Econ Test 5

If the cross-price elasticity of two goods is positive, then those two goods are..

substitutes.

An increase in supply and an increase in demand..

will have an indeterminate effect on equilibrium price but will increase equilibrium quantity.

Using the midpoint method, what is the price elasticity of supply between points D and G? (Figure 5-13)

0.53

(Figure 5-13) Using the midpoint method, what is the price elasticity of supply between points B and C?

1.19

(Figure 5-11) When price falls from $50 to $40, it can be inferred that demand between those two prices is..

elastic, since total revenue increases from $5,000 to $8,000.

The price elasticity of demand measures how much..

quantity demanded responds to a change in price.

When consumers face rising gasoline prices, they typically..

reduce their quantity demanded more in the long run than in the short run.

Food and clothing tend to have..

small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.

(Table 5-5) Using the midpoint method, the income elasticity of demand for good Y is..

-2.33, and good y is and inferior good.

(Figure 5-11) An increase in price from $30 to $35 would..

decrease total revenue by $250.

(Figure 5-11) When the price is $30, total revenue is..

$9,000.

(Figure 5-10) Total revenue when the price is P1 is represented by the area(s)..

B + D

(Figure 5-13) Along which of these segments of the supply curve is supply most elastic?

Between A and B

When demand is inelastic within a certain price range, then within that price range..

an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price.

If the cross-price elasticity of two goods is negative, then those two goods are..

complements

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 good by 10%. The equilibrium quantity will...

decrease in the aged cheddar cheese market and decrease in the bread market.

(Figure 5-11) An increase in price from $20 to $30 would..

increase total revenue by $1,000.

The following graph shows the linear demand curve for a particular good. (Figure 5-7) For prices below $6, demand is price..

inelastic, and total revenue will fall as price rises.

The supply of a good will be more elastic, the..

longer the time period being considered.

There are few, if any, good substitutes for motor oil. Therefore, ..

the demand for motor oil would tend to be inelastic.