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1. What does the price elasticity of demand measure?
e. | a consumer’s sensitivity to a price change REF: Determinants of the Price Elasticity of Demand |
2. From the accompanying table, we would expect that, for recreational skaters, the price elasticity of demand for ice skates between $10 and $20 to be ________ than that of hockey players because ________.
Price of Ice Skates | Quantity Demanded (hockey players) | Quantity Demanded (recreational skaters) |
$10 | 95 | 70 |
$20 | 85 | 50 |
$40 | 75 | 35 |
$50 | 65 | 45 |
$60 | 60 | 50 |
d. | more elastic; recreational skaters can substitute other activities |
3 Selena is a devoted Coca-Cola consumer, whereas Antonio can drink either Coca-Cola or Pepsi products. Selena’s demand for Coca-Cola will be relatively more ________, while Antonio’s demand will be relatively more ________.
d. | inelastic; elastic | ||
4. Assume that a family spends 35 percent of its income on housing, 20 percent on travel-related expenses, 10 percent on utilities, 25 percent on health care, and 5 percent on pet food and grooming. Demand for which category will be most responsive to a change in price?
a. | miscellaneous | d. | travel-related expenses |
b. | |||
5. Price elasticity of demand is measured as the. REF: Computing the Price Elasticity of Demand
e. | percentage change in quantity demanded divided by the percentage change in price. |
6. When the demand curve is vertical
d. | the price elasticity of demand is equal to zero. |
7. A perfectly elastic supply curve
b. | is horizontal. | ||
8. Consumer surplus is the difference between
d. | the willingness to pay for a good and the amount that is paid to get it. |
9. The difference between the willingness to pay for a good and the amount that is paid to get it is known as
e. | consumer surplus. | ||
10. Priscilla is willing to pay $65 for a new pair of shoes. Patty is willing to pay $50 for the same shoes. The shoes have a price of $45. What is the total consumer surplus for Priscilla and Patty?
d. | $25 | ||
11. Jung is willing to pay $85 for a new jacket that sells for $70. Eddie is willing to pay $65 for that same jacket. What is the total consumer surplus for Jung and Eddie?
b. | $15 | ||
12. In the figure, which region represents the consumer surplus?
b. | area B | ||
13. In the figure, which area represents the producer surplus?
c. | area C | ||
14. In the figure, which combination of areas represents the social welfare?
d. | A + B | ||
15. Questions about the equity of a tax are concerned mostly with
e. | elasticity. | ||
16. The difference between the price consumers pay and the price sellers receive after a tax is imposed is equal to the
b. | dollar amount of the tax. | ||
17. A tax that is applied to one specific good or service is a(n) ________ tax.
d. | excise | ||
18. Taxes will almost always cause consumer prices to increase. How much they increase depends on
b. | the amount of the tax. 19. When a tax is imposed on some good, the lost consumer surplus and producer surplus both typically end up as
20. For any type of tax the government imposes
21. If the government wants to raise taxes while generating the least amount of deadweight loss, it should raise taxes on a good with a
22. In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the
23. The price-quantity combination found where the supply and demand curves intersect is a unique combination that is efficient because
24. The costs or benefits of a market activity that affect a third party are called
25. The personal decisions of consumers and firms are based on ________ cost(s).
26. The costs of a market activity paid for by an individual NOT engaged in the market activity are ________ costs.
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