Economics Cards – Flashcards
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Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in
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Price
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Price elasticity of demand is the ratio of the
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Percentage change in quantity demanded to the percentage change in price.
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If the percentage change in quantity demanded is greater than the percentage change in price, demand is
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Elastic
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If the percentage change in quantity demanded is less than the percentage change in price, demand is
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Inelastic
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If the percentage change in quantity demanded is equal to the percentage change in price, demand is
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Unit elastic
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If quantity demanded is completely unresponsive to changes in price, demand is
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Perfectly inelastic
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Suppose at a price of $4 and at a price of $6, John purchases 40 units of good X. Given this information, we know that
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John's demand for good X is perfectly inelastic between the prices of $4 & $6.
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If the price of good X rises and the demand for good X is inelastic, then the percentage fall in quantity demanded is __________ the percentage rise in price, and total revenue ________.
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None of these choices are correct.
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Which of the following would result in higher price elasticity of good X?
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More substitutes for good X.
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For certain good, when the good's price falls from $12 to $10, it's quantity demanded rises from 10 to 12 units. The price elasticity of demand here is
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1.00
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The fewer substitutes for a good,
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The lower its price elasticity of demand
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The price of elasticity of demand would likely be highest for which of the following goods?
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Ford cars
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A good will tend to have a low price elasticity of demand if
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The good has few substitutes.
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The shorter the period of time consumers have to adjust to price changes, the _____ the _____ elasticity of demand.
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Lower;price
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The longer the period of time consumers have to adjust to price changes, the ______ the ________ elasticity of demand.
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Higher, price
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Cross elasticity of demand is the percentage change in the quantity _____ of a good divided by the percentage change in ______.
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Demanded; the price of another good.
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Cross elasticity of demand measures the responsiveness of changes in the quantity _______ of one good to change in _____.
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Demanded; the price of another good.
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If the cross elasticity of demand for two goods in negative,
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The goods are complements.
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If goods A and B have a cross elasticity of demand that is positive, this is evidence that goods A and B are ______ goods.
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Substitute
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If two goods are substitute goods,
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An increase in the price of one will cause an increase in the demand for the other.
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If price rises and total revenue falls, then
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None of these choices are correct.
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Income elasticity of demand for a normal good is always
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Greater than zero
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If Cassandra bought 12 blouses last year when her income was $55,000 and she buys 10 blouses this year when her income is $49,000, then her income elasticity of demand is
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+1.58
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If for good Z income elasticity is greater than 1, then demand for good Z is income _______, and good Z is a(n) _____ good.
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Elastic;normal
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A normal good is
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A good for which the demand rises as income rises.
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If the percentage change in quantity demanded of a good is less than the percentage change in income, then the good is said to be
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Income inelastic
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If the percentage change in quantity demanded of a good is equal to the percentage change in income, then the good is said to be
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Income unit elastic
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Price elasticity of supply is the percentage change in the quantity ______ of a good divided by the percentage change in
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Supplied; the price of the good.
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Suppose a producer decides that if the price of his or her product is $10, the quantity supplied will be 1,000 units, and if the price is $11, the quantity supplied will be 1,100. The supply of the good is
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Unit elastic
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The longer the period of time allowed for the ____ of a good to adjust to a change in the price of the good, the ___ the price elasticity of supply will be. This statement assumes that the quantity supplied _____ be altered with time.
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Producer;higher;can
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The quantity supplied of land is constant regardless of price. Suppose a tax is imposed on the rental price of land. Who will pay the greater share of such a tax?
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The sellers will pay the entire share.
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Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax?
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The buyer will pay the entire share.
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The demand curve D1 is
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Perfectly elastic
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The demand curve D2 is
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Perfectly inelastic
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The demand curve D3 is
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varying in elasticity along its length.
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Suppose someone believes that if a per unit is placed on the producers of good Y, the consumers of good Y will end up paying the full tax. This person assumes that the demand curve for good Y is
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Perfectly inelastic
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The price elasticity of demand is
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Usually negative, but could be zero.
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If the demand for a good is elastic,
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The percentage change in quantity demanded is greater than the percentage change in price.
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If the demand for a good is inelastic and the price of the good decreases, then
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Total revenue decreases.
