Microeconomics Chapter 6
The percentage change in quantity demanded divided by the percentage change in income is the formula for the ______ elasticity of demand.
income
If product demand is relatively elastic and the price is decreased, total revenue will ____________.
increase
A 5% decline in the price of cut flowers results in a 3% increase in the quantity demanded. Therefore, the demand for cut flowers is ______.
inelastic
A small percentage change in quantity demanded divided by a larger percentage change in price indicates _______ demand.
inelastic
A product that exhibits perfectly elastic demand has a price elasticity coefficient equal to ______.
infinity
If product demand is relatively elastic, what will be the effect on the total revenue if the price is increased?
it decreases
Supply for one-of-a-kind antiques is ______.
perfectly inelastic
Which of the following goods and services would most likely exhibit an inelastic price elasticity of demand coefficient?
-Medical care -Salt -Automobile repairs
When demand is unit elastic, the percentage change in quantity demanded is ______ the percentage change in price.
= to
Which of the following goods or services is more likely to be price inelastic?
An appendectomy
What type of demand is represented by a given change in price that leads to a larger change in the quantity demanded?
Elastic
Which of the following explain the high prices of antiques?
-Strong demand -Highly inelastic supply -Limited supply
What does "shiftability" refer to in economics?
A firm's ability to move resources from the production of one product to another
Which of the following represents a perfectly elastic demand curve?
A horizontal line
How is a buyer's responsiveness to price changes measured?
By the price elasticity of demand coefficient
Which type of elasticity shows how responsive demand is to a change in earnings?
Income elasticity of demand
What type of price elasticity of demand results from a relatively small percentage change in quantity demanded divided by a relatively larger percentage change in price?
Inelastic
Which of the following is true when the demand is unit elastic?
The percentage change in quantity demanded is equal to the percentage change in price.
Total revenue will rise under which of the following circumstances?
When the price falls on a good or service with an elastic price elasticity of demand
Calculating the percentage change in quantity demanded for a given product involves dividing the ______ by the ______.
change in quantity demanded; original quantity demanded
To calculate the ______, take the percentage change in quantity demanded of product X and divide by the percentage change in the price of product Y.
coefficient for the cross-price elasticity of demand
By comparing two different products, _____ elasticity of demand provides insight into consumer behavior concerning substitute and complementary goods.
cross
By comparing two different products, ________ elasticity of demand provides insight into consumer behavior concerning substitute and complementary goods.
cross
The government uses the idea of the ______ elasticity of demand to determine whether a proposed merger between two firms is a good idea.
cross
When the price elasticity of demand is inelastic, a decrease in price will ______ total revenue.
decline
The formula for the cross elasticity of demand is written as the percentage change in the quantity demanded of one product by the percentage change in the price of another product. (Do not use symbols)
divided
Demand for a specific brand of handbag is more price ______ than demand for handbags in general.
elastic
Demand is relatively price _______ when price and total revenue change in opposite directions.
elastic
If the quantity supplied by producers is relatively responsive to price changes, supply is relatively price _______.
elastic
When the price elasticity of demand is relatively ______, a price decrease will increase total revenue.
elastic
Restaurant meals, smartwatches, and concert tickets are all examples of goods that exhibit higher price _____ of demand.
elasticity
True or false: A positive income elasticity coefficient designates an inferior good.
false
If demand is ______, a price decrease will reduce total revenue.
inelastic
If the price elasticity coefficient of supply is less than 1, supply is ______.
inelastic
When the demand for a product is and the price is reduced, total revenue will fall.
inelastic
When the price elasticity of demand is perfectly _______, a change in price causes no change in the quantity demanded.
inelastic
The formula for calculating price elasticity of demand that involves terms for the average of two quantities and the average of two prices is known as the _____.
midpoint
We can expect a greater response, and therefore greater elasticity of supply, the ______.
more time the firm has to react to price changes
A corporate merger between two firms is more likely to meet with government approval if the cross elasticity coefficient of demand for both firms' products is ______.
near zero
Any good for which more is demanded as income rises is a(n) ______ good.
normal
If the income elasticity coefficient is positive, then the good is a _________ good.
normal
In measuring consumer responsiveness, we use ______ rather than absolute amounts.
percentages
A product for which a small change in price leads to a large change in the amount purchased is considered ______.
relatively elastic
If the quantity demanded changes only slightly in response to a significant change in price, the demand is said to be ______.
relatively inelastic
Larger positive cross elasticity implies greater ______ between two products.
substitutability
If the cross-price elasticity of demand between two goods is positive, then the pair must be ______.
substitutes
The percentage change in quantity supplied divided by the percentage change in price measures the price elasticity of _______.
supply
What is represented by the P x Q rectangle lying below a point on a demand curve?
total revenue
True or false: When an increase in the price of one good decreases the demand for another good, the goods are called complementary goods.
true
True or false: When considering the price elasticity of supply, price and total revenue always move together.
true
How many products (goods and services) are considered when referring to the cross elasticity of demand formula?
two
A 3% decrease in the price of sugar causes a 3% increase in the quantity demanded. In this example, the demand for sugar has ____ elasticity.
unit
Why is the supply curve more elastic in the long run than in the short run?
Because firms have time to adjust their plant sizes
In the upper-left portion of a linear demand curve, price elasticity of demand tends to be which of the following?
MORE ELASTIC
The demand for Reebok sneakers is relatively price
elastic
True or false: The price elasticity of supply is the percentage change in price divided by the percentage change in quantity supplied.
false
A decrease in price will lead to a decrease in total revenue if demand is ______.
inelastic
If the loss in revenue from a lower price is exactly offset by the gain in revenue from the increase in sales, then the price elasticity of demand is ______.
unit elastic
Which of the following are reasons that economists use percentages rather than absolute amounts to measure consumer responsiveness?
-Using percentages allows economists to correctly determine consumer responsiveness in relation to changes in prices of different products. -Using absolutes might arbitrarily affect the impression of buyer responsiveness.
With price elasticity of supply, the supply curve slopes upward because of the positive relationship between which of the following?
Price and amount supplied
Total revenue can be graphically evaluated and depicted using the ______ curve.
demand
Which of the following typically varies over the different price ranges of the same demand curve?
Elasticity
In the price-elasticity coefficient formula, the numerator being greater than the denominator indicates that demand is ______.
elastic
Supply is ______ if the price elasticity coefficient is greater than 1.
elastic
The more a good or service is considered to be a luxury rather than a necessity, the more ______ the demand for the good.
elastic
The price elasticity of supply is much more ________ in the long run than in the short run.
elastic
When prices and total revenue change in opposite directions, the price elasticity of demand is ______.
elastic
The demand for most farm products is ______.
highly inelastic
If product demand is relatively elastic and the price is decreased, total revenue will
increase
When the price elasticity of demand for a product is relatively price elastic and price is ______, total revenue will ______.
increased; decrease
If a 4% decrease in the price of coffee leads to a 2% increase in the quantity demanded, the price elasticity of demand for coffee is relatively price ______.
inelastic
When the price elasticity of demand is perfectly ________, a change in price causes no change in the quantity demanded.
inelastic
When the price elasticity of demand is perfectly _________ , a change in price causes no change in the quantity demanded.
inelastic
When the price elasticity of demand is perfectly_____. a change in price causes no change in the quantity demanded.
inelastic
A product that is considered to be a necessity would have a _____ price elasticity of demand.
low
A demand curve that runs parallel to the vertical axis indicates a(n) ______.
perfectly inelastic
When a change in price does not cause a change in the quantity demanded, the price elasticity of demand is considered ______.
perfectly inelastic
A demand curve that runs parallel to the vertical axis indicates a(n) ______.
perfectly inelastic demand
If the quantity supplied by producers is relatively insensitive to price changes, supply is ______.
relatively price inelastic
In the ______ period, a farmer would have time to cultivate a crop more intensively by applying more variable inputs, such as labor, fertilizer, and pesticides.
short-run