Question 1

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,calculate the approximately change in the quantity supplied of teenage labor.
A) 7.3 percent
B) 14.4 percent
C) 25.5 percent
D) There is insufficient information to answer the question.

Accepted Answer

Using the midpoint formula,

% Change in quantity supplied = [(Q2-Q1)/(Q2+Q1)/2] x 100%

% Change in wage rate = [(W2-W1)/(W2+W1)/2] x 100%

We are given that the wage rate increases from $7.25 to $8.75. So,

W1 = $7.25, W2 = $8.75
% Change in wage rate = [(8.75-7.25)/(8.75+7.25)/2] x 100%
% Change in wage rate = 20%
We are also given that the price elasticity of supply is 1.36.

% Change in quantity supplied = (1.36) x (20%)
% Change in quantity supplied = 27.2%

However, we need to use the midpoint formula to calculate the approximate change in the quantity supplied. Let's assume that the initial quantity supplied is 100.

Q1 = 100, % Change in quantity supplied = 27.2%
% Change in quantity supplied = [(Q2-100)/(Q2+100)/2] x 100%

27.2% = [(Q2-100)/(Q2+100)/2] x 100%
27.2% = (Q2-100)/(Q2+100) x 50
0.272(Q2+100) = Q2-100
0.272Q2 + 27.2 = Q2 - 100
0.728Q2 = 127.2
Q2 = 174.73

So, the approximate change in the quantity supplied of teenage labor is:

Q2-Q1 = 74.73
% Change in quantity supplied = [(74.73)/((174.73+100)/2)] x 100%
% Change in quantity supplied = 25.5%

Therefore, the best choice is C) 25.5 percent.

Question 2

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 3

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 4

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 5

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

The answer of Figure 6-10 
-Refer to Figure 6-10.A perfectly...

Question 6

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

Price elasticity of supply = % change in quantity supplied / % change in price
Given, % change in price = 4% and % change in quantity supplied = 2%
Therefore, price elasticity of supply = 2% / 4% = 0.5
Since the price elasticity of supply is less than 1, the product is considered inelastic.

Question 7

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

Using the formula for price elasticity of supply:

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

We know that E = 2 and (% change in quantity supplied) = 30%.

Therefore, we can solve for (% change in price):

2 = 30% / (% change in price)

(% change in price) = 30% / 2 = 15%

So, the percentage change in price that brought about a 30% increase in quantity supplied is 15%. Therefore, the correct answer is B.

Question 8

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 extent to which the quantity supplied of a good or service changes when there is a change in the price of that good or service. Therefore, it gauges how responsive suppliers are to price changes.

Question 9

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 10

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 11

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

The answer of Figure 6-10 
-Refer to Figure 6-10.A perfectly...

Question 12

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

If firms do not increase their quantity supplied when price changes, then supply is perfectly inelastic. This means that the quantity supplied remains the same no matter how much the price changes.

Question 13

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 14

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 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

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 the percentage increase in price results in a proportionately larger percentage increase in the quantity supplied, supply is said to be elastic. This means that producers are responsive to changes in price, and a small change in price leads to a relatively larger change in the quantity supplied.

Question 17

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 will cause quantity supplied to increase by 4 percent. This indicates that the supply of the good is very responsive to changes in price.

Question 18

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 measures the responsiveness of quantity supplied to a change in price. As the supply curve is upward sloping, this means that an increase in price will lead to an increase in quantity supplied. Therefore, the price elasticity of supply will always be positive.

Question 19

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 20

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...

Quiz 6: Elasticity: The Responsiveness of Demand and Supply

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,calculate the approximately change in the quantity supplied of teenage labor.

The price elasticity of supply is equal to

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.

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

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 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

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 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?

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

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

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

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

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

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

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