Question 1

Suppose the current price of oil is $90 a barrel and the quantity supplied is 800 million barrels per day. If the price elasticity of supply for oil in the short run is estimated at 0.5, use the midpoint formula to calculate the percentage change in quantity supplied when the price of oil rises to $98 a barrel.

Accepted Answer

The answer of Suppose the current price of oil is...

Question 2

Which of the following statements is true?
A) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic.
B) The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic.
C) The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly.
D) Over short periods of time, increases in the demand for oil are greater than increases in the supply of oil. Over the long run, increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run.

Accepted Answer

The statement "The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic" is true. This is because in the short run, oil production cannot be easily adjusted, making supply relatively inelastic. However, over time, oil producers can adjust their production levels and new sources of oil can be developed, making supply more elastic. Therefore, a given shift in supply will result in a smaller increase in price when supply is more elastic.

Question 3

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Accepted Answer

The answer of The price elasticity of supply is calculated...

Question 4

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

Accepted Answer

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Question 5

There are a limited number of original Picasso paintings. This means that the supply of original Picasso paintings is perfectly inelastic.

Accepted Answer

A perfectly inelastic supply means that regardless of the price, the quantity supplied will remain the same. In this case, there is a fixed number of original Picasso paintings, so the supply cannot change regardless of the price. Therefore, the supply of original Picasso paintings is perfectly inelastic.

Question 6

Suppose the current price of copper is $3 per pound and the quantity supplied is 200 pounds per day. If the price of copper falls to $2.50 per pound, the quantity supplied drops to 180 pounds per day. Use the midpoint formula to calculate the price elasticity of supply for copper.

Accepted Answer

The answer of Suppose the current price of copper is...

Question 7

Figure 6-12 
-Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product increases. Which of the following statements accurately predicts the resulting increase in price?
A) The more elastic the supply curve, the greater the price increase.
B) The more elastic the supply curve, the smaller the price increase.
C) The increase in price is not affected by the elasticity of the supply curve.
D) There will be no increase in price if the supply curve is perfectly inelastic.

Accepted Answer

If the demand for a product increases, the price will increase, but the magnitude of the increase will depend on the elasticity of the supply curve. If the supply curve is relatively elastic, producers can increase production quickly in response to the higher demand, so the price increase will be relatively small. If the supply curve is relatively inelastic, however, producers cannot easily increase production, so the price increase will be larger. Therefore, the more elastic the supply curve, the smaller the price increase.

Question 8

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Accepted Answer

The price elasticity of supply measures how responsive quantity supplied is to changes in price. The more easily and quickly firms can acquire additional inputs to increase supply, the more elastic their supply will be and the higher the numerical value of the price elasticity coefficient. Therefore, the statement is true.

Question 9

Figure 6-12 
-Refer to Figure 6-12. The diagram shows two supply curves, SA and SB. As price rises from P0 to P1, which supply curve is more elastic?
A) SA
B) SB
C) They are equally inelastic.
D) They are equally elastic.

Accepted Answer

As price rises from P0 to P1, the quantity supplied by both suppliers increases, but the increase is more significant for Supply Curve B (SB). Therefore, SB is more elastic than SA.

Question 10

Suppose the supply curve for digital cameras shifts to the right. This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Accepted Answer

The answer of Suppose the supply curve for digital cameras...

Question 11

Supply is elastic whenever the elasticity value for supply is positive and greater than 1.

Accepted Answer

This statement is correct. When the elasticity value for supply is positive and greater than 1, it indicates that the quantity supplied changes proportionally more than the percentage change in price. This means that suppliers are highly responsive to changes in price, and as a result, the supply is elastic.

Question 12

For a given demand curve, will there be a greater loss of economic efficiency from a binding price floor when supply is elastic or inelastic? Illustrate your answer with a demand and supply graph. In your graph you must show two supply curves, one elastic and the other inelastic.

Accepted Answer

The answer of For a given demand curve, will there...

Question 13

Shifts in the supply of oil have caused large changes in price since the 1970s because
A) the supply of oil is very inelastic while the demand for oil is very elastic over short periods of time.
B) the supply of oil is very elastic while the demand for oil is inelastic over short periods of time.
C) both the supply of oil and the demand for oil are inelastic over short periods of time.
D) the supply of oil and the demand for oil are perfectly elastic over short periods of time.

Accepted Answer

The answer of Shifts in the supply of oil have...

Question 14

The process involved in bringing oil to world markets can take years. Substitutes for oil-based products such as gasoline are limited. As a result
A) the supply of oil is very elastic and the demand for oil is very elastic over short periods of time.
B) the supply of oil is very inelastic and the demand for gasoline is inelastic over short periods of time.
C) the supply of oil and the demand for oil shift to the right over short periods of time.
D) the supply of oil and the demand for oil are both perfectly elastic over short periods of time.

Accepted Answer

The process of bringing oil to market is lengthy and substitutes are limited, leading to a situation where the supply of oil is very inelastic and the demand for gasoline is also inelastic over short periods of time. This means that changes in price will not have a significant effect on either supply or demand in the short term.

Question 15

Suppose the demand curve for hybrid cars shifts to the right. This will cause a relatively small increase in the price of hybrid cars if
A) demand is elastic and supply is inelastic.
B) demand is inelastic and supply is elastic.
C) both demand and supply are inelastic.
D) both demand and supply are elastic.

Accepted Answer

The answer of Suppose the demand curve for hybrid cars...

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

Which of the following statements is true?

The price elasticity of supply is calculated as the change in supply divided by the change in price.

Explain the economic concept of price elasticity of supply. How is price elasticity of supply calculated?

There are a limited number of original Picasso paintings. This means that the supply of original Picasso paintings is perfectly inelastic.

Suppose the current price of copper is $3 per pound and the quantity supplied is 200 pounds per day. If the price of copper falls to $2.50 per pound, the quantity supplied drops to 180 pounds per day. Use the midpoint formula to calculate the price elasticity of supply for copper.

Figure 6-12 -Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product increases. Which of the following statements accurately predicts the resulting increase in price?

The value of the price elasticity of supply depends primarily on how quickly firms can acquire inputs to increase quantity supplied when price increases.

Figure 6-12 -Refer to Figure 6-12. The diagram shows two supply curves, SA and SB. As price rises from P0 to P1, which supply curve is more elastic?

Suppose the supply curve for digital cameras shifts to the right. This will cause a relatively large decrease in the price of digital cameras if both demand and supply are inelastic.

Supply is elastic whenever the elasticity value for supply is positive and greater than 1.

For a given demand curve, will there be a greater loss of economic efficiency from a binding price floor when supply is elastic or inelastic? Illustrate your answer with a demand and supply graph. In your graph you must show two supply curves, one elastic and the other inelastic.

Shifts in the supply of oil have caused large changes in price since the 1970s because

The process involved in bringing oil to world markets can take years. Substitutes for oil-based products such as gasoline are limited. As a result

Suppose the demand curve for hybrid cars shifts to the right. This will cause a relatively small increase in the price of hybrid cars if