exam 2
Suppose demand is unit elastic,
the percentage change in quantity demanded is equal to the percentage change in price.
In a competitive market, buyers and sellers are coordinated through
the price signal.
If the price elasticity of demand is equal to 0.5, then a 10 percent decrease in price will cause the quantity demanded to
increase by 5 percent
Suppose that a 5 percent increase in the price of good X causes a 2.5 percent decrease in the quantity demanded of good X and 10 percent increase in quantity supplied of good X. For good X, demand is ------ and supply is
inelastic, elastic
Perfectly elastic
infinity, horizontal
Perfectly inelastic
0
Inelastic
<1
Elastic
>1
Who are unambiguously worse off in the case of a price floor?
Buyers
Good A has a high price elasticity of demand; it is most likely that
Good A has many substitutes.
A decrease in demand.
a decrease in both equilibrium price and quantity
A price ceiling is
a government price control that sets the maximum allowable price and it tends to cause a shortage.
a decrease in quanity supplied
a leftward movement along the supply curve.
Suppose that the demand for good X has a low (inelastic) price elasticity, then a 10 percent increase in the price of good X will result in
a less than 10 percent decrease in the quantity demanded.
an increased in quanitity supplied
a rightward movement along the supply curve
a decrease in supply
a shift of the supply curve to the left
An increase in demand.
an increase in both equilibrium price and the equilibrium quanity
An increase in both demand and supply.
an increase in equilibrium quantity.
Mobile phones and mobile apps are ----- All other things being equal, when the prices of mobile phones fall, the ------mobile phones -------- and the demand for mobile apps -----.
complements, quanity demand of , rises , rises
An increase in supply.
decreases the equilibrium price and increases the equilibrium quantity.
The income elasticity of a normal good.
greater than 0
The cross-price elasticity of demand for a pair of substitutes.
greater than zero
the price elasticity of supply.
greater than zero
The cross-price elasticity of demand for a pair of complements.
less than zero
The sum of producer surplus and consumer surplus is maximized when
marginal benefit and marginal cost are equal.
Pareto efficiency occurs when
no one can achieve greater utility without someone else losing utility.
The price elasticity of supply is a measure of how sensitive producers are to a change in
output price.
Stephanie buys one coffee each morning, regardless of the price. we can conclude that Stephanie's demand for coffee is
perfectly inelastic.
A law that stipulates the maximum interest rate on loans
price ceiling
A reduction in the quality of goods and services.
price ceiling
A shortage will likely occur in the market.
price ceiling
Must be below the equilibrium price.
price ceiling
rent control in large U.S. cities
price ceiling
A given change in gasoline supply will result in a larger change in the equilibrium price of gasoline if the
price elasticity of demand for gasoline is lower.
A surplus will likely occur in the market.
price floor
U.S. government price guarantee for the price of sugar
price floor
minimum wage
price floor
the government regulated price is higher than the market equilibrium price.
price floor
If the government imposes a sales tax on a good, then the deadweight loss of the tax is the
reduction in the sum of the consumer surplus and producer surplus.
Total revenue will decrease if price
rises and demand is elastic.
An increase in supply.
shifts the supply curve to the right
If both supply and demand increase simultaneously, we will be certain that
the equilibrium quantity will increase.
For a given shift in supply, the less elastic is demand
the greater is the change in price.