ScienceEconomicsECON301: Chapter 3
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ECON301: Chapter 3

Landyn Miller avatar Landyn Miller
25 July 2022
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The price elasticity of demand coefficient measures:
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buyer responsiveness to price changes.
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The basic formula for the price elasticity of demand coefficient is:
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percentage change in quantity demanded/percentage change in price.
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The demand for a product is inelastic with respect to price if:
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consumers are largely unresponsive to a per unit price change.
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If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
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increase the quantity demanded by about 25 percent.
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Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand using the average formula is:
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1.37.
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If the demand for product X is inelastic, a 4 percent increase in the price of X will:
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decrease the quantity of X demanded by less than 4 percent.
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A perfectly inelastic demand schedule:
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can be represented by a line parallel to the vertical axis.
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The larger the coefficient of price elasticity of demand for a product, the:
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smaller the resulting price change for an increase in supply.
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The price elasticity of demand is generally:
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negative, but the minus sign is ignored.
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For a linear demand curve:
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demand is elastic at high prices.
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Suppose we find that the price elasticity of demand for a product is 3.5 when its price is increased by 2 percent. We can conclude that quantity demanded:
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decreased by 7 percent.
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If a demand for a product is elastic, the value of the price elasticity coefficient is:
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greater than one.
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A perfectly inelastic demand curve:
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graphs as a line parallel to the vertical axis.
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If quantity demanded is completely unresponsive to price changes, demand is:
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perfectly inelastic.
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When the percentage change in price is greater than the resulting percentage change in quantity demanded:
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an increase in price will increase total revenue.
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Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of:
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W and Y.
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If a firm's demand for labor is elastic, a union-negotiated wage increase will:
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cause the firm's total payroll to decline.
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Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:
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relatively inelastic.
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If the price elasticity of demand for a product is unity, a decrease in price will:
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increase the quantity demanded, but total revenue will be unchanged.
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The elasticity of demand for a product is likely to be greater:
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the greater the amount of time over which buyers adjust to a price change.
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The price elasticity of supply measures how:
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responsive the quantity supplied of X is to changes in the price of X.
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Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:
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will increase but equilibrium quantity will be unchanged.
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If the supply of product X is perfectly elastic, an increase in the demand for it will increase:
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equilibrium quantity but equilibrium price will be unchanged.
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A supply curve that is a vertical straight line indicates that:
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a change in price will have no effect on the quantity supplied.
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The supply curve of a one-of-a-kind original painting is:
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perfectly inelastic.
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We would expect the cross elasticity of demand between Pepsi and Coke to be:
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positive, indicating substitute goods.
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The larger the positive cross elasticity coefficient of demand between products X and Y, the:
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greater their substitutability.
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Suppose that a 10 percent increase in the price of normal good Y causes a 20 percent increase in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
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positive and therefore these goods are substitutes.
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Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is:
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negative and therefore these goods are complements.