Question 1

An increase in the demand for green tea raises the price of apples from $16 a pound to $20 a pound.As a result, quantity supplied increases by 30 percent.Using the midpoint formula, calculate the value of the price elasticity of supply?
A)1.35
B)1.875
C)2.22
D)7.5

Accepted Answer

The answer of An increase in the demand for green...

Question 2

Suppose the price elasticity of demand for cigarettes is -0.4.Health Canada decides to regulate tobacco production, which increases the price of cigarettes and causes the quantity of cigarettes demanded to decrease by 25 percent.What is the percentage increase in price which would lead to the 25 percent decrease in quantity demanded? If the price elasticity was -4, what would be the percentage increase in price?

Accepted Answer

The answer of Suppose the price elasticity of demand for...

Question 3

Suppose the value of the price elasticity of supply is 4.What does this mean?
A)A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent.
B)A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent.
C)A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.
D)For every $1 increase in price, quantity supplied increases by 4 units.

Accepted Answer

A price elasticity of supply of 4 means that a 1 percent increase in price will lead to a 4 percent increase in quantity supplied. Therefore, choice C is the correct answer. Option A and D are incorrect because they suggest a linear relationship between price and quantity supplied, which is not necessarily true. Option B is incorrect because a change in price elasticity of supply does not shift the supply curve upward, but just changes the slope of the curve.

Question 4

Figure 6.6
 
-Refer to Figure 6.6.The supply curve on which price elasticity changes at every point is shown in
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

The answer of Figure 6.6
 
-Refer to Figure 6.6.The supply...

Question 5

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase, quantity supplied increased by 30 percent.What was the percentage change in price that brought this about?
A)60 percent
B)15 percent
C)6.7 percent
D)impossible to determine without additional information

Accepted Answer

We know that the price elasticity of supply (PES) formula is:

PES = (% change in quantity supplied) / (% change in price)

We are given PES=2 and ΔQs / Qs = 0.3 (since quantity supplied increased by 30%). Let's solve for the percentage change in price:

2 = 0.3 / (% change in price)
% change in price = 0.3 / 2 = 0.15

Therefore, the percentage change in price that brought about a 30% increase in quantity supplied is 15%, which corresponds to answer choice B.

Question 6

Price elasticity of supply is used to gauge
A)how responsive suppliers are to price changes.
B)how responsive suppliers are to changes in future prices.
C)how responsive suppliers are to a change in demand.
D)how responsive sales are to a change in input prices.

Accepted Answer

Price elasticity of supply measures the responsiveness of suppliers towards changes in the price of a good or service. It tells us the percentage change in quantity supplied due to a percentage change in price.

Question 7

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is -0.75.Suppose that the government of New Brunswick is considering raising the minimum wage from $10.00 per hour to $10.60 per hour.Based on this information, calculate the percentage change in the employment of low-skilled workers.Use the midpoint formula.

Accepted Answer

The answer of A study of the effects of the...

Question 8

If firms do not increase their quantity supplied when price changes, then supply is
A)perfectly elastic.
B)perfectly inelastic.
C)relatively inelastic.
D)elastic.

Accepted Answer

When firms do not increase their quantity supplied when price changes, it means that their supply is not responsive to price changes. This is characteristic of perfectly inelastic supply, where the quantity supplied is completely fixed and unresponsive to changes in price.

Question 9

Figure 6.6
 
-Refer to Figure 6.6.A unit-elastic supply curve is shown in
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

The answer of Figure 6.6
 
-Refer to Figure 6.6.A unit-elastic...

Question 10

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

The answer of The demand for most farm products is...

Question 11

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterize the product.
A)2; The product is elastic.
B)0.2; The product is inelastic.
C)0.5; The product is inelastic.
D)50%; The product is inelastic.

Accepted Answer

Using the formula for price elasticity of supply: 
% change in quantity supplied / % change in price = 2% / 4% = 0.5
Since the result is between 0 and 1, the product is considered inelastic. Therefore, the correct choice is C.

Question 12

The price elasticity of supply is equal to
A)the value of the slope of the supply curve.
B)the change in quantity supplied divided by the change in price.
C)the percentage change in price divided by the percentage change in quantity supplied.
D)the percentage change in quantity supplied divided by the percentage change in price.

Accepted Answer

The price elasticity of supply is measured as the percentage change in quantity supplied divided by the percentage change in price. This formula helps in determining how responsive the quantity supplied is to the change in price. Choice A is incorrect because the slope of the supply curve indicates the marginal cost of producing an additional unit. However, it is not related to the elasticity of supply. Choice B is incorrect because it measures the slope of the supply curve, which is the same as the elasticity in the case of a linear supply curve only. Choice C is incorrect because it measures the elasticity of demand instead of elasticity of supply.

Question 13

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is
A)unit-elastic.
B)perfectly elastic.
C)relatively inelastic.
D)elastic.

Accepted Answer

If the quantity supplied increases by a proportionately larger percentage than the percentage increase in price, then supply is said to be elastic.

Question 14

Figure 6.6
 
-Refer to Figure 6.6.A perfectly elastic supply curve is shown in
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

The answer of Figure 6.6
 
-Refer to Figure 6.6.A perfectly...

Question 15

Figure 6.6
 
-Refer to Figure 6.6.A perfectly inelastic supply curve is shown in
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

Panel A shows a perfectly inelastic supply curve, where the quantity supplied remains the same regardless of changes in price. The other panels show different types of supply curves, such as elastic supply, unitary elastic supply, and horizontal supply.

Question 16

The price elasticity of an upward-sloping supply curve is always
A)positive.
B)negative.
C)greater than one.
D)impossible to determine.

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. As the price increases, the quantity supplied also increases, indicating an upward-sloping supply curve. Therefore, the numerator and denominator of the elasticity calculation are both positive, resulting in a positive elasticity value.

Question 17

If, for a given percentage decrease in price, quantity supplied decreases by a proportionately smaller percentage, then supply is
A)unit-elastic.
B)perfectly elastic.
C)relatively inelastic.
D)elastic.

Accepted Answer

If a given percentage decrease in price results in a proportionately smaller percentage decrease in the quantity supplied, then supply is relatively inelastic. This means that producers are not very responsive to changes in price, and there will be a relatively small change in the amount of goods supplied even if the price changes significantly.

Question 18

Figure 6.7
 
-Refer to Figure 6.7.What is the value of the price elasticity of supply between g and h?
A)20 percent
B)0.5
C)2
D)0.02

Accepted Answer

The formula for price elasticity of supply is % change in quantity supplied / % change in price. From point g to point h, the quantity supplied increases by 40 units (from 60 to 100) and the price increases by $0.20 (from $1.00 to $1.20). 
% change in quantity supplied = (40/60) x 100% = 66.67%
% change in price = (0.20/1.00) x 100% = 20%
Price elasticity of supply = 66.67% / 20% = 3.33 
Therefore, the value of the price elasticity of supply between g and h is 3.33, which is closest to answer choice C (2).

Question 19

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.
A)1.22
B)1.0
C)0.82
D)0.07

Accepted Answer

The answer of Suppose that the price of a money...

Question 20

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the government of Prince Edward Island raises the minimum wage rises from $10.00 per hour to $10.25.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.
A)17.3 percent
B)24.4 percent
C)3)4 percent
D)There is insufficient information to answer the question.

Accepted Answer

Using the midpoint formula, the percent change in quantity supplied is:
[(Q2 - Q1) / ((Q1 + Q2) / 2)] x 100%
Assuming that the initial quantity supplied is Q1 and it increases by x% to become Q2, then we can rearrange the formula to solve for x:
x = [(Q2 - Q1) / ((Q1 + Q2) / 2)] x 100%
Given that the price elasticity of supply is 1.36, we know that:
x = 1.36 x (($10.25 - $10.00) / (($10.00 + $10.25) / 2)) x 100%
x = 1.36 x (0.25 / $10.125) x 100%
x ≈ 3.98%
Therefore, the approximate change in the quantity supplied of teenage labour is 3.98%, which is closest to option C (4 percent).

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

An increase in the demand for green tea raises the price of apples from $16 a pound to $20 a pound.As a result, quantity supplied increases by 30 percent.Using the midpoint formula, calculate the value of the price elasticity of supply?

Suppose the value of the price elasticity of supply is 4.What does this mean?

Figure 6.6 -Refer to Figure 6.6.The supply curve on which price elasticity changes at every point is shown in

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase, quantity supplied increased by 30 percent.What was the percentage change in price that brought this about?

Price elasticity of supply is used to gauge

If firms do not increase their quantity supplied when price changes, then supply is

Figure 6.6 -Refer to Figure 6.6.A unit-elastic supply curve is shown in

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.

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterize the product.

The price elasticity of supply is equal to

If, for a given percentage increase in price, quantity supplied increases by a proportionately larger percentage, then supply is

Figure 6.6 -Refer to Figure 6.6.A perfectly elastic supply curve is shown in

Figure 6.6 -Refer to Figure 6.6.A perfectly inelastic supply curve is shown in

The price elasticity of an upward-sloping supply curve is always

If, for a given percentage decrease in price, quantity supplied decreases by a proportionately smaller percentage, then supply is

Figure 6.7 -Refer to Figure 6.7.What is the value of the price elasticity of supply between g and h?

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.

The price elasticity of the supply of teenage labour services is approximately 1.36.Suppose the government of Prince Edward Island raises the minimum wage rises from $10.00 per hour to $10.25.Using the midpoint formula, calculate the approximate change in the quantity supplied of teenage labour.