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