Question 1

Suppose that when the price of coffee beans goes from $1 to $1.20 per pound,production increases from 90 million pounds of coffee beans per year to 100 million pounds.
Using the mid-point method,the percentage change in quantity supplied would be:

Accepted Answer

The percentage change in quantity supplied using the mid-point method is calculated as: [(100 - 90) / ((100 + 90) / 2)] * 100 = (10 / 95) * 100 = 10.53%, which rounds to 11%.

Question 2

A linear demand curve:

Accepted Answer

A linear demand curve has a constant slope, which means that for each unit increase in price, there is a constant decrease in quantity demanded. The slope (or coefficient) of the linear equation represents the elasticity at any point on the demand curve. However, the elasticity will vary along the curve, meaning that it will be more elastic at higher prices and more inelastic at lower prices. A linear demand curve can be neither perfectly inelastic nor perfectly elastic.

Question 3

A good is unit elastic if:

Accepted Answer

When a good is unit elastic, the percentage change in quantity demanded is equal to the percentage change in price, so total revenue remains unchanged when the price changes.

Question 4

The price elasticity of supply tells us:

Accepted Answer

The price elasticity of supply measures the percentage change in quantity supplied resulting from a one percent change in price, indicating the responsiveness of supply to price changes.

Question 5

Suppose that when the price of pizza goes from $7 to $10 per pie,production increases from 2,500 pies per month to 4,000 pies.Using the mid-point method,the percentage change in price would be:

Accepted Answer

The mid-point method for calculating percentage change is to take the average of the initial and final values, and then divide the difference between the final and initial values by the average. In this case, the average price is (7+10)/2 = 8.5, and the difference between the final and initial prices is 10-7 = 3. Therefore, the percentage change in price is 3/8.5 * 100 = 35.29%, which is closest to choice A, 35%.

Question 6

Suppose that when the price of shoe laces goes from $1 to $2 per pair,production increases from 90 million pairs per year to 100 million pairs.Using the mid-point method,the price elasticity of supply would be:

Accepted Answer

The price elasticity of supply is calculated using the mid-point method as the percentage change in quantity supplied divided by the percentage change in price. The percentage change in quantity is (100-90)/((100+90)/2) = 10/95 = 0.1053. The percentage change in price is (2-1)/((2+1)/2) = 1/1.5 = 0.6667. The elasticity is 0.1053/0.6667 = 0.158, which rounds to 0.16.

Question 7

A good is inelastic if:

Accepted Answer

A good is inelastic if the quantity demanded is relatively unresponsive to changes in price. This means that a price increase will lead to a proportionately smaller decrease in quantity demanded, resulting in an increase in total revenue. Therefore, choice A is the correct answer. Choices B and C are incorrect because they describe the characteristics of elastic goods, not inelastic goods. Choice D is also incorrect because at least one of the choices is true.

Question 8

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

Accepted Answer

When the quantity effect outweighs the price effect, it indicates that the percentage change in quantity demanded is greater than the percentage change in price, which is characteristic of a price elastic good.

Question 9

If the quantity effect outweighs the price effect of a price decrease,then:

Accepted Answer

When the quantity effect outweighs the price effect, it indicates that the good is price elastic, leading to an increase in total revenue, and the elasticity is greater than 1.

Question 10

A price increase will cause an increase in revenue:

Accepted Answer

A price increase will result in an increase in revenue when the price effect, i.e., the price per unit, outweighs the quantity effect, i.e., the decrease in the quantity demanded due to the price increase. This situation occurs when the demand is inelastic, i.e., consumers are not sensitive to price changes. Hence, option A is the correct answer. Options C and D are not possible because, in a perfectly elastic demand or unit elastic demand, a price increase will result in a decrease in revenue, regardless of the magnitude of price or quantity effect. Option B is also incorrect because a price increase will not result in an increase in revenue when the quantity effect is higher than the price effect.

Question 11

Demand tends to be more elastic:

Accepted Answer

When price is high, consumers are more sensitive to price changes, making demand more elastic. Conversely, when price is low, demand tends to be more inelastic as consumers are less sensitive to price changes.

Question 12

A good is inelastic if:

Accepted Answer

A good is inelastic if the percentage change in quantity demanded is less than the percentage change in price, meaning the elasticity is less than 1. None of the given options correctly describe this.

Question 13

Elasticity along a demand curve:

Accepted Answer

Elasticity measures the responsiveness of the quantity demanded to changes in price. Along any demand curve, the elasticity will change as price and quantity demanded change. It is not dependent on the curvature of the demand curve.

Question 14

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

Accepted Answer

The term "price elasticity of supply" specifically refers to the percentage change in quantity supplied due to a one percent change in price.

Question 15

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

Accepted Answer

Price elasticity of supply measures the percentage change in the quantity supplied of a good in response to a percentage change in price. Therefore, it directly measures producers' responsiveness to a change in price. Choice B) Price elasticity of demand measures the consumers' responsiveness to a change in price, while choices C) and D) measure how the quantity demanded or supplied of one good responds to a change in the price of another good or a change in income, respectively.

Question 16

If total revenue increases as a result of a price increase:

Accepted Answer

If total revenue increases as a result of a price increase, it means that consumers are not very sensitive to the price change and are willing to pay more for the good. This indicates that the good is price inelastic, as the change in price did not have a significant effect on the quantity demanded. If the good was price elastic, a price increase would result in a decrease in total revenue, as consumers would reduce their quantity demanded to a greater extent than the price increase. If the good was price unit elastic, the increase in total revenue would be equal to the percentage increase in price. However, in this scenario, the increase in total revenue suggests that the good is price inelastic.

Question 17

Price elasticity of supply:

Accepted Answer

All of the options are true statements about the price elasticity of supply. Price elasticity of supply measures the responsiveness of producers to a change in price by showing the percentage change in the quantity supplied of a good or service when its price changes by one percent. It is typically a positive number, demonstrating that the quantity supplied of a product will increase as the price of the product increases.

Question 18

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

Accepted Answer

The percentage change in price using the mid-point method is calculated as: [(New Price - Old Price) / ((New Price + Old Price) / 2)] * 100. Substituting the given values: [(3 - 5) / ((3 + 5) / 2)] * 100 = (-2 / 4) * 100 = -50 percent. The absolute value is 50 percent.

Question 19

If the price effect outweighs the quantity effect of a price decrease,then:

Accepted Answer

If the price effect outweighs the quantity effect of a price decrease, then total revenue will decrease. This is because the decrease in price will lead to a greater decrease in revenue than the increase in quantity sold. The good is price inelastic, meaning that the quantity demanded does not change much in response to a change in price. The measured elasticity must be greater than 1, because the percentage change in quantity demanded is less than the percentage change in price.

Question 20

A linear demand curve:

Accepted Answer

A linear demand curve has a constant slope, but the elasticity changes along the curve because elasticity depends on both the slope and the price-quantity combination.

Quiz 4: Elasticity

Suppose that when the price of coffee beans goes from $1 to $1.20 per pound,production increases from 90 million pounds of coffee beans per year to 100 million pounds. Using the mid-point method,the percentage change in quantity supplied would be:

A linear demand curve:

A good is unit elastic if:

The price elasticity of supply tells us:

Suppose that when the price of pizza goes from $7 to $10 per pie,production increases from 2,500 pies per month to 4,000 pies.Using the mid-point method,the percentage change in price would be:

Suppose that when the price of shoe laces goes from $1 to $2 per pair,production increases from 90 million pairs per year to 100 million pairs.Using the mid-point method,the price elasticity of supply would be:

A good is inelastic if:

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

If the quantity effect outweighs the price effect of a price decrease,then:

A price increase will cause an increase in revenue:

Demand tends to be more elastic:

A good is inelastic if:

Elasticity along a demand curve:

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

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

If total revenue increases as a result of a price increase:

Price elasticity of supply:

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

If the price effect outweighs the quantity effect of a price decrease,then:

A linear demand curve: