MICRO CHAP 5

If the price of a product falls by 15% and the quantity supplied falls by 25%, the elasticity of supply is:

1.67

If the price elasticity of demand is 10, then for every 1% increase in price, there is a:

10% decrease in quantity demanded.

Suppose that the quantity demanded for a product falls by 9% as people's incomes fall by 3%. What is the income elasticity for this good?

3.00

If the income elasticity of demand for tea is 0.50, tea is a:

Normal good

Which of these would result in a higher price elasticity?

a longer time period

If the cross elasticity of demand for two goods is negative, that means that they are:

complementary goods

Tax burdens are higher on consumers when:

demand is inelastic and supply is elastic.

If a product's price rises by 6% and its quantity demanded falls by 8%, then we can say that demand for this product is:

elastic

Suppose the price elasticity of demand is 3.0 and the price elasticity of supply is 0.08. The burden of an excise tax:

falls primarily on producers.

Which of the following products would have the highest price elasticity of demand?

hot dogs sold by a street vendor

A firm increases its price for a good and total revenues increase. From this, we can conclude that its demand:

is price inelastic.

If hot dogs and relish are complements, their cross elasticity of demand is:

less than 0

In general, the flatter the supply curve is, the:

more elastic is supply.

If soda and potato chips are complements, then their cross elasticity of demand is:

negative

A vertical demand curve represents demand that is:

perfectly inelastic

Knowing a product's price elasticity of demand allows economists to:

predict the amount by which quantity demanded will change in response to a change in price.

Most income taxes are:

progressive

(Figure: Impact of Tax on Market Equilibrium) Based on the graph, implementing a tax:

raises equilibrium price from $6 to $10 and lowers equilibrium quantity from 120 units to 100 units.

A tax in which the percentage of income tax rises as income falls is known as a:

regressive tax

If the cross price elasticity of demand for good A with respect to good B is 2.3, then good A is a(n):

substitute for good B.