ECN101 Chapter 5 Key Terms

Which of the following statements describes an elastic demand​? A. Mary's quantity demanded of milk decreased by 8 percent when the price of milk rose by 5 percent. B. A fall in​ Ralph's income by 5 percent changes his demand for chocolates by 1 percent. C. I​ can't afford as many books because my income has fallen. D. Tom's demand for apples does not change when the price of bananas rises.

Which of the following statements describes an elastic supply​? A. Ron grows both corn and soybean in his field and supplies them to the market. B. A fall in​ Tom's profits by 5 percent changes his supply of chocolates by 1 percent. C. Federal officials say that food supply is safe even though a fourth case of mad cow disease has been detected in California. D. A rise in the price of tomatoes by 10 percent increases the quantity supplied by more than that.

Which of the following illustrates a unit elastic supply​? A. Webster Dictionaries and Oxford Dictionaries are almost perfect substitutes and therefore have a constant elasticity of substitution. B. A 5 percent increase in wage rates has increased the cost of production in China by 5 percent. C. The supply of lettuce will be more elastic in the long run than the supply today. D. Dan says that a 10 percent rise in the price of movie tickets increases the quantity of movie tickets supplied by the same proportion.

Which of the following statements illustrates income elasticity of demand​? A. A rise in​ Annie's income by 5 percent decreases supply of canned fruits by 6 percent. B. Poor economic conditions are resulting in higher unemployment and lower aggregate demand. C. A salary cut and no other changes has resulted in Mary buying less fast food. D. A 2 percent fall in the price of peanuts increases​ Ralph's demand for almonds by 5 percent.

Which of the following statements is an example of perfectly inelastic supply​? A. Twitter plans to raise​ $1 billion in an IPO. B. In​ India, poor supply chain management is one of the reasons for high inflation. C. When the price of insulin falls by 10​ percent, Rite Aid pharmacy continues to supply the same quantity. D. A 5 percent rise in the price decreases quantity supplied by zero percent.

Which of the following statements is an example of price elasticity of supply? A. The quality of fruits sold by Safeway is getting better. B. A 10 percent fall in the price of turkey with no other change decreases quantity supplied by 12 percent. C. A 20 percent discount at all Old Navy stores is drawing large crowds. D. Farmers increase their supply of potatoes when the price of onions rises.

When the price of tomatoes rises from​ $3 per pound to​ $4 per​ pound, the quantity of tomatoes sold decreases from 15 pounds to 10 pounds. Total revenue​ _____, and using the total revenue test​, we can determine that the demand for tomatoes is​ _____ . A. initially is​ $45; unit elastic B. equals quantity sold divided by​ price; elastic C. decreases from​ $45 to​ $40; elastic D. decreases by​ $5; inelastic

The demand for plums is unit elastic if​ _____. A. the price of plums does not change after a drought B. a 5 percent rise in the price of plums results in a 5 percent decrease in the quantity of plums demanded C. my demand for plums increases when the price of apples falls D. any increase in the price of plums results in a 1 percent decrease in the quantity of plums demanded

Which of the following statements describe an inelastic demand​? A. A rise in the tax rate has decreased imports of auto parts from China. B. People are buying HDTVs before the Super Bowl game begins. C. Megan did not buy too many hockey tickets even though their price dropped by 10 percent. D. Housing prices in London rose by 10 percent due to rock bottom interest rates.

Which of the following statements describes a perfectly inelastic demand​? A. The government is promoting generic drugs that are much cheaper. B. Walgreens does not find any change in the number of people buying chlorthalidone after a 7 percent rise in its price. C. A large number of youngsters buy roses from Colombian​ rose-growers before​ Valentine's Day. D. I prefer taking the subway to work rather than driving because of high fuel prices.

Which of the following statements describes perfectly elastic supply​? A. Walgreens reports a 70 percent increase in the sales of Ibuprofen. B. The demand for pears increases by 800​ percent, but Kroger continues to sell them at an unchanged price. C. The total revenue from the sale of notebooks is constant regardless of the price of a notebook. D. The price of ice cream falls by​ $1 a carton and Baskin Robbins continues to sell the same quantity of ice cream.

Which of the following is an example of price elasticity of demand​? A. Banana farmers enjoyed higher prices when the demand for bananas increased. B. Richer people buy fewer bananas than poorer people. C. When the price of bananas increased by 5 percent and nothing else​ changed, the quantity of bananas demanded decreased by 2 percent. D. When the price of bananas increased by 5 percent and incomes​ slumped, banana sales decreased by 5 percent.

Which of the following statements is an example of perfectly elastic demand​? A. A high incidence of diabetes has resulted in a large increase in demand for insulin. B. A 10 percent rise in​ Rita's income decreases supply of canned fish by 5 percent. C. Sherry is overwhelmed with buyers of her peaches when she lowers their price by a penny a pound compared to other sellers in the​ farmers' market. D. The price elasticity of demand for bottled water in Ohio is 1.5 while in Illinois it is 0.96.

Which of the following statements illustrates an inelastic supply​? A. Farmers have not been able to respond to a rise in the price of peas. B. IBM sold its personal computing division to Lenovo. C. Sales of​ Apple's new iPhone 5S have broken all previous records. D. Foxconn​ technologies, a large manufacturing company that supplies​ electronics, is facing a strike.

Which of the following statements describes cross price elasticity of demand​? A. A 10 percent rise in the price of ink cartridges decreases the quantity demanded of ink cartridges by 6 percent. B. A quota imposed on the production of potatoes has increased supply of onions. C. A weaker rupee against the dollar has increased​ India's export competitiveness. D. As a result of a rise in the price of spinach with all else remaining​ constant, Ralph buys more​ broccoli, a substitute for spinach.