Question 1

Table 6-7
 
-Refer to Table 6-7.
a.Using the information in the table, calculate the income elasticity of demand for good X and characterize the good.Use the midpoint formula.
b.Can you calculate the income elasticity of demand for good Y? If you can, show your calculation and characterize the good.If you cannot, explain why.

Accepted Answer

The answer of Table 6-7
 
-Refer to Table 6-7.
a.Using the...

Question 2

Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.

Accepted Answer

The answer of Suppose a 4 percent increase in income...

Question 3

The demand for most farm products is relatively inelastic.All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity?

Accepted Answer

When productivity increases due to better equipment, supply increases, leading to lower prices. Since demand is inelastic, the percentage drop in price leads to a smaller percentage increase in quantity demanded, resulting in decreased total revenue.

Question 4

Between 1950 and 2017, the number of acres devoted to wheat production in the United States ________ and the price of wheat ________.

Accepted Answer

According to the information given, the number of acres devoted to wheat production in the United States declined and the price of wheat decreased. Option A accurately reflects this information.

Question 5

Between 1950 and 2017 the productivity of wheat farmers in the United States more than doubled.This means that

Accepted Answer

Productivity refers to the amount of output produced per unit of input. In this case, the productivity of wheat farmers in the US more than doubled, which means that the amount of wheat produced by the average farmer more than doubled, not necessarily the total amount of wheat produced, the amount of land or resources dedicated, or the income of farmers.

Question 6

From 1950 to 2017 the number of people who lived on farms fell from 23 million to fewer than 3 million.Which of the following factors have contributed to this trend?

Accepted Answer

Rapid growth in farm production has led to fewer people needed on farms, and low income and price elasticities for food products mean that demand doesn't increase significantly with income, reducing the need for a large farming population.

Question 7

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Accepted Answer

A drought that reduces the supply of farm products will typically cause prices to rise due to the inelastic demand, potentially increasing farm revenues despite the reduced quantity sold.

Question 8

If a soda tax is implemented and demand for soda is price elastic, the effect on discouraging soda consumption would be ________ and ________ tax revenue would be collected than if demand were inelastic.

Accepted Answer

If demand for soda is price elastic, a soda tax would lead to a larger decrease in consumption as consumers are more responsive to changes in price. This would result in less tax revenue collected as overall sales would decrease, but the tax rate remains the same. Therefore, a larger effect on discouraging soda consumption would occur, but less tax revenue would be collected than if demand were inelastic.

Question 9

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Accepted Answer

The answer of Explain the concepts of cross-price elasticity of...

Question 10

The paradox of American farming is

Accepted Answer

The paradox is that despite the decrease in the number of farms, food has become cheaper and more abundant due to increased efficiency and productivity in farming practices.

Question 11

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?

Accepted Answer

The answer of Suppose a frost destroys the tomato crop...

Question 12

Assume that a 2 cent per ounce percent soda tax led to a large increase in its price and only a small decrease in the quantity of soda demanded.Economic analysis would lead one to conclude that

Accepted Answer

Economic analysis can provide information on the effects of a soda tax, but ultimately the decision to tax soda is a normative issue based on ethical and political considerations that cannot be fully decided through economic analysis alone.

Question 13

The price of wheat has fallen since 1950.Which of the following explains this price decline?

Accepted Answer

When the price elasticity of demand is less than 1, demand is inelastic, meaning consumers do not significantly reduce their quantity demanded as prices fall. Additionally, a low income elasticity of demand indicates that changes in income do not significantly affect the quantity demanded. Together, these factors can lead to a decline in price as supply increases or remains constant while demand does not increase proportionately.

Question 14

A soda tax is more effective at reducing soda consumption when demand is price ________ and is more effective at raising tax revenue when demand is price ________.

Accepted Answer

A soda tax is more effective at reducing soda consumption when demand is price elastic, meaning that consumers are sensitive to changes in price and will decrease their consumption in response to a price increase. On the other hand, a soda tax is more effective at raising tax revenue when demand is price inelastic, meaning that consumers will continue to purchase soda even with a price increase. Therefore, option B is the correct answer as a tax on soda will work best in reducing consumption of soda and raising tax revenue when demand for soda is elastic.

Question 15

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peet's coffee increased by 10 percent.Calculate the cross-price elasticity of demand between Starbucks coffee and Peet's coffee.What is the relationship between the two products?

Accepted Answer

The answer of When the price of Starbucks coffee increased...

Question 16

A recent study indicated that "Stricter college alcohol policies such as raising the price of alcohol, or banning alcohol on campus, decrease the number of students who use marijuana." This indicates that the cross-price elasticity between alcohol and marijuana is positive.

Accepted Answer

The answer of A recent study indicated that "Stricter college...

Question 17

Since 1950, there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?

Accepted Answer

When the price elasticity of demand is less than 1, demand is inelastic, meaning that an increase in supply leads to a proportionally smaller increase in quantity demanded, causing prices to fall. Additionally, a low income elasticity of demand indicates that changes in income have little effect on the quantity demanded, reinforcing the price drop.

Question 18

If a soda tax is implemented and demand for soda is price elastic, the decline in equilibrium quantity would be ________ and the increase in equilibrium price would be ________ than if demand were inelastic.

Accepted Answer

If demand for soda is price elastic, consumers are more responsive to changes in price and will reduce their quantity demanded by a larger amount when the price increases. This means that the decline in equilibrium quantity will be larger compared to if demand were inelastic. However, since consumers are also more sensitive to price increases, producers cannot raise the price as much without experiencing a significant decline in demand. Therefore, the increase in equilibrium price will be smaller compared to if demand were inelastic.

Question 19

Which of the following is one reason why the income of small family farms has decreased over time?

Accepted Answer

The answer of Which of the following is one reason...

Question 20

Explain why a local bottler of PepsiCo products would likely prefer a national soda tax to a local soda tax in its region.

Accepted Answer

The answer of Explain why a local bottler of PepsiCo...

Quiz 6: Elasticity: the Responsiveness of Demand and Supply