Microeconomics Exam 2
If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is?
-0.75.
Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is?
-1.
Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is?
-2.33.
Determinants of E*s
-availability of inputs -time over longer periods of time
The price elasticity of demand for bread?
-depends, in part, on the availability of close substitutes for bread. -is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. -reflects the many economic, social, and psychological forces that influence consumers' tastes for bread.
Determinants of price elasticity of demand?
-luxury good/necessity -more substitutions (more elastic) -portion of income -time
Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month when the price of beans is $3 per pound. Maddy's cross-price elasticity of demand for beans and rice is?
0.71, and they are substitutes.
Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about?
1.2, and X and Y are substitutes
Suppose Tinsel Town Videos lowers the price of its movie club membership by 10% and as a result, CineArts Videos experienced a 16% decline in its movie club membership. What is the value of the cross-price elasticity between the two movie club memberships?
1.6
If the cross price elasticity of demand is negative, then the goods are
Complements
Which of the following statements is correct??
The demand for bourbon whiskey is more elastic than the demand for alcoholic beverages in general.
Which of the following statements is correct?
The demand for grandfather clocks is more elastic than the demand for clocks in general.
Newspaper vending machines illustrate that publishers believe?
The marginal utility of a second identical newspaper is zero or less
Marginal Utility is the?
added satisfaction from consuming one more unit of a good
Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is?
assuming that the demand for university education is inelastic
When a tax is levied on sellers of tea?
both sellers and buyers of tea are made worse off.
If demand is price inelastic, then?
buyers do not respond much to a change in price.
The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on?
buyers of salt and the sellers of caviar.
The price elasticity of demand measures?
buyers' responsiveness to a change in the price of a good.
the government imposes a tax on champagne, buyers will bear the entire burden of the tax if?
demand curve for imported champagne is vertical
When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is?
elastic, and her demand curve would be relatively flat.
When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is?
elastic.
Which of the following is correct? A tax burden?
falls more heavily on the side of the market that is less elastic.
If marginal utility is negative, total utility is negative? True or False?
false
If price elasticity of demand is unit elastic, increases in price decreases total revenue? true or false
false
When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is?
inelastic.
Income elasticity of demand for a necessity is?
less than one but greater than 0
When a tax is placed on the sellers of a product, buyers pay?
more, and sellers receive less than they did before the tax.
when total utility is falling, marginal utility is...?
negative
To derive a demand curve using utility analysis
note how the utility-maximizing Quantity changes when price changes
Economists compute the price elasticity of demand as the?
percentage change in quantity demanded divided by the percentage change in price.
The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should?
raise the price of the cinnamon rolls
Total utility can be calculated as the...
sum of all marginal utilities
For a good that is a necessity, demand?
tends to be inelastic.
When quantity demanded responds strongly to changes in price, demand is said to be?
the steepness or flatness of the supply curve for the good.
Along a linear demand curve, as the price increases from zero...
total revenue first increases but eventually decreases
A $2.00 tax levied on the sellers of birdhouses will shift the supply curve?
upward by exactly $2.00.