Microeconomics Homework 2 and Quiz 2 Practice Review

The supply of flour will decrease in the market.

A large amount of harvested grain used to make flour grows mold due to flooding. How will this affect the supply of flour in the market?

Goes in the opposite direction of the substitution effect.

Choose the wrong statement. Income effect of a normal good

0.75.

If the price of strawberries increases by 20%, and the quantity of strawberries demanded decreases by 15%, then the price elasticity of demand is equal to:

elastic.

It is very easy for Evelyn to find inexpensive inputs for her business. Evelyn's supply is therefore likely to be:

Consume more of the good that is relatively cheaper and stay on your original indifference curve

Substitution effect tells me to do what?

P = 5, Q = 150

Suppose the market demand curve for all-natural cosmetics is 200-10P. Also assume that the market supply curve for all-natural cosmetics is 100+10P. What should be the equilibrium price and equilibrium quantity

supply; inelastic

Suppose the price of real estate increases by 37.11% in New York City next year. If the quantity of new homes supplied does not change, the price elasticity of _____ will be perfectly _____ in New York City next year.

decrease by 6.1%.

The cross-price elasticity of demand between Fanta and Dr. Pepper has been estimated at 0.61. If the price of Dr. Pepper falls by 10%, the quantity demanded of Fanta will:

sum of consumer surplus and producer surplus.

The economic surplus in a market is the:

rise.

The income elasticity of demand for pears has been estimated as 2.46. If income grows by 12%, all other things equal, demand will:

4; elastic

The price of chicken breast rises from $3.30 per pound to $3.63 per pound. In response to this price change, the quantity demanded for chicken breast falls by 40%. The absolute value of the price elasticity of demand for chicken breast is _____, and the price elasticity of demand is _____.

perfectly elastic.

When the absolute value of the price elasticity of demand is infinite, demand is: