Elasticity

Along a linear demand curve, the price elasticity of demand is: a. increasing as you move from left to right down the demand curve. b. constant as you move from left to right down the demand curve. C. decreasing as you move from left to right down the demand curve.

C. decreasing as you move from left to right down the demand curve.

If the estimated price elasticity of supply for chickens is 0.20, then a [ Select ] change in price is associated with a [ Select ] change in the quantity of chickens

Answer 1: 1% Answer 2: .20%

The price elasticity of demand is defined as the: A. change in price per unit change in quantity demanded. B. percent change in quantity demanded per percent change in price. C. percent change in price per percent change in quantity demanded. D. change in quantity demanded per unit change in price

B. percent change in quantity demanded per percent change in price

One estimate of the price elasticity of demand for coffee is 0.25. Which of the following is the correct interpretation of this estimate? a. none of these b. A 1% increase in the price of coffee is associated with a 25% reduction in the quantity of coffee demanded. c. A 1% increase in the quantity of coffee demanded is associated with a 0.25% reduction in the price of coffee. D. A 1% increase in the price of coffee is associated with a 0.25% reduction in the quantity of coffee demanded.

D. A 1% increase in the price of coffee is associated with a 0.25% reduction in the quantity of coffee demanded.

For a given price and quantity, a supply curve that is relatively steeper with be more elastic. True False

False

The price elasticity of demand is equal to the slope of the demand curve. True False

False

For a given price and quantity, a demand curve that is relatively more flat will be more elastic. True or False

True

Scenario 5-3 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% . Total consumer spending on aged cheddar cheese will a. decrease, and total consumer spending on bread will decrease. b. increase, and total consumer spending on bread will decrease. c. decrease, and total consumer spending on bread will increase. d. increase, and total consumer spending on bread will increase.

a. decrease, and total consumer spending on bread will decrease.

The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the a. supply of wheat is elastic. b. demand for wheat is elastic. c. demand for wheat is inelastic. d. supply of wheat is inelastic.

b. demand for wheat is elastic.

Scenario 5-3 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 change in equilibrium price will be: a . Any of the above could be correct. b. greater in the aged cheddar cheese market than in the bread market. C. greater in the bread market than in the aged cheddar cheese market. D. the same in the aged cheddar cheese and bread markets.

b. greater in the aged cheddar cheese market than in the bread market.

if the price elasticity of demand for gasoline is 0.5 in over a 1 year period, then we might expect that a 1% increase in the price would a. reduce quantity demanded by 0.5% over the next year, and reduce quantity demanded by less than 0.5% after that. b. reduce quantity demanded by 0.5% over the next year, and reduce quantity demanded by more than 0.5% after that. C. reduce quantity demanded by 50% over the next year, and then by more after that. d. reduce quantity demanded by 0.5% over the next year, then then quantity demanded would return to its previous state after that.

b. reduce quantity demanded by 0.5% over the next year, and reduce quantity demanded by more than 0.5% after that.

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true? a. Both programs would decrease revenues for cigarette manufacturers. b. Both programs would increase the price of cigarettes. c. Both programs would reduce the quantity of cigarettes sold. d. All of the above are correct.

c. Both programs would reduce the quantity of cigarettes sold

A decrease in supply will cause the largest increase in price when a. demand is elastic and supply is inelastic. b. demand is inelastic and supply is elastic . c. both supply and demand are inelastic. D. both supply and demand are elastic.

c. both supply and demand are inelastic.

Which of the following goods is likely to have the most elastic demand in the short run? EDIT: This question isn't very clear. There's no objective reason to choose between luxury yachts and Marlboro cigarettes, the two best candidate solutions. a milk b. Marlboro cigarettes c. luxury yachts d. cigarettes

c. luxury yachts

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then .a. wheat farmers would suffer a reduction in their total revenue. b. consumers of wheat would buy more wheat. c. wheat farmers would experience an increase in their total revenue. d. the demand for wheat would decrease.

c. wheat farmers would experience an increase in their total revenue.

Scenario 5-3 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 equilibrium price will: a. decrease in the aged cheddar cheese market and increase in the bread market. b. increase in the aged cheddar cheese market and decrease in the bread market. c. increase in both the aged cheddar cheese and bread markets. d. decrease in both the aged cheddar cheese and bread markets.

d. decrease in both the aged cheddar cheese and bread markets.