Question 1

The government of Bassaland is looking for new revenue sources.It is considering imposing an excise tax on two goods: palm wine and diapers.If the price elasticity of demand for the goods are -0.47 and -1.89 respectively, which good should it tax if the goal is to raise revenue? If the government wants to tax only one good, which good should it tax if the goal is to discourage consumption? Explain your answer.

Accepted Answer

The answer of The government of Bassaland is looking for...

Question 2

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 the price of the good causes quantity supplied to increase by 4 percent. This indicates that supply is very responsive to changes in price, as a small increase in price leads to a large increase in the quantity supplied.

Question 3

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 to changes in price. It shows how the quantity supplied of a good or service changes in response to a change in the price of the good or service.

Question 4

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

Price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price. We have been given the elasticity of supply as 2, which means that 1% increase in price will lead to a 2% increase in quantity supplied. 
Let x be the percentage change in price that led to a 30% increase in quantity supplied. We can write the following equation based on the given information:

2 = 30/x

Solving for x, we get x = 15%. Therefore, the percentage change in price that brought about a 30% increase in quantity supplied is 15%. So, the answer is B.

Question 5

The price elasticity of the supply of teenage labor services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula, what is the approximate change in the quantity of teenage labor supplied?
A)7.3 percent
B)14.4 percent
C)25.5 percent
D)There is insufficient information to answer the question.

Accepted Answer

The answer of The price elasticity of the supply of...

Question 6

Figure 6-10
 
-Refer to Figure 6-10.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, which means that regardless of the price, the quantity supplied remains the same. This is shown by the vertical line at Qs. Panels B, C, and D all show upward sloping supply curves, which means that as the price increases, the quantity supplied also increases.

Question 7

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 formula for price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Therefore, the correct choice is D.

Question 8

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

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, we have:
Price elasticity of supply = (2%/4%) = 0.5
Since the value is less than 1, the product is considered to be inelastic. Therefore, the correct answer is C.

Question 9

Figure 6-10
 
-Refer to Figure 6-10.A perfectly elastic supply curve is shown in
A)Panel A.
B)Panel B.
C)Panel C.
D)Panel D.

Accepted Answer

Panel B shows a perfectly elastic supply curve, meaning that any change in price will result in an infinite change in the quantity supplied. This is shown by the horizontal line. The other panels show different levels of inelasticity or elasticity in the supply curve.

Question 10

Suppose the price elasticity of demand for methamphetamine is -0.35.If decriminalization caused the price of methamphetamine to fall by 75 percent, what will be the percentage increase in the quantity of methamphetamine demanded? If the price elasticity is -3.5, what will be the percentage increase in quantity demanded?

Accepted Answer

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

Question 11

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 always positive because as prices increase, suppliers are willing to produce more in order to take advantage of the higher prices. Therefore, the quantity supplied increases as the price increases, resulting in a positive elasticity of supply.

Question 12

Figure 6-11
 
-Refer to Figure 6-11.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

Price elasticity of supply = percentage change in quantity supplied / percentage change in price. Moving from point g to point h, the quantity supplied increases from 12 to 24 (100% increase) while the price increases from $10 to $20 (100% increase). Therefore, the price elasticity of supply between g and h is 100% / 50% = 2.

Question 13

Figure 6-10
 
-Refer to Figure 6-10.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 6-10
 
-Refer to Figure 6-10.The supply...

Question 14

Figure 6-10
 
-Refer to Figure 6-10.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 6-10
 
-Refer to Figure 6-10.A unit-elastic...

Question 15

Suppose the price elasticity of demand for cigarettes is -0.4.The FDA 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 16

An increase in the demand for green tea raises the price of green tea from $16 a pound to $20 a pound.As a result, quantity supplied increases by 30 percent.Using the midpoint formula, what is 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 17

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 is considering raising the minimum wage from $7.25 per hour to $7.75 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 18

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 19

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

When quantity supplied increases by a proportionately larger percentage than the percentage increase in price, it is an indication of a relatively responsive change in quantity supplied. This kind of responsiveness is referred to as elasticity, which means that supply is elastic in this scenario.

Question 20

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 supply is not responsive to changes in price. This is the definition of perfectly inelastic supply. In this case, the quantity supplied remains the same regardless of changes in price.

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

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

Price elasticity of supply is used to gauge

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?

The price elasticity of the supply of teenage labor services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula, what is the approximate change in the quantity of teenage labor supplied?

Figure 6-10 -Refer to Figure 6-10.A perfectly inelastic supply curve is shown in

The price elasticity of supply is equal to

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.

Figure 6-10 -Refer to Figure 6-10.A perfectly elastic supply curve is shown in

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

Figure 6-11 -Refer to Figure 6-11.What is the value of the price elasticity of supply between g and h?

Figure 6-10 -Refer to Figure 6-10.The supply curve on which price elasticity changes at every point is shown in

Figure 6-10 -Refer to Figure 6-10.A unit-elastic supply curve is shown in

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

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.

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

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