Econ Chapter 6
What are two inferior goods?
Hamburger is inferior in comparison to steak and a bus ticket from LA to NY is inferior to a plane ticket from LA to NY
What are the main sources of gold price fluctuations?
Highly inelastic supply and shifts in demand
If you compute the price elasticity of demand using a quantity of tickets from 1 to 8 and using a quantity of tickets from 1,000 to 8,000, the value of the price elasticity of demand is
the same because the percentage change in quantity will remain the same.
What is the term that indicates the total amount the seller receives from the sale of a product in a particular time period?
Total Revenue
The % change in quantity demanded divided by the % change in income is the formula for the
income elasticity of demand
A firm charges different groups of customers different prices in order to
increase revenue and profit. Lower afternoon movie prices are an example of this type of pricing.
Walnuts and screwdrivers would be classified as what type of goods?
independent
When two goods are unrelated, they are called _____ goods
independent
A decrease in price will lead to a decrease in total revenue if demand is
inelastic
The price elasticity of demand for most farm products is relatively price ____.
inelastic
When demand is relatively price ______, the coefficient for the price elasticity of demand will be less than one
inelastic
An _______ good has a negative income elasticity coefficient
inferior
When demand is unit elastic, the % change in quantity demanded ______ the % change in price
is equal to
Substitutability
is the ease of switching from one good to another
The ______ the negative cross elasticity coefficient, the greater is the complementary relationship between the two goods
larger
The % change in quantity demanded of good X divided by the % change in the price of product Y is known as the:
Cross elasticity of Demand
What type of price elasticity of demand results from a relatively small % change in quantity demanded by a relatively larger % change in price?
Inelastic
According to McConnell, which of the following are viable arguments in favor of legalizing illegal drugs?
Legalization would reduce drug trafficking, Drugs should be treated like alcohol and regulated for purity, the current war on drugs has been unsuccessful
What goods would likely be affected the most by falling incomes during a recession?
Movie tickets, Flat screen TVs, cruise vacations
Luxuries vs _____ is one of the determinants of the price elasticity of demand
Necessitites
What is the term for a good that, as income rises, more of it is demanded?
Normal good
Which of the following reasons explain the high prices of antiques?
Relatively inelastic supply, strong demand, limited supply
What are viable arguments against the legalization of illegal drugs?
Removal of prohibitions will make drug use more socially acceptable, and overall demand for cocaine and heroin is more elastic than proponents think.
How many products (goods and services) are considered when referring to the cross elasticity of demand formula?
Two
The midpoint formula for calculating elasticity ____ the two prices and the two quantities
averages
Digital cameras and memory sticks are what type of goods?
complementary
As you move from higher to lower prices, the price elasticity of demand
declines
The income elasticity of demand measures the responsiveness of demand to a change in
earnings
If the quantity supplied by producers is relatively responsive to price changes, supply is relatively price _____
elastic
Restaurant meals, filet mignon, and cadillacs are all examples of goods that have relatively price _____ demand
elastic
Supply is _______ if the price elasticity coefficient of supply is greater than 1.
elastic
The ______ formula is used for calculating the price elasticity of demand
midpoint
The change in quantity, divided by the average quantity one and quantity two, divided by the change in price divided by the average of price one and price two is known as the ________ formula or approach for the price elasticity of demand.
midpoint
With substitute goods, an increase in the price of one good will cause consumers to buy ________ of the other good
more
Total revenue is calculated by ______ the product price by the quantity sold
multiplying
Research has found that an increase in the price of beer would reduce the amount of marijuana consumed. This research indicates that the cross elasticity of the two products is
negative so that beer and marijuana are complements
A ______ good is one that is demanded more as income rises
normal
When the price elasticity of demand is ______ ______, a change in prices causes no change in the quantity demanded.
perfectly inelastic
If two goods are substitutes, the cross elasticity of demand will be
positive
The ______ _______ of demand measures the responsiveness or sensitivity of consumers to a price change.
price elasticity
In the market period, the _____ curve is vertical
supply
The % change in quantity supplied divided by the % change in price measures the price elasticity of ______
supply
The proportion of income allocated to a particular good or service is a determinant of
the price elasticity of demand
The passage of _________ involved in making a decision is one determinant of the price elasticity of demand.
time
The price elasticity of demand and _______ revenue are inversely related
total
For all down-sloping demand curves, the price elasticity of demand is more elastic
toward the upper left
Total revenue will rise
when the price falls on a good/service with an elastic price elasticity of demand
