Chapter 4 (MC)

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75 terms · Elasticity

Buyer responsiveness to price changes

The price elasticity of demand coefficient measures:

Percentage change in quantity demanded/percentage change in price

The basic formula for the price elasticity of demand coefficient is:

Consumer are largely unresponsive to a per unit price change

the demand for a product is inelastic with respect to price if:

decrease the quantity of X demanded by less than 4 percent

If the demand for product X is inelastic, a 4 % increase in the price of X will:

can be represented by a line parallel to the verical axis

A perfectly inelastic demand schedule:

Smaller the resulting price change for an increase in supply

The larger the coefficient of price elasticity of demand for a product, the:

From which th percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small

Most demand curves are relatively elastic in the upper-left portion becuase the original price:

demand will become less price elastic

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week:

Elastic in high-price ranges and inelastic in low-price ranges

The price elasticity of demand of a straight-line demand curve is:

More inelastic the demand for the product

A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:

increase the amount demanded by more than 10 percent

If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will:

negative, but the minus sign is ignored

the price elasticity of demand is generally:

demand is elastic at high prices

for a linear demand curve:

greater than one

If a demand for a product is elastic, the value of the price elasticity coefficient coefficient is:

the sensitivity of consumer purchases to price changes

The concept of price elasticity of demand measures:

graphs as a line parallel to the vertical axis

A perfectly inelastic demand curve:

perfectly inelastic

If quantity demanded is completely unresponsive to price changes, demand is:

perfectly elastic

A firm can sell as much as it wants at a constant price. Demand is thus:

perfectly elastic

A demand curve which is parallel to the horizontal axis is:

an increase in price will increase total revenue

When the percentage change in price is greater than the resulting percentage change in quantity demanded:

cause the firm's total payroll to decline

If a firm's demand for labor is elastic, a union-negotiated wage increase will:

relatively inelastic

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:

decease

If the demand for farm products is price inelastic, a good harvest wil cause farm revenues to:

relatively elastic

Other things the same, if a price change causes total revenue to change in the opposite direction, demand is:

increase the quantity demanded, but total revenue will be unchanged

if the price elasticity of demand for a product is unity, a decrease in price will:

does not apply to supply because price and quantity are directly related

the total-revenue test for elasticity:

inelastic

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is:

demand for education at GSU is inelastic

The state legislature has cut Gigantic State Univeersity's appropriations. GSU's Board of Regents decided to increase tuition fees to compensate for the loss of revenue. The board is assuming that the:

relatively price inelastic

the demand schedules for such products as eggs, bread, and electricity tend to be:

the greater the amount of time over which buyers adjust to a price change

The elasticity of demand for a product is likely to be greater

the larger the number of subsitutes and the greater the price elasticity of demand

the narrower the definitions of a product:

the greater will be the price elasticity of demand

the more time consumers have to adjust to a change in price:

less price elastic than the demand for Honda Accords

The demand for autos is likely to be:

greater in the long run than in the short run

Price elasticity of demand is generally:

relatively elastic

if price and total revenue vary in opposite direction, demand is:

relatively price elastic

The demand for a luxury good whose purchase would exhaust a big portion of one's income is:

relatively price inelastic

The demand for a neccessity whose cost is a small portion of one's total income is:

responsive the quantity supplied of X is to changes in the price of X

the price elasticity of supply measures how:

amount of time the producer has to adjust inputs in response to a price change

the main determinant of elasticity of supply is the:

will increase but equilibrium quantity will be unchanged

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:

the short-run supply curve for pork is less elastic than the long-run supply curve for pork

It takes a considerable amount of time to increase the production of pork

equilibrium quantity but equilibrium price will be unchanged

if the supply of product X is perfectly elastic, an increase in the demand for it will increase:

No conclusion can be reached with respect to the elasticity of supply

Suppose the price of a product rises and the total revenue of sellers increases

more elastic in the long run because there is time for firms to enter or leave the industry

Supply curves tend to be:

in the long run

For an increase in demand the price effect is smallest and the quantity effect is largest:

a change in price will have no effect on the quantity supplied

A supply curve that is a vertical straight line indicates that:

a change in demand will change the equilibrium quantity but not price

A supply curve that is parallel to the horizontal axis suggests that:

the less elastic the supply curve

An increase in demand will increase equilibrium price to a greater extent:

perfectly inelastic

The supply of known Monet paintings is:

increase street crime because the addict's demand for heroin is highly inelastic

An antidrug policy which reduces the supply of heroin might:

an increase in the minimum wage would increase the total incomes of eenage works as a group

Studies of hte minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that:

price inelastic in both the short and long run

Studies show that the demnd for gasoline is:

the price elasticity of demand for farm products is less than 1

Farmers often find that large bumper crops are associated with declines in their gross incomes. This suggests that:

the supply of old baseball cards is price inelastic

The price of old baseball cards rises rapidly with increases in demand because:

perfectly inelastic

The supply curve of a one-of-a-kind original painting is:

relatively elastic

The supply curve of antique reproductions is:

a 10 % increase in income will increase the purchase of toys by 20 percent

Suppose the income elasticity of demand for toys is +2.00. this means that:

lard is an inferior good

If the income elasticity of demand for lard is -3.00, this means that:

quantity demanded of X/ percentage change in price of Y

The formula for cross elasticity of demand is percentage change in:

the price of some other product

Cross elasticity of demand measures how sensitive purchses of a specific product are to changes in:

greater their substitutability

The larger the positive cross elasticity coefficient of demand between producs X and Y, the:

positive, indicating substitute goods

We would expect the cross elasticity of demand between Pepsi and Coke to be:

negative, indicating complementary goods

We would expect the cross elasticity of demand between dress shirts and ties to be:

tea to be positive, but negative for cream

Compared to coffee, we would expect the cross elasticity of demand for:

there are fewer good subsititutes for soft drinks as a whole than for Pepsi specifically

We would expect the cross elastiity of demand for Pepsi to be greater in relation to other soft drinks than that for soft drinks in general because:

positive and therefore these goods are substitutes

Suppose that a 10% increase in the price of normal good Y causes a 20% increase in the quantity demanded of normal good X. the coefficient of cross elasticity of demand is:

negative, and therefore these goods are complements

suppose that a 20% increase in the price of normal god Y causes a 10% decline in the quantiy demanded of normal good X. The coefficient of cross elasticity of demand is:

Positive and therefore X is a normal good

Assume that a 4% increase in income across the economy produces an 8 % increase in the quantity demanded of good X. The coefficent of income elasticity of demand is:

positive and therefore X is a normal good

Assume that a 6% increase in income in the economy produces a 3% increase in the quantity demnded of good X. The coefficient of income elasticity of demand is:

negative, and therefore X is an inferior good

Assume that a 3% increase in income accross the economy produces a 1% decline int eh quantity deanded of good X. The coefficient of income elasticity of deman for good X is:

ace bandage; firm rubber tie-down

Elastic demand is analogous to a ____________ and inelastic demand to a _____________.

quantity stretch

Elasticity can be though of as degree of relative:

a higher price to the group that has the less elastic demand

suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand. The firm might charge:

more elastic than the demand for the original software

Microscoft charges a substantially lower pice for a software upgrade than for the initial purchase of the software. This implies that Microsoft views the demand curve for the software upgrade to be:

colleges charging lower tuition for low-income students

Based on the concept of price elasticity of demand, which of the following cases is most likely to occur

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