Econ Week 2 Elasticities

Question 1

Elasticity

Answer 1

Percentage change in one variable compared to another

Question 2

Price Elasticity

Answer 2

percentage change in quantity demanded in response to a given percentage change in price at a particular point in the demand curve

Question 3

Perfectly Elastic

Answer 3

people are willing to buy as much as the firms sell
consumers view this good as identical to another good

Question 4

Perfectly Inelastic

Answer 4

goods consumers must have regardless to change in price

Question 5

Revenue increase or decrease if the demand curve is inelastic

Answer 5

increases

Question 6

Why are demand elasticities different in long run

Answer 6

in long run firms can substitute between products

Question 7

Income Elasticity

Answer 7

percentage change demanded in response to a percentage change in income

Question 8

cross price elasticity

Answer 8

percentage change in quantity demanded in response to a given percentage change in pricee of another good

Question 9

what effect does a sale tax have on equilibrium prices and quantity as well as revenue

Answer 9

p increases
q decreases
revenue rises

Question 10

does equilibrium price and quantity depend on whether the specific tax is collected from suppliers or their consumers

Answer 10

no

Question 11

is it true that taxes assessed on producers are passes along to consumers

Answer 11

depended on the elasticities of supply and demand

Question 12

do vat and specific taxes have the same effect

Answer 12

depends

Question 13

If perfectly elastic on who does the incidence of tax fall on

Answer 13

consumers must absorb the entire tax because firms will not supply the good at a price that is any lower than they received before the tax pq

Question 14

perfectly inelastic on who does the effect of vat fall on

Answer 14

all falls on firms because they must supply the same amount of q no matter what

Question 15

subsidy

Answer 15

negative tax