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ECON 160 Midterm: Spr17Econ160Midterm2Review

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School
Binghamton University
Department
Economics
Course
ECON 160
Professor
khanna

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Document Summary

Price elasticity of demand: (unit free) measure of responsiveness of qd of good to change in its price when all other influences on buyers" plans remain the same. An increase in supply = small decrease in price, large increase in qd. Ed does not equal demand curve compare percentage change in qd with percentage change in price. % (cid:1866) (cid:1842)(cid:1870)(cid:1855)(cid:1857) = (cid:1866)(cid:1857)(cid:1875) (cid:1843) (cid:1867)(cid:1864)(cid:1856) (cid:1843) (cid:1876) (cid:883)(cid:882)(cid:882) (cid:1874)(cid:1857)(cid:1870)(cid:1853)(cid:1859)(cid:1857) % (cid:1866) (cid:1842)(cid:4667): rise/fall in price: % (cid:1866) (cid:1842)(cid:1870)(cid:1855)(cid:1857)=((cid:1866)(cid:1857)(cid:1875) (cid:1868)(cid:1870)(cid:1855)(cid:1857) (cid:1866)(cid:1872)(cid:1853)(cid:1864) (cid:1868)(cid:1870)(cid:1855)(cid:1857) (cid:1866)(cid:1872)(cid:1853)(cid:1864) (cid:1868)(cid:1870)(cid:1855)(cid:1857, elastic |ed| >1 , p increases, revenue decreases inelastic 0< |ed| <1 , price increases, revenue increases. % (cid:1866) (cid:1842)(cid:1870)(cid:1855)(cid:1857)= (cid:1840)(cid:1857)(cid:1875) (cid:1868)(cid:1870)(cid:1855)(cid:1857) (cid:1867)(cid:1864)(cid:1856) (cid:1868)(cid:1870)(cid:1855)(cid:1857) (cid:1876) (cid:883)(cid:882)(cid:882) (cid:1874)(cid:1857)(cid:1870)(cid:1853)(cid:1859)(cid:1857) = (cid:1840)(cid:1857)(cid:1875) (cid:1842)(cid:1870)(cid:1855)(cid:1857) (cid:1841)(cid:1864)(cid:1856) (cid:1842)(cid:1870)(cid:1855)(cid:1857) (cid:1876) (cid:883)(cid:882)(cid:882) (cid:1866)(cid:1857)(cid:1875) (cid:1868)(cid:1870)(cid:1855)(cid:1857)+(cid:1867)(cid:1864)(cid:1856) (cid:1868)(cid:1870)(cid:1855)(cid:1857) (cid:884: average price is same regardless of whether price rises/falls, price change in price calculated by midpoint method is same (magnitude) for price rise/fall. % (cid:1866) (cid:1843)(cid:1873)(cid:1853)(cid:1866)(cid:1872)(cid:1872)(cid:1877)= (cid:1840)(cid:1857)(cid:1875) (cid:1869)(cid:1873)(cid:1853)(cid:1866)(cid:1872)(cid:1872)(cid:1877) (cid:1867)(cid:1864)(cid:1856) (cid:1869)(cid:1873)(cid:1853)(cid:1866)(cid:1872)(cid:1872)(cid:1877) (cid:1876) (cid:883)(cid:882)(cid:882)

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Related Questions

Who bears the primary costs of a rent control program?

A. landlords
B. renters that get rent-controlled apartments
C. taxpayers
D.

the wealthy

Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). A price of $20 would result in:

A. Excess supply of 60
B. Excess supply of 120
C. Excess supply of 140
D. Excess demand of 140

US agricultural price supports are politically popular because

A. They have no adverse impacts
B. The US would have food shortages without them
C. The benefits accrue to a large number of voters and the costs are paid by a small number of voters
D.

The costs are spread out among millions of people

Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). What would be the equilibrium price?

A. $15.50
B. $12.50
C. $10
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$15

Price floors and ceiling prices:

A. cause the supply and demand curves to shift until equilibrium is established.
B. both cause surpluses.
C. interfere with the rationing function of prices.
D.

A change in the price of a good leads to a change in ________, which leads to a ___________

A. quantity supplied; shift of the supply curve
B. supply; shift of the supply curve
C. quantity supplied; movement along the supply curve
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When the supply of a product increases, this implies that

A. the price of the product first declined
B. more will be purchased at the same price
C. producers will be willing to accept a lower price for each unit sold
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E.

producers will offer less for sale at each possible price

If there is a excess demand for product X:

A. fewer resources will be allocated to the production of this good.
B. the price of the product will rise.
C. the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.
D.

the price of the product will decline.

Which of the following will occur when there is a simultaneous decrease in demand and a decrease in supply?

A. B and D both necessarily occur
B. An increase in equilibrium quantity
C. A and C both necessarily occur
D. An increase in price
E. A and D both necessarily occur
F. A decrease in price
G.

A decrease in equilibrium quantity

Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?

A. Both price and quantity should decrease.
B. Price should increase and quantity decrease.
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Nothing.

If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception?

A. conversion of some apartment complexes to condos
B. a shortage
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supply; movement along the supply curve

both cause shortages.

When quantity demanded decreases in response to a change in price,

A. the demand curve shifts to the right.
B. the demand curve shifts to the left.
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D. there is a movement up along the demand curve.
E. the supply curve shifts to the right.

The price elasticity of demand is the measure of the responsiveness of the demand for a good to a percentage change in the price of that same good. When the demand for a good changes due to an increase or decrease in the price of the good, it can be said that the good has a price elastic demand. On the other hand, a good whose demand is not significantly affected by a change in the price levels is price inelastic. For example, luxury goods are usually price elastic because these are not something that most people really need. Thus, when the price of luxury goods increases, the demand for such goods falls. Goods that fall within the latter category are usually the basic necessities such as food and prescription medicine. Even when these types of goods become pricier, most people would find ways to afford them because they need those items to survive. 

1. Grand TV Manufacturer wants to increase the quantity of TVs it sells by 8%. If the price elasticity of demand is 4, the manufacturer must:

a. decrease price by 1.5%.

b. increase price by 1.5%.

c. increase price by 2.0%.

d. decrease price by 2.0%.

 

2. Suppose that an Italian ice cream firm is facing a linear demand curve and that the current price for the Italian ice cream is set at a point where the price elasticity is 0.7. If the firm decreases the product price,

Select one:

a. the demand becomes less inelastic, and total revenue increases.

b. the demand becomes more inelastic, and total revenue decreases.

c. the demand becomes more inelastic, and total revenue increases.

d. the demand becomes less inelastic, and total revenue decreases.

 

3. Suppose that in a month, the price of movie rentals decreases from $3.25 to $3. At the same time, the quantity of movie rentals demanded increases from 100 to 120. The price elasticity of demand for movie rentals (calculated using the midpoint formula) is:

a. elastic.

b. zero.

c. inelastic.

d. unitary elastic.

 

4. The price elasticity of demand for color printers is 1.6, and you would like to see the quantity demanded of color printers increase by 32%. Then the percentage change in price should be:

Select one:

a. 15%.

b. 25%.

c. 10%.

d. 20%.

 

5. The price of apple increases from $1 to $1.10. At the same time, the quantity of apples demanded decreases from 100 to 90. The price elasticity of demand for apples (calculated using the initial value formula) is:

a. 0.9.

b. 0.02.

c. 1.1.

d. 1.