economics ch 5 – Flashcards

question
the price elasticity of demand measures how much
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quantity demaned responds to a change in price
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demand is said to be price elastic if
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buyers respond substantially to changes in the price of a good
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demand is said to be inelastic if
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the quantity demanded changes inly slightly when the price of the good changes
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demand is elastic if the price elasticity of demand is
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greater than 1
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demand is inelastic if the price elasticity of demand is
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less than 1
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goods with many close substitutes tend to have
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more elastic demands
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for a good that is a luxury demand tends
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to be elastic
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for a good that is a necessity demand tends
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to be Inelastic
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a good will have more inelastic demand the
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broader the definition of the market
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economists compute the price elasticity of demand as the
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percentage change in quanitity demanded divided by the percentage change in price
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if the price elasticity of demand for a good is 2.0 then a 10 percent increase in price results in
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20 percent decrease in quanityty demanded
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when demand is perfectly inelastic the demand curve will be
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vertical bc buyers purchase the same amount as before whenever the price falls or rises
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demand is said to have unit elasticity if the price elasticity od demand is
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equal to 1
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when demand is elastic a decrease in price will cause
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an increase in total revenue
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when demand is inelastic an increase in price will cause an
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increase in total revenue
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when demand is unit elastic price elasticity of demand equals
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1, and total revenue does not change when price changes
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incomse elasticity of demand measures how
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the quantity demanded changes as consumer income changes
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if an increase in income results in a decrease in quantity demanded of a goos then for that good the
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income elasticity of demand is negative
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assume that a 4% increase in income results in a 2% increase in quantity remaded of a good. income elasticity of demand for the good is
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positive, and the good is a normal good
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cross price elasticity of demand measures how
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the quantity demanded of one good changes in response to a change in price of another good
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if 2 goods are substitutes their cross price elasticity will bw
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positive
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if 2 goods are complements their cross price elasticity will be
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negative
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if the quantity supplies responds only slightly to changes in price then
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supply is said to be inelastic
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Key determinant of the price elasticity of supply is the
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time horizon
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if the quantity supplies is the same regardless of price then supply is
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perfectly inelastic
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suppose that corn farmers want to increase their total revenue knowing that the demand for corn is inelastic corn farmers should
answer
reduce the number of acres on which they plant corn
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question
the price elasticity of demand measures how much
answer
quantity demaned responds to a change in price
question
demand is said to be price elastic if
answer
buyers respond substantially to changes in the price of a good
question
demand is said to be inelastic if
answer
the quantity demanded changes inly slightly when the price of the good changes
question
demand is elastic if the price elasticity of demand is
answer
greater than 1
question
demand is inelastic if the price elasticity of demand is
answer
less than 1
question
goods with many close substitutes tend to have
answer
more elastic demands
question
for a good that is a luxury demand tends
answer
to be elastic
question
for a good that is a necessity demand tends
answer
to be Inelastic
question
a good will have more inelastic demand the
answer
broader the definition of the market
question
economists compute the price elasticity of demand as the
answer
percentage change in quanitity demanded divided by the percentage change in price
question
if the price elasticity of demand for a good is 2.0 then a 10 percent increase in price results in
answer
20 percent decrease in quanityty demanded
question
when demand is perfectly inelastic the demand curve will be
answer
vertical bc buyers purchase the same amount as before whenever the price falls or rises
question
demand is said to have unit elasticity if the price elasticity od demand is
answer
equal to 1
question
when demand is elastic a decrease in price will cause
answer
an increase in total revenue
question
when demand is inelastic an increase in price will cause an
answer
increase in total revenue
question
when demand is unit elastic price elasticity of demand equals
answer
1, and total revenue does not change when price changes
question
incomse elasticity of demand measures how
answer
the quantity demanded changes as consumer income changes
question
if an increase in income results in a decrease in quantity demanded of a goos then for that good the
answer
income elasticity of demand is negative
question
assume that a 4% increase in income results in a 2% increase in quantity remaded of a good. income elasticity of demand for the good is
answer
positive, and the good is a normal good
question
cross price elasticity of demand measures how
answer
the quantity demanded of one good changes in response to a change in price of another good
question
if 2 goods are substitutes their cross price elasticity will bw
answer
positive
question
if 2 goods are complements their cross price elasticity will be
answer
negative
question
if the quantity supplies responds only slightly to changes in price then
answer
supply is said to be inelastic
question
Key determinant of the price elasticity of supply is the
answer
time horizon
question
if the quantity supplies is the same regardless of price then supply is
answer
perfectly inelastic
question
suppose that corn farmers want to increase their total revenue knowing that the demand for corn is inelastic corn farmers should
answer
reduce the number of acres on which they plant corn
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