ECON Chapter 5

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If sellers do not respond at all to a change in price, technological advancement must be great

False

A good will have a more inelastic demand the greater the availability of close substitutes

False

For a horizontal demand curve, slope is undefined and elasticity equals 0

False

If a 15 % increase in price causes a 30% decrease in quantity demanded, this product might have no close substitute

False

When quantity demanded responds only slightly to changes in price, demand is said to be unit elastic

False

A decrease in supply will cause the largest increase in price when both supply and demand are inelastic

True

Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth, Alice's demand for banana splits is perfectly inelastic

True

As the elasticity of supply approaches infinity, very small changes in price will lead to very large changes in quantity supplied

True

Concerning a vertical supply curve, suppliers will not respond to a change in price

True

Goods with close substitutes tend to have more elastic demands than do goods without close substitutes

True

If two supply curves pass through the same point and one is steep and the other is flat, the steeper supply curve is more inelastic

True

The demand for Rice Krispies is more elastic than the demand for cereal

True

The price elasticity of demand measures a buyer's responsiveness to a change in the price of a good

True

The price of calculators increases by 15% and the quantity demanded per week falls by 45%. the price elasticity is 3.

True

Chocolate Chip Cookie Dough ice cream would tend to have very elastic demand because it must be eaten quickly

False

Demand for a good is said to be inelastic if the quantity demanded increases substantially when the price falls by a small amount

False

Demand is elastic if elasticity is less than 1

False

Demand is inelastic if the elasticity is greater than 1

False

Demand is said to be elastic if the price of the good responds substantially to changes in demand

False

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the demand curve will be steeper

False

If a 30% change in price causes a 15% change in quantity supplied, then the price elasticity of supply is 1/2 and supply is elastic

False

If the elasticity of supply is zero, then supply is very elastic

False

If the elasticity of supply of a product is 2.5 we know that supply is inelastic

False

If the price elasticity of demand for a good is 4.0, then a 10% increase in price would result in a 4.0% decrease in the quantity demanded

False

If the quantity supplied is the same regardless of price, then the supply curve would be elastic

False

If the quantity supplied responses only slightly to changes in price, then supply is said to be elastic

False

In general, elasticity is the friction that develops between buys and sellers in a market

False

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price

False

Supply tends to be more elastic in the short run and more inelastic in the long run

False

The demand for gasoline will respond more to a change in price over a period of five weeks than a period of five years

False

The elasticity of a perfectly elastic supply curve equals 0

False

The flatter the demand curve that passes through a given point, the more inelastic the demand

False

The greater the price elasticity of demand the more likely the product is a necessity

False

The price elasticity of supply measures how much the quantity supplied responds to changes in input prices

False

When the price of knee braces increased by 25% the Brace Yourself Company increased their quantity supplied of knee braces per week by 75%. BYC's price elasticity of supply of knee braces is 0.33

False

Suppose the price elasticity of demand for basketballs is 1.20 A 15% increase in price will result in an 18% decrease in the quantity of basketballs demanded

True

The difference between slope and elasticity is that slope measures actual changes and elasticity measures percentage changes

True

The main determinant of the price elasticity of supply is time

True

The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price

True

When a supply curve is relatively flat, the supply is relatively elastic

True

Demand is unit elastic if elasticity is less than 1

False

If the price elasticity of demand is equal to 0, demand is unit elastic

Perfectly inelastic

As elasticity rises, the supply curve gets flatter

True

Demand for a good would tend to be more inelastic the fewer the available substitutes

True

Demand is inelastic if elasticity is less than 1

True

Demand is said to be unit elastic if quantity demanded changes by the same percent as the price

True

If a supply curve is horizontal it is said to be perfectly elastic and the price of elasticity of supply approaches infinity

True

If demand is perfectly inelastic, the demand curve is vertical and elasticity is equal to 0

True

Necessities tend to have price inelastic demands, whereas luxuries have price elastic demands

True

Price elasticity of supply measures how much the quantity supplied responds to changes in the price

True


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