastic, and so an increase in the price of corn will increase the income of corn farmers.

The demand for corn is price inelastic, and so an increase in the price of corn will increase the income of corn farmers.

When demand is elastic in the current price range, ______________. an increase in price would increase total revenue because the decrease in quantity demanded is less than the increase in price an increase in price would decrease total revenue because the decrease in quantity demanded is greater than the increase in price a decrease in price would decrease total revenue because the increase in quantity demanded is smaller than the decrease in price a decrease in price would not affect the total revenue

an increase in price would decrease total revenue because the decrease in quantity demanded is greater than the increase in price

The price elasticity of demand measures how responsive ______________. buyers are to a change in income sellers are to a change in price buyers are to a change in price sellers are to a change in buyers' incomes

buyers are to a change in price

The cross-price elasticity of demand can tell us whether goods are _____________. normal or inferior elastic or inelastic luxuries or necessities complements or substitutes

complements or substitutes

Last year, Sheila bought 6 pairs of shoes when her income was $40,000. This year, her income is $50,000 and she purchased 10 pairs of shoes. All else constant, it is obvious that Sheila ______________. prefers shoes to boots considers shoes to be an inferior good considers shoes to be a normal good has a price-inelastic demand for shoes

considers shoes to be a normal good

An inelastic demand means that _____________. consumers hardly respond to a change in price consumers respond substantially to a change in price consumers respond directly to a change in income the change in quantity demanded is equal to the change in price

consumers hardly respond to a change in price

When quantity demanded responds substantially to changes in price, demand is said to be _____________. elastic inelastic unit elastic perfectly elastic

elastic

Refer to Figure 5-11. When a new, more productive strawberry was developed which caused supply to increase, strawberry farmers' total revenue ________________. Figure 5-11.png fell from $6000 to $5250 since demand is elastic fell from $6000 to $5250 since demand is inelastic rose from $5250 to $6000 since demand is elastic fell from $6000 to $5250 since supply is elastic

fell from $6000 to $5250 since demand is inelastic

Demand is elastic if elasticity is _____________. less than 1 equal to 1 equal to 0 greater than 1

greater than 1

Refer to Figure 5-6. The price elasticity of this demand curve between $10 and $15 is ________________. Figure 5-6.png unit elastic elastic inelastic perfectly elastic

inelastic

Assume that a 4 percent increase in income results in a 6 percent decrease in the quantity demanded of a good. The income elasticity of demand for the good is _____________. negative and therefore the good is an inferior good negative and therefore the good is a normal good positive and therefore the good is an inferior good positive and therefore the good is a normal good

negative and therefore the good is an inferior good

Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because _____________. it must be eaten quickly the market is broadly defined there are few substitutes other flavors of ice cream are almost perfect substitutes

other flavors of ice cream are almost perfect substitutes

If the quantity supplied is the same regardless of price, then the supply curve would be ____________. elastic perfectly elastic perfectly inelastic inelastic

perfectly inelastic

Which of the following is NOT a determinant of the price elasticity of demand for a product? time price market definition substitutes

price

If sellers respond substantially to changes in price, then ____________. the supply curve will shift substantially when the price rises sellers are considered to be relatively price insensitive sellers are considered to be relatively price sensitive the price elasticity of supply equals 1

sellers are considered to be relatively price sensitive

Suppose that you are in charge of pricing at a local sandwich shop. The business needs to increase revenue and your job is on the line. If the demand for sandwiches is elastic you _______________. should increase the price of sandwiches should decrease the price of sandwiches should not change the price of sandwiches could not determine what to do with price until you determine whether supply is elastic or inelastic

should decrease the price of sandwiches

If the cross-price elasticity of demand is 1.25, then the two goods would be ____________. complements luxuries normal goods substitutes

substitutes

If sellers do not respond at all to a change in price, _______________. technological advancement must be great supply must be perfectly elastic a long period of time must have elapsed supply must be perfectly inelastic

supply must be perfectly inelastic

Given the market for illegal drugs, if the government attempts to reduce the flow of drugs into the United States, ____________. supply would fall and prices would rise demand would fall and prices would fall also demand and supply would both fall, leaving prices basically the same supply may fall, but demand would increase, causing prices to skyrocket

supply would fall and prices would rise

When quantity moves proportionally the same amount as price, demand is ____________. relatively elastic and the price elasticity of demand is 1 perfectly elastic and the price elasticity of demand is 1 perfectly inelastic and the price elasticity of demand is less than 1 unit elastic and the price elasticity of demand is 1

unit elastic and the price elasticity of demand is 1

Refer to Figure 5-1. The point on the demand curve labeled B represents the ____________________. Figure 5-1.png elastic section of the demand curve inelastic section of the demand curve unit elastic section of the demand curve perfectly elastic section of the demand curve

unit elastic section of the demand curve