Topic 3: Analysing Markets: Elasticity Flashcards
The supply curve for the output of a famous artist who is now deceased, could be drawn as:
perfectly vertical
Two goods are complements (i.e. complementary goods) when:
an increase in the price of one will cause a decrease in the demand for the other.
A factory recently adds new robots to their production line, increasing productivity. This will likely cause:
a rightward shift of the supply curve.
Assume that for the Newcastle housing market in 2019 there is an increase in new houses being built. Meanwhile stricter credit requirements mean that there is a decline in the number of buyers. If these scenarios are drawn on a Supply and Demand diagram, ceteris paribus, we could conclude that:
the supply curve will shift to the right; the demand curve will shift to the left; the new equilibrium quantity could be higher or lower (i.e. ambiguous); the new equilibrium price will be lower
If the price of petrol increases by 10% and the demand for electric cars increases by 8%, then:
cross elasticity is + 0.8 and these are substitute goods
Assuming there is competition, if producers set the price of their product too high, the likely result is:
a surplus, and unsold goods will signal to producers to lower their prices.
The space on the freeway is fixed at any instant of time. A supply curve that shows this is:
perfectly vertical
If the income elasticity of demand for coffee at a local Starbucks was 0.5, then one would expect a 10% increase in regular customers’ incomes to result in:
5% increase in coffee sales
An increase in the number of sellers of a good will, ceteris paribus, __________________ for that good.
decrease equilibrium price and increase equilibrium quantity
Table One
Price of Good X Quantity Quantity
Demanded Supplied
$10 400 60
11 360 70
12 310 80
13 230 90
14 130 130
15 70 150
Refer to Table One. At a price of $10, there are ____________ units ____________ of good X.
340; shortage
