Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key

image

Play button

image

Play button

image

Progress

1/26

Click to flip

26 Cards in this Set

  • Front
  • Back
Suppose that as the price of a good rises from $3.90 to $4.10, the quantity demanded falls from 210 to 190. Then the price elasticity of demand is:
2
While it is relatively easy to shift land from production from one type of grain to another, the process takes a considerable amount of time. This implies that:
the supply of barley is more elastic in the long run than the short run
If the short run supply of good X is perfectly inelastic
the short-run supply curve graphs as a vertical line
Refer to the diagram. If total revenue at price P3 is the same at price P2, the in the P2P3 price range, demand is:
of unit elasticity
An increase in demand for a product whose supply is perfectly elastic will
increase quantity but leave price unchanged
Suppose there is an inverse relationship between the price of one good and the quantity demanded of another. We could conclude that
the cross elasticity of demand is negative and the two goods are complements
Suppose that a 2% increase in income in the economy decreases the quantity of gadgets demanded by 1% at every possible price. This implies that:
income elasticity is negative and gadgets are an inferior good
Assume that the price of product Y decreases by 5% and the quantity supplied decreases by 2%. The coefficient of price elasticity of supply for good Y is:
less than one and therefore supply is inelastic
Refer to the diagram. Over the range of P1 to P2 we know that demand is:
elastic because area D exceeds area A
The maker of a particular breakfast cereal found that increasing the price from $3.00 to $3.25 per box had no impact on total revenue, but increasing the price further to $3.50 reduced total revenue by 2%. Thus, the demand for the cereal is:
unit elastic over the range $3.00 to $3.25 and elastic over the range $3.25 to $3.50
The cross price elasticity of demand between two goods is reported to be +0.2. This implies that:
the two goods are substitutes
Which of the following is likely to have the most elastic demand?

Food
Fruit
Bananas
Dole Brand Bananas
Dole brand bananas
If a decrease in price increases total revenue:
demand is elastic
Use the following table to answer the next question. The data represent the demand schedule for a concert to be held in an arena that holds 5000 people.



Price per ticket -Quality demanded
$13 1,000
11 2,000
9 3,000
7 4,000
5 5,000
3 6,000
$7 per ticket
The price elasticity of demand for gadgets is 1.20. All else equal, a 2% reduction in the price of gadgets will increase quantity demanded by:
2.4%
A firm finds that its price elasticity of demand is 4.0. Currently, the firm is selling 2000 units per month at $5 per unit. If it wishes to increases its sales by 10%, it must lower its price by:
2.5%
A perfectly elastic supply curve
graphs as a horizontal line
The greater the elasticity of supply:
the more an increase in demand will increase quantity
If demand is inelastic:
an increase in price will increase total revenue
If a 12% price reduction causes quantity demand to rise by 12%:
total revenue will remain constant
A manufacturing firm lowers its price by 3% and finds its revenue has decreased. Which of the following best explains this outcome?
Demand elasticity is less than one
Suppose price rises from $15 to $17 and quantity demanded decreases by 20%. We can conclude:
total revenue will decrease
If demand is a downward-sloping straight line with slope of -2:
demand is elastic on the upper half of the diagram; inelastic on the lower half
Suppose legalization--and subsequent taxation--of heroin and cocaine reduces their prices by 50%. Estimates suggest the total quantity of heroin and cocaine demanded would rise by 83% and 42%, respectively. Consequently, legalization would:
increase total expenditures on heroine and decrease total expenditures on cocaine
Each of two firms willingly supply 25,000 gadgets a month at a price of $13. If the price were to fall to $11, one of the firms would decrease its monthly production by 1,500 and the other would decrease its monthly production by 2,500. If these are the only two producers, the elasticity of supply in this market is
0.5
The cross elasticity of demand between root beer and cola is likely to be:
a positive number