Chapter 5 (most questions of exam 1) Flashcards

1
Q

Price elasticity of demand refers to the

A

percentage change in the quantity demanded in response to a percentage change in the price of a good

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2
Q

Demand price elasticity (the price elasticity of demand for good X) measures

A

how consumers change their purchases (in percentage terms) in response to a change in price brought about by a change in supply of a commodity

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3
Q

If demand price elasticity measures 2, this implies that consumers would

A

buy 2% more of the product in response to a 1 % drop in price

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4
Q

If the price elasticity of demand for a product measures .45,

A

this good is demand price elastic

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5
Q

If the percentage change in the quantity demanded of a good is less than the percentage change in price, price elasticity of demand is

A

inelastic

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6
Q

If the percentage change in the quantity demanded of a good is greater than the percentage change in price, price elasticity of demand is

A

elastic

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7
Q

If the percentage change in the quantity demanded of a good equals the percentage change in price, price elasticity is

A

unitary elastic

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8
Q

When demand is price inelastic

A

price and total revenue move in the same direction

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9
Q

If demand is inelastic, an increase in the price of a good will cause total revenue to

A

rise

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10
Q

If demand is price elastic, a decrease in price causes

A

an increase in total revenue

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11
Q

Suppose the president of a college argues that a 50% tuition increase will raise revenues for the college. It can be concluded that the president thinks that demand to attain this college is

A

inelastic, but not perfectly elastic

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12
Q

If a demand curve for a good was completely vertical, it would be considered

A

perfectly inelastic

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13
Q

An economist estimates that .67 is the price elasticity of demand for disposable diapers. This suggests that disposable diaper producers could

A

raise the price of disposable diapers to raise more revenue

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14
Q

The short-run price elasticity of demand for airline travel is .15, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to

A

collect less revenue form travelers who book well in advance

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15
Q

Firms would like to know the price of elasticity of demand for their products because it helps determine the effect of price changes on the firms’

A

revenues

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16
Q

If New York City expects that an increase in bus fares will raise mass transit revenues, it must think that the demand for bus travel is

17
Q

Which of the following describes a situation in which demand must be elastic?

A

Total revenue decreases by more than $15 when the price of corn dogs rises by 15%

18
Q

Consider the market for bicycles. If a dealer cuts prices by 10% and sells 20% more bikes, then demand for bicycles is

A

elastic, and total revenue will increase

19
Q

Governments can use price elasticity of demand to estimate how changes in excise tax rates will affect

A

tax revenues

20
Q

If the price elasticity of demand coefficient equals 2 then

A

a price decrease will increase total revenue

21
Q

The demand for a product is likely to be more elastic when

A

more substitutes for the product are available

22
Q

Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if

A

people spend an insignificant share of their income on the product

23
Q

A product would be more demand price elastic

A

the less the essential nature of the good

24
Q

A product would be more demand price inelastic

A

the shorter the time the consumer has to adjust to price changes

25
The longer the time period under study,
the more elastic is the price elasticity of demand
26
The long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because
people have more time to find substitute goods
27
The price elasticity of demand coefficient for a good will be inelastic
if there are few substitutes and if expenditure on it is small part of one's budgets
28
As the period for firms to expand output is lengthened, the elasticity of the market supply curve will
increase (more elastic)
29
All things equal, the price elasticity of supply
will be greater in the long run than in the short run
30
If the price elasticity of supply coefficient is greater than one, then supply is
elastic
31
A perfectly elastic supply curve is expressed graphically as a
horizontal line
32
In the very short-run period
the price elasticity of supply is very inelastic