Demand & Supply Applications

Question 1

Price rationing is ?

Answer 1

The process by which the market system allocates goods and services to consumers when quantity demanded exceeds quantity supplied.

Question 2

The adjustment of price is ?

Answer 2

The rationing mechanism in free markets.

Question 3

Price rationing means ?

Answer 3

whenever there is a need to ration a good - If Shortage exists - in a free market, the price of the good will rise until quantity supplied equals quantity demanded.

Question 4

Price ceiling ?

Answer 4

A maximum price that sellers may charge for a good, usually set by government.

Question 5

Queing is ?

Answer 5

A waiting line as a means of distributing goods and services; a non price rationing mechanism.

Question 6

Favored customers ?

Answer 6

Those who receive special treatment for dealers during situations of excess demand.

Question 7

Ration coupons ?

Answer 7

Are tickets or coupons that entitle individuals to purchase a certain amount of a given product per month.

Question 8

A black market ?

Answer 8

A market in which illegal trading takes place at market-determined prices.

Question 9

Elasticity ?

Answer 9

A general concept used to quantify the response in one variable when another variable changes.

Question 10

Price elasticity of demand ?

Answer 10

The ratio of the percentage of change in quantity demanded to the percentage of change in price.

Measures the responsiveness of demand to changes in price.

Question 11

A perfect inelastic demand ?

Answer 11

A demand in which quantity demanded does not respond at all to a change in price.

Elasticity = 0

Question 12

An inelastic demand ?

Answer 12

A demand that responds somewhat, but not a great deal, to changes in price Inelastic demand always has a numerical value between 0 and (-1).

(-1)

Question 13

A unitary elasticity is ?

Answer 13

A demand relationship in which the percentage of change in quantity of a product demanded is the same as the percentage change in price in absolute value (a demand elasticity of (-1) ).

elasticity = (-1)

Question 14

An elastic demand is ?

Answer 14

A demand relationship in which the percentage of change in quantity demanded is larger in absolute value than the percentage change in price (a demand elasticity with an absolute value greater than 1).

elasticity > 1

Question 15

A perfectly elastic demand ?

Answer 15

A demand in which quantity demanded drops to 0 at the slightest increase in price.

Question 16

The income elasticity of demand ?

Answer 16

Measures the responsiveness of demand to changes in income.

Question 17

The cross-price elasticity of demand ?

Answer 17

A measure of the response of the quantity of one good demanded to a change in the price of another good.

Question 18

The elasticity of supply ?

Answer 18

A measure of the response of the quantity of a good supplied to a change in price of that good. It’s likely to be positive in output markets.

Question 19

The elasticity of labor supply ?

Answer 19

A measure of the response of labor supplied to a change in the price of labor.