ECON 2023: TEST 2
51 Cards in this Set
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more elastic demand
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The more quantity demanded responds to a change in the price of that good, and the _____ is for that good
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less elastic the demand
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The steeper a linear demand curve is the
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inelastic
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If two linear demand (or supply) curves run through a common point, then at any given quantity the curve that is steeper is more
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elasticity of demand
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To examine how responsive consumers are to price changes, economists measure
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how easy it is to substitute the good for another
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The fundamental determinant of the elasticity of demand for a good is
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more; develop more/better substitutes
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Over time, the demand for most goods becomes ______ elastic since we are able to ______.
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prescription medications
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Which of the following probably has the least elastic demand?
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Cheerios; cheerios
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Are there more substitutes for Cheerios or for cereal in general? For which good is demand more elastic?
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Massages tend to be luxuries and chiropractic adjustments tend to be necessities.
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Why might the demand for massages be more elastic than the demand for chiropractic adjustments?
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few; not very
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There are ______ substitutes for oil, so the elasticity of demand for oil is ______ elastic.
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2 only
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Which of the following statements is TRUE?
Goods tend to be more elastic in the short run than in the long run.
When the price of product is a large fraction of a person's budget, the product tends to be more elastic.
. Luxury goods are less elastic than goods viewed as necessiti…
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more elastic than
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The long run demand for oil ______ the short run demand for oil.
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less
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A higher income tends to make demand for a given good ______ elastic.
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elastic
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Economists categorize price elasticity of demand greater than 1 as
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revenues decrease when the price goes up
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If the demand for a good is elastic, then
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demand for apartments is unit elastic
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If the supply of rental housing increases causing its price to fall and apartment dwellers move into
bigger apartments that cost the same as their old ones, we can infer that the
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increases
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In the elastic portion of a linear demand curve, firm revenue ______ when price falls.
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inelastic
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The supply of ancient Egyptian papyrus manuscripts is probably
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how quickly the cost of production increases with increase in production
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The fundamental determinant of the elasticity of supply is
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it would be more elastic
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Because of aging requirements it takes many years to make good Scotch. If a technology were invented that made it possible to create good Scotch literally overnight, how would the short-run supply of good Scotch change?
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0.25
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If the price of aluminum increases 4 percent, and the quantity supplied increases by 1 percent, what is
the price elasticity of supply?
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...
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The elasticity of demand for oil is –0.5 and the elasticity of supply is 0.20. If the demand for oil increases 10 percent, what happens to the price of oil?
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0.25; inelastic
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If a 4 percent increase in the price of pepper results in a 1 percent decrease in pepper sales, what is the absolute value of the price elasticity of demand for pepper? Is it elastic or inelastic?
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elastic
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Use the midpoint method to answer this question. When a good's price increases from $20 to $25 and its quantity demanded decreases from 100 to 75, the elasticity of demand for that good is
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gains from growing roses in an ideal climate are greater than the trasportation costs
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It's worthwhile to grow roses in Kenya because
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Supply will increase, prices will fall, and sales will increase.
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If an increase in oil prices made it profitable to use corn-based ethanol for fuel and corncobs are a waste product of ethanol production, what will happen in the market for corncob pipes?
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Local forests become less common.
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The locovore movement encourages eating locally produced food to reduce the greenhouse gases emitted from transporting food long distances, placing upward pressure on local land prices as farmland becomes more valuable. Which of the following likely occurs as a result?
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The price of soybeans rose since farmers began planting corn instead of soybeans, decreasing the supply of soybeans.
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Land used to grow corn can also grow soybeans. As the demand for corn used in ethanol began to increase the price of corn, what happened to the price of soybeans?
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central planners have limited information on the true value of the various ways to utilize
scarce resources.
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One of the biggest problems with centrally planned economies is
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satisfying infinite wants with limited resources.
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The great economic problem is
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its next highest-valued use of the good.
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In a competitive free market, consumers decide not only whether their use of a good is worth more than the market price, but also whether their use of a good is worth more than
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his incentive would be to use that power to enrich himself, not to solve the problem.
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If a central planner had the power to solve the great economic problem
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Yes, central planners have no way of knowing the value of a particular resource in all of its uses.
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Is the task of effective central planning difficult?
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be used on the driveway.
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If the value of a heap of asphalt to be used on one's driveway is greater than the opportunity cost of using the heap elsewhere, then the asphalt will
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satisfied; unsatisfied
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The demand curve above the equilibrium point represents ______ demands. The demand curve below the equilibrium point represents ______ demands.
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suppliers to increase the quantity supplied in those markets.
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Increasing prices act as a signal to
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South Carolina
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Suppose that a hurricane hits both North Carolina and South Carolina. North Carolina has severe price gouging laws in place while South Carolina has none. Both states have a shortage of ice. Which state will recover from its ice shortage more quickly?
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helps smooth price fluctuations.
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Speculation often
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allow individuals to speculate in various markets without having to store the product.
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Futures contracts
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become less volatile than they otherwise would be.
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With speculation, prices
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reduce the size of the popcorn market.
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A tax on sellers of popcorn will
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leads sellers to supply less apples at every price
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A tax on sellers of apples
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Buyers and sellers share the burden of the tax.
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Which of the following is correct concerning the burden of a tax imposed on coffee mugs?
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True
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In a market with a downward sloping demand curve and an upward sloping supply curve, a tax placed on sellers will cause sellers to receive a lower price and buyers to pay a higher price.
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True
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If the demand and supply curves have equal slopes in absolute value, the burden of a commodity tax will be split equally regardless of on whom the tax is placed
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False
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When demand is more elastic than supply, buyers bear more of the tax burden
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True
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Suppose the government requires firms to buy insurance against hair loss for their employees. Workers will end up paying for this coverage in the form of lower wages
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True
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Subsidies lead to existence of non-beneficial trades
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True
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According to Nobel Laureate Edmund Phelps, minimum wages cause higher unemployment, but wage subsidies cause higher employment.
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Elasticity of demand
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a measure of how responsive the quantity demanded is to a change in price
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Elasticity of supply
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measures how responsive the quantity supplied is to the a change in price.
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ECON 2023: TEST 2