Econ 202 Chapter 5

A perfectly elastic demand implies that

any rise in price above that represented by the demand curve will result in a quantity demanded of zero

For which of the following goods is the income elasticity of demand likely highest?

boats

A good will have a more elastic demand, the

greater the availability of close substitutes

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

inelastic

If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches

infinity, and the supply curve is horizontal

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

lower both price and total revenues

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

peanut butter and jelly

The price elasticity of supply measures how responsive

sellers are to a change in price

Generally, a firm is more willing and able to increase the quantity supplied in response to a price change when

the relevant time period is long rather than short

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

zero, and the supply curve is vertical