ECO2023 Chapter 5 Quiz 4

Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. The price elasticity of supply for aged cheddar cheese could be

0.5

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

0.6 percent increase in the quantity demanded.

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, then the price increase is about

1.20%

A tax accounting firm produces 500 tax returns units when the market price is $150 per return and produces 700 tax returns when the market price is $170 per tax return. Using the midpoint method, for this range of prices, the price elasticity of supply is about

2.67

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%, then the quantity supplied of soccer balls will increase by about

6% in the short run and 24% in the long run.

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

a 5 percent increase in the price.

Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other factors constant, it follows that Max

considers athletic shoes to be normal goods.

When quantity demanded responds strongly to changes in price, demand is said to be

elastic

The supply of oil is likely to be

inelastic in the short run and elastic in the long run

While in college, Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty's

is negative, and Laura's is positive.

Frequently, in the short run, the quantity supplied of a good is

not very responsive to price changes.

For which pair of goods is the cross-price elasticity most likely to be negative?

peanut butter & jelly

Total revenue

remains unchanged as price increases when demand unit is elastic.

Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States,

supply decreases, demand is unaffected, and price increases.

A key determinant of the price elasticity of supply is

the ability of sellers to change the amount of the good they produce.

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

the equilibrium quantity decreases, and the equilibrium price is unchanged.

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic; and the city manager thinks demand is elastic.

If the cross-price elasticity of demand for two goods is 1.25, then

the two goods are substitutes.