question
Elasticity is a measure of how much___and___will respond to a change in market conditions
answer
consumers; producers
question
Price elasticity of demand describes the size of the change in the quantity demanded of a good or service when its ___ changes.
answer
price
question
The general formula for the price elasticity of demand is
answer
% change in Q demanded / % change in P.
question
Suppose the quantity demanded for coffee went from 10 million cups at $2 to 15 million cups at $1.50. Using the mid-point formula, the price elasticity of demand is ______ approximately.
answer
-1.4
question
A percentage change is the
answer
difference between the starting and ending levels divided by the starting level, expressed as a percentage.
question
What term do we use to describe a measure of how sensitive producers and consumers are to price changes?
answer
Elasticity
question
The mid-point method of calculating the price elasticity of demand avoids the problem related to___of the the price movement.
answer
direction
question
The size of the change in the quantity demanded of a good when its price changes can be described by which of the following?
answer
price elasticity of demand
question
One factor that does NOT determine the price elasticity of demand is
answer
price of related complements
question
Describe the following equation:
%ΔQD%ΔP%ΔQD%ΔP
Multiple choice question.
%ΔQD%ΔP%ΔQD%ΔP
Multiple choice question.
answer
price elasticity of demand
question
If a good has close substitutes, the demand will tend to be ____ elastic than a good with only distant substitutes.
answer
more
question
Suppose the demand for coffee went from 12 million cups at $2 to 15 million cups at $1.50. Using the mid-point formula, the price elasticity of demand is approximately ________
answer
-0.78
question
When a good is a basic necessity, compared to a luxury, demand will tend to be
answer
less elastic
question
The following equation,
Q2−Q1Q1Q2-Q1Q1 x 100
illustrates a change in quantity demanded.
Q2−Q1Q1Q2-Q1Q1 x 100
illustrates a change in quantity demanded.
answer
percentage
question
When demand is perfectly ___ the demand curve is horizontal
answer
elastic
question
The mid-point method of calculating the price elasticity of demand
answer
avoids the problem related to the direction of the price movement.
question
Which of the following factors determine the price elasticity of demand?
answer
- availability of substitutes
- time needed to adjust to price change
- time needed to adjust to price change
question
If close substitutes are available for a particular good, then the demand for that good will be more elastic than if only distant substitutes are available.
answer
True
question
When the absolute value of the price elasticity of demand is greater than one, we say that demand is
answer
Elastic
question
Which of the following would likely have the least elastic demand?
answer
Insulin
question
When the absolute value of the price elasticity of demand is less than one we say that demand is
answer
Inelastic
question
When demand is perfectly inelastic, consumers are
answer
not sensitive to price
question
When the absolute value of the price elasticity of demand is equal to ___ we say that demand is unit-elastic.
answer
one
question
If demand is relatively inelastic, then an increase in price will cause
answer
an increase in total revenue
question
When the absolute value of the price elasticity of demand is greater than____ , we say that demand is elastic.
answer
one
question
Total revenue is the quantity of a good or service that is sold
answer
multiplied by the price paid for each unit.
question
When the absolute value of the price elasticity of demand is less than one, we say that demand is
answer
Inelastic
question
When demand is perfectly inelastic, the demand curve is
answer
vertical
question
When the price effect _____ the quantity effect, a price increase will cause an increase in revenue.
Multiple choice question.
Multiple choice question.
answer
outweighs
question
When the absolute value of the price elasticity of demand is equal to one, we say that demand is ___-elastic.
answer
unit
question
A line with a slope of (-5) will be _____ than a line with a slope of (-2).
answer
- more inelastic
- less elastic
- steeper
- less elastic
- steeper
question
Knowing whether the demand for a good is elastic or inelastic is useful in business, because it allows a manager to determine whether a price increase will cause total___ received by the firm to rise or fall.
answer
revenue
question
When demand is elastic and the price changes,
answer
the quantity effect outweighs the price effect.
question
Total revenue is the___ sold multiplied by the___paid for each unit. (Enter one word in each blank.)
answer
quantity; price
question
When demand is inelastic,
answer
price and total revenue move in the same direction
question
True or false: The price elasticity of demand for the good with a linear demand curve at a price of $25 will be higher than the price elasticity of demand for the good at a price of $5.
answer
True (Demand tends to be more elastic at higher prices along a linear demand curve.
question
When the price effect outweighs the quantity effect, a price
answer
increase will cause an increase in revenue
question
The farther the number representing the slope is from ___, the steeper the curve will be.
answer
zero
question
When demand is elastic,
answer
a price increase causes total revenue to fall.
question
Price elasticity of supply describes the size of the change in the quantity supplied of a good or service when its changes.
answer
price
question
Demand tends to
answer
be more elastic when price is high and more inelastic when price is low.
question
When there is a decrease in price, the___ effect on revenue results from selling the units of the good at a lower price.
answer
price
question
The price elasticity of supplyBlank 1Blank 1 supply , Correct Unavailable is given by:
%ΔQS%ΔP
%ΔQS%ΔP
answer
supply
question
The closer the number representing the slope is to zeroBlank 1Blank 1 zero , Correct Unavailable, the flatter the curve will be.
answer
zero
question
Suppose the price of coffee beans goes from $1 to $1.35 per pound, production increases from 72 million bags of coffee beans per year to 100 million bags. Using the midpoint method, the price elasticity of supply would be ____.
Multiple choice question.
Multiple choice question.
answer
1.09
question
Price elasticity of supply describes
answer
the size of the change in the quantity supplied of a good or service when its price changes.
question
The factors that affect the price elasticity of supply do not include
answer
relative need and relative cost
question
If producing more of a good costs a lot more than the initial quantity did,
answer
supply will be less elastic
question
The general formula for the price elasticity of supply is
answer
% change in Q supplied/ % change in P.
question
To evaluate what happens if the price of Dunkin' Donuts coffee falls but the price of a Starbucks latte stays the same, we use the
Multiple choice question.
Multiple choice question.
answer
cross-price elasticity of demand.
question
Suppose the price of coffee beans goes from $1 to $1.20 per pound, production increases from 90 million bags of coffee beans per year to 100 million bags. Using the midpoint method, the price elasticity of supply would be approximately, _______.
Multiple choice question.
Multiple choice question.
answer
0.60
question
To determine how much the quantity demanded changes in response to a change in consumers' incomes, we look at
answer
income elasticity of demand
question
Total revenue will increase when price increases and demand is
answer
inelastic
question
The general formula for the income elasticity of demand is
Multiple choice question.
Multiple choice question.
answer
% change in Q demanded / % change in income.
question
What are the factors that affect the price elasticity of supply?
answer
- Time needed to adjust to changes in price
- The flexibility of the production process
- The availability of inputs
- The flexibility of the production process
- The availability of inputs
question
Necessities and luxuries have income elasticities greater than zero; therefore they are ___ goods.
answer
normal
question
The elasticity of supply, in general, depends on the elasticity of the supply of
answer
inputs
question
Cross-price elasticity of demand describes how
answer
the quantity demanded of one good changes when the price of a different good changes.
question
The income elasticity of demand for a good describes how much
answer
the quantity demanded changes in response to a change in consumers' incomes.
question
Percentage change using the mid-point method is given by
answer
the difference in the values divided by the average value, times 100.
question
What does the following equation show?
%ΔQD%ΔIncome%ΔQD%ΔIncome
Multiple choice question.
%ΔQD%ΔIncome%ΔQD%ΔIncome
Multiple choice question.
answer
income elasticity
question
When a variable, x, increases and a variable, y, decreases, the slope of the line is
answer
neative
question
If a good is a necessity, income elasticity of demand will be
answer
positive but less than 1
question
The___of a vertical line is zero. The ___of a vertical line is mathematically undefined.
answer
elasticity; slope
question
The same change in Q or P is a different percentage of the midpoint at different points on a line with constant slope. As a result,
answer
moving down the demand curve means less elasticity.
question
The midpoint method for calculating percentage change
answer
measures the percentage change relative to a point midway between the two measured points.
question
When two variables, x and y, move in opposite directions, they are said to demonstrate a
answer
negative relationship
question
The ___of a horizontal line is zero. The___of a horizontal line is mathematically undefined.
answer
slope; elasticity
question
What is one characteristic of slope and elasticity along a linear curve?
answer
Slope is constant while elasticity changes
question
Use the demand schedule in the table below to answer the following questions. Use the mid-point method when calculating elasticity.
a. The price elasticity of demand for a price change from $2 to $3 is:
The slope of the demand curve for a price change from $2 to $3 is: .
b. The price elasticity of demand for a price change from $3 to $5 is: The slope of the demand curve for a price change from $3 to $5 is: .c. The price elasticity of demand for a price change from $6 to $7 is: The slope of the demand curve for a price change from $6 to $7 is: .
a. The price elasticity of demand for a price change from $2 to $3 is:
The slope of the demand curve for a price change from $2 to $3 is: .
b. The price elasticity of demand for a price change from $3 to $5 is: The slope of the demand curve for a price change from $3 to $5 is: .c. The price elasticity of demand for a price change from $6 to $7 is: The slope of the demand curve for a price change from $6 to $7 is: .
answer
a. -0.45 and -0.14
b. -1 and -0.14
c. -4.47 and -0..14
b. -1 and -0.14
c. -4.47 and -0..14
question
Calculate the percentage change in each of the following examples using the mid-point method.
a. 8 to 12:
b. 13 to 11:
c. 130 to 125:
d. 90 to 100:
a. 8 to 12:
b. 13 to 11:
c. 130 to 125:
d. 90 to 100:
answer
a. 40%
b. -16.67%
c. -3.92%
d. 10.53%
b. -16.67%
c. -3.92%
d. 10.53%
question
Use the demand curve in the figure above to answer the following questions. Use the mid-point method in your calculations.
a. The price elasticity of demand for a price change from $0 to $20
b. The price elasticity of demand for a price change from $20 to $40 c. The price elasticity of demand for a price change from $40 to $60
a. The price elasticity of demand for a price change from $0 to $20
b. The price elasticity of demand for a price change from $20 to $40 c. The price elasticity of demand for a price change from $40 to $60
answer
a. -0.14
b. -0.60
c. -1.67
b. -0.60
c. -1.67
question
Price decreases from $30 to $20. Demand is___ and total revenue___
answer
inelastic; decreases
question
Refer to the demand schedule below:
a. Suppose the price increases from $10 to $20. Demand is___ and total revenue___
b. Suppose the price increases from $30 to $40. Demand is___ and total revenue___
c. Suppose the price increases from $50 to $60. Demand is___ and total revenue___
a. Suppose the price increases from $10 to $20. Demand is___ and total revenue___
b. Suppose the price increases from $30 to $40. Demand is___ and total revenue___
c. Suppose the price increases from $50 to $60. Demand is___ and total revenue___
answer
a. inelastic: increases
b. inelastic: increases
c. elastic: decreases
b. inelastic: increases
c. elastic: decreases
question
When the price of paintings is set at $500, the local art gallery supplies 20 paintings per week. When the price of paintings increases to $750, the gallery supplies 25 paintings.
Calculate the price elasticity of supply using the mid-point formula. The price elasticity of supply is
Calculate the price elasticity of supply using the mid-point formula. The price elasticity of supply is
answer
0.55
question
When demand is elastic:
answer
a price increase causes revenue to fall
question
You have been hired by the government of Kenya, which produces a lot of coffee, to examine the supply of gourmet coffee beans. Suppose you discover that the price elasticity of supply is 0.85. When you share your information with the Kenyan government, you explain that a price elasticity of supply is 0.85 means that:
answer
if the price rises by 1 percent, the quantity supplied will increase by 0.85 percent.
question
A 10 percent decrease in consumer incomes leads to a 20 percent decrease in the quantity demanded of good D.
The income elasticity of this good is:
This good can best be described as:
The income elasticity of this good is:
This good can best be described as:
answer
2.0; normal and a luxury
question
a. Which of the following firms would tend to have the most elastic supply?
b. Which of the following products would tend to have the most inelastic supply?
b. Which of the following products would tend to have the most inelastic supply?
answer
a. A firm that has many substitute production processes for making its product
b. Paintings by van Gogh
b. Paintings by van Gogh
question
Use the graph in the figure below to calculate the price elasticity of supply between points A and B using the mid-point method. The price elasticity of supply between points A and B is
answer
1.0
question
Supply is more elastic over long periods than over short periods because:
answer
producers can make more adjustments in the long run than in the short run.
question
Although we could describe both the cross-price elasticity of demand between paper coffee cups and plastic coffee lids and the cross-price elasticity of demand between sugar and artificial sweeteners as highly elastic, the first cross-price elasticity is negative and the second is positive. This is because:
answer
paper coffee cups and plastic coffee lids are strong complements and sugar and artificial sweeteners are strong substitutes.
question
If the cross-price elasticity of goods A and B is 0.8, these goods are:
The size of the number indicates that these goods can best be described as:
The size of the number indicates that these goods can best be described as:
answer
substitutes; weak substitutes
question
Certain skilled labor, such as hair cutting, requires licensing or certification. This is costly and takes a long time to acquire. If this licensing requirement were removed, the price elasticity of supply for haircuts would:
answer
increase, or become more elastic, because more people could enter the occupation.
question
You are working as a private math tutor to raise money during spring break.
a. The price elasticity of demand for math tutoring might be elastic because:
b. The price elasticity of demand for math tutoring might be inelastic because:
a. The price elasticity of demand for math tutoring might be elastic because:
b. The price elasticity of demand for math tutoring might be inelastic because:
answer
a. the break provides students with more time to look for a substitute tutor.
b. students may need to use the limited break time to catch up on work.
b. students may need to use the limited break time to catch up on work.
question
In France, cheese is an important and traditional part of people's meals. The French eat about six times more cheese per person as is consumed in the United States. The demand for cheese can be expected to be more income-elastic in:
answer
the United States because the French will eat cheese regardless of income changes.
question
Suppose that when the average family income rises from $30,000 per year to $40,000 per year, the average family's purchases of toilet paper rise from 100 rolls to 105 rolls per year.
a. The income elasticity of demand for toilet paper is___
b. Toilet paper is___
c. The demand for toilet paper is___
a. The income elasticity of demand for toilet paper is___
b. Toilet paper is___
c. The demand for toilet paper is___
answer
a. 0.17
b. a normal good
c. income-inelastic (the income elasticity is greater than zero but less than one)
b. a normal good
c. income-inelastic (the income elasticity is greater than zero but less than one)
question
If price elasticity of demand is -0.3 and price decreases by 2 percent, quantity demanded will___ by ____
answer
increase; less than 2%
question
If income increases by 4 percent and the quantity demanded of a good then decreases by 8 percent, the good is:
answer
inferior (negative) and income-elastic (absolute value is greater than 1)
question
If the price elasticity of supply is 5, supply is said to be____
This means that a 1 percent increase in the price of the product will lead to a___change in the quantity supplied.
Supply is____to price changes.
If a 1 percent change in price leads to no change in the quantity supplied, supply is___
This means that a 1 percent increase in the price of the product will lead to a___change in the quantity supplied.
Supply is____to price changes.
If a 1 percent change in price leads to no change in the quantity supplied, supply is___
answer
elastic; 5%; responsive; perfectly inelastic
question
In the diagram below, draw the price effect and the quantity effect for a price change from $10 to $20.
Based on the graph, the___is larger.
Based on the graph, total revenue___
Based on the graph, the___is larger.
Based on the graph, total revenue___
answer
price effect; increases
question
In the diagram below, draw the price effect and the quantity effect for a price change from $30 to $20.
Based on the graph, the___is larger.
Based on the graph, total revenue___
Based on the graph, the___is larger.
Based on the graph, total revenue___
answer
price effect; decreases
question
In the diagram below, draw the price effect and the quantity effect for a price change from $60 to $70.
Based on the graph, the___is larger.
Based on the graph, total revenue___
Based on the graph, the___is larger.
Based on the graph, total revenue___
answer
quantity effect; decreases
question
You have noticed that the price of tickets to your university's basketball games keeps increasing but the supply of tickets remains the same. Supply might be unresponsive to changes in price because:
answer
there is a fixed number of stadium seats
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