Econ 101 chapter 5

the demand for tired should be more inelastic than the demand for Goodyear brand tires.

true

the income elasticity of demand for luxury items, such as diamonds, tends to be large (greater than 1).

true

the price elasticity of supply tends to be more inelastic as the firms production facility reaches maximum capacity.

true

the supply of automobiles for this week is likely to be more price inelastic than the supply of automobiles for this year.

true

using the midpoint method to calculate elasticity, if an increase in the price of pencils from 10 cents to 20 cents reduces the quantity demanded from 1,000 pencils to 500 pencils, then the demand for pencils is unit price elastic.

true

if an increase in the price of a good has no impact on the total revenue in that market, demand must be?

unit price elastic

If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught, the fisherman's price elasticity of supply for fresh fish is?

zero

If consumers always spend 15% of their income on food, then the income elasticity of demand for food is?

1

suppose that at a price of $30 per month, there are 30,000 subscribers to cable tv in small town. if small town cable raises its prices to $40 per month, the number of subscribers will fall to 20,000. A) using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable tv in small town? B) At which prices does small town cable earn the greater total revenue?

A) 1.4 B) $30 per month

if the cross price elasticity between two goods is negative, the two goods are likely to be?

complements

If the demand for a good is price inelastic, an increase in its price will increase total revenue in the market.

true

a decrease in supply (shift to the left) will increase total revenue in that market if?

demand is price inelastic

If consumers think that there are very few substitutes for a good, then?

demand would tend to be price inelastic

if demand is linear (straight line), then price elasticity of demand is?

elastic in the upper portion and inelastic in the lower portion

if a demand curve is linear, the price elasticity of demand is constant along it.

false: elastic in upper portion inelastic in lower portion

the demand for a necessity such as insulin tends to be elastic.

false: inelastic

the demand for aspirin this month should be more elastic than the demand for aspirin this year.

false: longer time period, the more price elastic the demand curve is

the price elasticity of demand is defined as the percentage change in the price of that good divided by the percentage change in quantity demanded of that good.

false: percentage change in quantity demanded of a good divided by the percentage change in the price of that good

if the cross price elasticity of demand between two goods is positive, the goods are likely to be complements.

false: substitutes

an advanced in technology that shifts the market supply curve to the right always increases total revenue received by producers.

false: will only increase total revenue only if demand is price elastic

if the quantity demanded of a good is sensitive to a change in the price of that good, demand is said to be price inelastic.

false: demand would be price elastic

if the income elasticity of demand for a good is negative, it must be?

inferior good

is supply is price inelastic, the value of the price elasticity of supply must be?

less than 1

if the income elasticity of demand for a bus ride is negative, then a bus ride is an inferior good.

true

if the price elasticity of supply for blue jeans is 1.3, an increase of 10% in the price of blue jeans would increase the quantity supplied of blue jeans by 13%.

true

If there is excess capacity in a production facility, it is likely that the firm's supply curve is?

price elastic

In general, a flatter demand curve is more likely to be?

price elastic

if a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is?

price elastic

in general, a steeper supply curve is more likely to be?

price inelastic

technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to?

reduce total revenue to farmers as a whole because the demand for food is inelastic

what would cause a demand curve for a good to be price inelastic?

the good is a necessity

the price elasticity of demand is defined as?

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

if a supply curve for a good is price elastic, then?

the quantity supplied is sensitive to changes in the price of that good

the demand for what is most likely to be the most price inelastic?

transportation