MicroEconomics Unit 3

At a price of $20 per unit, 140 units of good W are demanded and 100 units are supplied. When the price is raised to $30 per unit, 100 units are demanded and 140 units are supplied. The price elasticity of supply in this range is:

Which will cause a demand curve to be relatively elastic?

You are the sales manager for a software company and have been informed that the price elasticity of demand for your most popular software is less than 1. To increase total revenues, you should:

An increase in the price of a good will cause total revenue to fall if price elasticity of demand is:

If an increase in the supply of a product results in a decrease in the price, but no change in the actual quantity of the product exchanged, then:

Economists distinguish between the short run and the long run by noting that:

Which product is most likely to be the most price elastic?

Along a linear downward-sloping demand curve, the price elasticity of demand will be:

When the demand for a good is price-elastic at a given output level,

A product priced at $5 has annual sales of 1,000 units. When price is reduced to $4, quantity increases to 1,250 units. Other things unchanged, the price elasticity of demand for the product is:

The supply curve for cars will be more elastic the:

The price elasticity of demand is a measure of the:

If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price:

Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume. The price elasticity of demand is:

Which is not characteristic of a product with relatively inelastic demand?

What effect would a rule stating that university students must live in university dormitories have on the price elasticity of demand for dormitory space? What impact might this in turn have on room rates?

7.You are chairperson of a state tax commission responsible for establishing a program to raise new revenue through excise taxes. Why would elasticity of demand be important to you in determining the products on which the taxes should be levied?

9.Because of a legal settlement over state health care claims, in 1999 the U.S. tobacco companies had to raise the average price of a pack of cigarettes from $1.95 to $2.45. The decline in cigarette sales was estimated at 8 percent. What does this imply for the elasticity of demand for cigarettes? Explain.

10.The income elasticities of demand for movies, dental services, and clothing have been estimated to be +3.4, +1, and + .5, respectively. Interpret these coefficients. What does it mean if an income-elasticity coefficient is negative?