Chapter 4 Using Supply and Demand

Question 0

relatively elastic good

Answer 0

elasticity of (d/s) greater than 1, sensitive to price changes

Question 1

price elasticity of demand

Answer 1

the percentage change in the quantity demanded divided by the percentage change in price
elasticity of demand = % change in quantity demanded/ % change in price

Question 2

unitary elasticity

Answer 2

price elasticity = 1, change in quantity just offsets change in prices

Question 3

relatively inelastic

Answer 3

price elasticity between 0 and 1

Question 4

infinite elasticity

Answer 4

flat curve, perfectly elastic

Question 5

zero elasticity

Answer 5

no change in (d/s) based on price, perfectly inelastic

Question 6

determinants of the elasticity of demand

Answer 6

1. availability of substitutes
2. relative price of the good consumed
3. length of time it takes to make an adjustment (often more elastic in long run than short run)

Question 7

price elasticity of supply

Answer 7

the percentage change in quantity supplied divided by the percentage change in price
elasticity of supply = % change in quantity supplied / % change in price

Question 8

supply curve short run vs. long run

Answer 8

In long run the stock of machines can be changed, so it is relatively elastic in long run and inelastic in short run

Question 9

shortage

Answer 9

people would like to buy something but simply cannot find it for sale at the going price

Question 10

surplus

Answer 10

sellers would like to sell their product, but they cannot sell as much of it as they would like at the going price

Question 11

supply curve = highly elastic

Answer 11

shifts in demand curve result mainly in changes in quantities

Question 12

demand curve = highly elastic

Answer 12

shifts in supply curve result mainly in changes in quantities

Question 13

taxes on goods & shift of burden to consumers

Answer 13

more inelastic demand curve = greater burden passed on to consumers

Question 14

short run vs. long run shifts

Answer 14

in short run shifts in d/s curve more likely to be reflected in prices, long run in quantities

Question 15

price ceiling

Answer 15

impose a maximum price that can be charged for a product

Question 16

price floors

Answer 16

impose a minimum price that can be charged for a product

Question 17

externalities

Answer 17

an activity that affects the options of others

Question 18

public goods

Answer 18

consuming the good does not diminish the capacity of others, up to a point