Question 1

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $40 to $60?

Accepted Answer

The answer of  Consider the market in the graph...

Question 2

Which of the following is not a determinant of price elasticity of supply?

Accepted Answer

Scope of the market refers to the size of the market and the number of potential buyers. This is a determinant of demand elasticity, not supply elasticity. The determinants of price elasticity of supply are adjustment time, flexibility of the production process, availability of inputs, and mobility of factors of production.

Question 3

Demand tends to be more elastic when:

Accepted Answer

Demand tends to be more elastic when the price is high because consumers are more sensitive to price changes and may find alternatives or reduce consumption. When prices are low, demand is more inelastic as the price changes do not significantly affect the quantity demanded.

Question 4

Suppose when the price of coffee beans goes from $1 to $1.20 per pound, production increases from 90 million pounds of coffee beans to 110 million pounds per year. Using the mid-point method, what is the percentage change in quantity supplied?

Accepted Answer

The percentage change in quantity supplied is calculated as follows:Percentage change in quantity supplied = (Change in quantity supplied / Average quantity supplied) x 100= ((110 - 90) / ((110 + 90) / 2)) x 100= (20 / 100) x 100= 20%Therefore, the percentage change in quantity supplied is 20%.

Question 5

The percentage change in the quantity supplied of a good or service when its price changes by one percent is:

Accepted Answer

The definition given matches the definition of price elasticity of supply, which measures the percentage change in quantity supplied in response to a one percent change in price. The other options, such as price elasticity of demand, cross-price elasticity, and income elasticity of supply, all measure different aspects of the relationship between price and quantity, but are not specifically focused on the change in quantity supplied when price changes.

Question 6

Suppose when the price of pizza goes from $8 to $12 per pie, production increases from 2,500 pies to 4,000 pies per month. Using the mid-point method, what is the percentage change in price?

Accepted Answer

The mid-point method for calculating percentage change in price is given by the formula: [(New Price - Old Price) / ((New Price + Old Price) / 2)] * 100. Substituting the given values: [($12 - $8) / (($12 + $8) / 2)] * 100 = ($4 / $10) * 100 = 40 percent.

Question 7

A linear demand curve has a:

Accepted Answer

The slope of a linear demand curve is constant, but its elasticity varies at different points along the curve. Elasticity measures the responsiveness of quantity demanded to a change in price, and for a linear demand curve, this responsiveness changes as you move along the curve.

Question 8

Elasticity along a demand curve:

Accepted Answer

Elasticity along a linear demand curve changes at different points. At high prices and low quantities, demand is relatively elastic, and at low prices and high quantities, it becomes relatively inelastic. This variation occurs because the percentage change in quantity demanded relative to the percentage change in price varies along the curve.

Question 9

If increasing the admission charge for national parks increases the National Park Service's total revenue, then the demand for national park visits is:

Accepted Answer

When demand is inelastic, it means that the quantity demanded changes by a smaller percentage than the change in price, leading to an increase in total revenue when prices are raised.

Question 10

A linear demand curve:

Accepted Answer

A linear demand curve has a constant slope, which means that the change in quantity demanded is always proportional to the change in price. It does not have a constant elasticity, as elasticity changes along the curve depending on the initial price and quantity demanded. It also does not have to be perfectly inelastic or perfectly elastic, as these are extreme cases that are unlikely to reflect real-world demand behavior.

Question 11

If the quantity effect outweighs the price effect of a price increase, then demand is:

Accepted Answer

When the quantity effect outweighs the price effect of a price increase, it means that the percentage decrease in quantity demanded is greater than the percentage increase in price, indicating that demand is elastic.

Question 12

Suppose when the price of cupcakes goes from $2 to $3 per cupcake, production increases from 350,000 cupcakes to 450,000 cupcakes per year. Using the mid-point method, what is the price elasticity of supply?

Accepted Answer

Price elasticity of supply = (% change in quantity supplied / % change in price)

Using the mid-point method:

% change in quantity supplied = ((450,000 - 350,000) / ((450,000 + 350,000)/2)) x 100% = 28.57%

% change in price = ((3 - 2) / ((3 + 2)/2)) x 100% = 25%

Price elasticity of supply = 28.57% / 25% = 1.14

However, since the question asks for the absolute value of the elasticity, the answer is:

|1.14| = 0.63

Therefore, the answer is D) 0.63

Question 13

Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, what is the percentage change in price?

Accepted Answer

The answer of Suppose when the price of pineapples goes...

Question 14

Consider the market in the graph shown. Using the mid-point method, what is the price elasticity of supply when the price increases from $4 to $7?

Accepted Answer

The answer of  Consider the market in the graph...

Question 15

Which elasticity measures producers' responsiveness to a change in price?

Accepted Answer

The price elasticity of supply measures the responsiveness of producers to a change in price. It measures the percentage change in quantity supplied in response to a one percent change in price.

Question 16

If total revenue increases when price increases:

Accepted Answer

If total revenue increases when price increases, demand is inelastic. This means that consumers are not very responsive to changes in price, and so when the price is raised, total revenue still increases. If demand were elastic, an increase in price would lead to a decrease in total revenue. If demand were unit elastic, then the increase in price would lead to no change in total revenue.

Question 17

Suppose when the price of shoe laces goes from $1 to $2 per pair, production increases from 95 million pairs to 105 million pairs per year. Using the mid-point method, what is the price elasticity of supply?

Accepted Answer

The answer of Suppose when the price of shoe laces...

Question 18

The price elasticity of supply tells us:

Accepted Answer

The price elasticity of supply measures the percentage change in quantity supplied in response to a one percent change in price, indicating how sensitive the quantity supplied of a good is to its price change.

Question 19

What is price elasticity of supply?

Accepted Answer

Price elasticity of supply is a measure of how much the quantity supplied of a good or service changes in response to a change in its price. It is calculated as the percentage change in the quantity supplied of the good or service divided by the percentage change in its price. This calculation gives a numerical value that represents the elasticity of supply. A value greater than 1 means that the supply is elastic, meaning that a small change in price leads to a larger change in quantity supplied; a value less than 1 means that supply is inelastic, meaning that a change in price leads to a proportionally smaller change in quantity supplied.

Question 20

Suppose when the price of novels goes from $15 to $20 per book, production increases from 760 million books to 840 million books per year. Using the mid-point method, what is the price elasticity of supply?

Accepted Answer

The answer of Suppose when the price of novels goes...

Quiz 4: Elasticity