Chapter 5: Elasticity

Question 1

Elasticity measures

Answer 1

the responsiveness of one variable when there is a change in another variable

Question 2

increase in price=___________ in quantity demanded= __________ the quantity supplied

Answer 2

decrease;increase

Question 3

the steepness of the demand curve gives us information about how

Answer 3

responsive the quantity demanded is to change in its price

Question 4

a flat demand curve is

Answer 4

more responsive, demand is elastic (big decrease in quantity demand)

Question 5

a steep demand curve is

Answer 5

less responsive, demand is inelastic (small decrease in quantity demand)

Question 6

Determinants of the price elasticity of demand

Answer 6

availability of substitutes, necessities VS luxuries, time horizon, share of income spent on the good,

Question 7

a product that has only a few substitutes (ex milk) is

Answer 7

Inelastic

Question 8

a product that has many substitutes (ex. pepsi) is

Answer 8

Elastic

Question 9

For important necessities like food, demand is

Answer 9

inelastic

Question 10

For luxuries, demand is

Answer 10

elastic

Question 11

a good where in the short run demand is inelastic but in the long run can become elastic ex. gasoline is

Answer 11

Time horizon

Question 12

how do we calculate price elasticity?

Answer 12

%change in quantity demanded/% change in price

Question 13

a negative number larger than -1 is

Answer 13

Elastic

Question 14

a negative number between -1 and 0 is

Answer 14

Inelastic

Question 15

how do we calculate Total Revenue?

Answer 15

price x quantity

Question 16

TR changes based on

Answer 16

quantity demanded

Question 17

if demand is inelastic TR and Price move in

Answer 17

the same direction

Question 18

if demand is elastic TR and P move in

Answer 18

opposite directions

Question 19

how to calculate cross price elasticity?

Answer 19

%change in demand for good 1 / %change in the price of good 2

Question 20

goods that are substitutes have a ___________ price elasticity

Answer 20

positive number

Question 21

goods that are complements have a ____________ price elasticity

Answer 21

negative number

Question 22

the steepness of the supply curve gives us info on

Answer 22

how responsive the quantity supplies of a product is to change in its own price

Question 23

if the supply curve is steep the supply is

Answer 23

inelastic

Question 24

if the supply curve is flat the supply is

Answer 24

elastc

Question 25

Determinants of the price elasticity of supply depends on, whats an example of an important determinant

Answer 25

how easy it is for suppliers to change their quantity supplied. an example is time horizon

Question 26

how can we calculate price elasticity

Answer 26

% change in quantity supplied/ % change in price

Question 27

If it is difficult to change the quantity supplied. increase in production costs is ___________, price increase is ________, the supply curve is _________ and the elasticity is ____________

Answer 27

large; large; steep; inelastic

Question 28

If it is easy to the change the quantity supplied. increase in production costs is ___________, price increase is ________, the supply curve is _________ and the elasticity is ____________

Answer 28

small; small; flat; elastic

Question 29

Inelastic Supply is ______ and ______________

Answer 29

steep; less responsive

Question 30

Elastic Supply is __________ and ___________

Answer 30

flat; more responsive

Question 31

Inelastic demand is _________ and ________________

Answer 31

steep; less responsive

Question 32

Elastic demand is _________ and _________________

Answer 32

flat, more responsive