econ test2
When the price of a Starbucks latte is $5, the quantity demanded is 100 lattes per day. When the price is $7, the quantity demanded is 80 lattes per day. Using the midpoint method, the price elasticity of demand for Starbucks lattes is
.67
for substitutes cross price elasticity is
>0
Which of the following is NOT correct? A. Taxes levied on sellers and taxes levied on buyers are not equivalent. B. A tax places a wedge between the price the buyer pays and the price that the seller receives. C. The wedge between the buyer's price and the seller's price is the same, regardless of whether the tax is levied on the buyer or seller. D. In the new after-tax equilibrium, buyers and sellers share the burden of the tax.
A taxes are equivalent
. Suppose demand is perfectly inelastic and the supply of the good in question decreases. As a result, A. the equilibrium quantity decreases and the equilibrium price is unchanged. B. the equilibrium price increases and the equilibrium quantity is unchanged. C. the equilibrium quantity and the equilibrium are both unchanged. D. the equilibrium quantity decreases and the equilibrium price decreases.
B
Erin produces jewelry boxes. If the demand for jewelry boxes is elastic and Erin wants to increase her total revenue, she should A. increase the price of the jewelry boxes B. decrease the price of the jewelry boxes C. not change the price of the jewelry boxes D. none of the above answers is correct
B if elastic then lower price to make more money
If the government levies a $5 tax per tablet computer on buyers of tablet computers, then the price paid by buyers of tablet computers would likely
Increased by 5
an excise tax of 11$ placed on bikes will shift the demand curve in what way
It wont excise= supply left 11
Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts? A. It increases. B. It decreases. C. It remains unchanged. D. It may increase or decrease depending on the shape of the supply curve
a
Which of the following goods would have the steepest demand curve? A. Ben & Jerry's cookie dough ice cream B. McDonald's Big Mac hamburger C. Chevron gasoline D. Apple iPhone smartphone
c
the relationship of elasticity to slope
closely related but not equal
cross price elasticity is <0 for
compliments
the amount a consumer is willing to pay minus what he actually pay
consumer surplus
Sheldon loves strawberry Nestle Quik and he would be willing to pay more for the drink mix than he now currently pays. Suppose that Sheldon has a change in his tastes such that he values strawberry Nestle Quik more than before. If the market price is the same as before, then
consumer surplus rise
Which of the following goods would have a relatively large deadweight loss if a tax was levied on that good? A. a gallon of milk B. a gallon of gasoline C. a cup of coffee D. a ticket to a football game
d
Which of the following is correct? A. The demand for Ralph Lauren clothing is more elastic than the demand for basic clothing. B. The demand for gasoline is less elastic than the demand for tickets to Walk Disney World. C. The demand for Pepsi Cola is more elastic than the demand for milk. D. All of the above statements are correct.
d
when tax decreases dwl____ and total revenue
decrease increase
Suppose a tax is levied on books. If the sellers end up bearing most of the tax burden, we know that the
demand is elastic
sellers bare most of tax burden when
demand is elastic
buyers bare most of burden of tax when
demand is inelastic
substitutes available time frame narrowly or broadly defined luxury or necessity
determinants of elasticity of demand
aalocation of resources that maximizes total surplus
efficient
demand >1
elastic
supply>1
elastic
how much qs responds to change in p
elasticity of supply
example of perfectly elastic
farmers
examples of inelastic items
gasoline, necessities
for many good price elasticity is ________in the long run because
greater
the more easily sellers can change the quantity they produce
greater price elasticity of supply
measures response of qd related to change in income
income elasticity of demand
when tax increases dwl_____ and total revenue
increases and decreases
demand< 1
inelastic
supply<1
inelastic
income elasticity is negative for
inferior goods
demand is elastic dwl is
larger
sales tax shifts the d curve
left by the amount of the tax
if demand is elastic_____ price to make more money
lower
buyer that would leave market if price were higher
marginal buyer
seller who would leave market if price were lower
marginal seller
economists use price elasticity of demand to
measure how much buyers respond to a change in price of a good
you can increase surplus by
moving toward equilibrium quantity
Suppose a good has a positive income elasticity of demand, such as 0.99. This implies the good is
normal
income elasticity is positive for
normal goods
price floor below the equi. price is
not binding
price ceiling above the equi. price is______ and has
not binding and has no effect on market outcomes
demand =infinity
perfectly elastic
supply= infinity
perfectly elastic
demand=0
perfectly inelastic
supply=0
perfectly inelastic
legal maximum set for pice of a good
price ceiling
numerical measurement of the responsiveness of quantity demanded based on change in price
price elasticity of demand
leagal minimum for price of a good
price floor
When the price of a good falls, A. consumer surplus decreases for original buyers because some new buyers will now purchase the product B. producer surplus rises because existing firms gain an extra benefit and new firms will now enter the market C. consumer surplus rises because existing buyers gain an extra benefit and some buyers will now leave the market and not purchase the product D. producer surplus decreases for some firms will now leave the market and those sellers that remain will see their producer surplus decrease
price goes down consumer surplus rises and producer surplus decreases
more revenue on each unit you sell but you sell fewer units due to law of demand results from
price increase
ammount seller is paid minus his actual cost
producer surplus
if demand is inelastic _______price to make more money
raise
with a shortage sellers must
ration goods among buyers
what is the shape of the demand curve for a good with few substitutes
relatively vertical
demand is said to be elastic if buyers
respond substantially to change in price
the fall in revenue from lower q is greater than the increased revenue from higher p so....
revenue falls
the fall in revenue from lower q is smaller than the increase in revenue from higher p so....
revenue rises
price ceiling is binding constraint on the price causes a
shortage
in the long run supply and demand are more price elastic
shortage is larger
when demand is inelastic dwl
smaller
DWL is higher
supply is elastic
DWL is low when
supply is inelastic
excise tax shifts what graph
supply to the left by ammount of tax
how the burden of tax is shared among market participants
tax incidence
the affects of p and q and the tax incidence are the same whether
tax is imposed on buyers or sellers
demand =1
unit elastic demand
the floor is a binding constraint on the
wage causes an surplus