ECON 102 Lecture Notes - Lecture 9: Demand Curve, Normal Good, Market Clearing

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oliveferret918

27 Dec 2015

School

University of Illinois

Department

Economics

Course

ECON 102

Professor

Isaac Di Ianni

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ECON 102 Full Course Notes

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The more substitutes (satisfy similar desires), the more elastic relatively small change in price can change relatively large change in quantity demand curve being relatively flat. Quantity demanded for wendy"s will drop dramatically if price goes up people will just go to mcdonalds. If price of salt doubles, you won"t cut quantity by that much: fixed consumption patterns. The more time you have, the easier it is to find other substitutes. Gasoline is used based on where we live and take long time to change. The more fixed your consumption patterns are, the more inelastic it is; over time as you change these patterns, becomes more elastic: expenditure share. More efficient means of collecting money from perspective of gov makes sense: cross-price elasticity of demand: Percent change in quantity demanded of x/percent change in price of y. If it"s a positive number, price of y increases, it causes the quantity of x to increase also means it"s a substitute.

Related Questions

1. When demand is inelastic, a decrease in price will cause

a. an increase in total revenue.

b. a decrease in total revenue.

c. no change in total revenue but an increase in quantity demanded.

d.no change in total revenue but a decrease in quantity demanded.

2. For which of the following types of goods would the income elasticity of demand be positive and relatively large?

a. all inferior goods

b. all normal goods

c. goods for which there are many complements

d. luxuries

3. Which of the following should be held constant when calculating the income elasticity of demand?

a. the quantity of the good demanded

b. the price of the good

c. income

d. All of the above should be held constant.

4. Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

a. positive.

b. negative.

c. either positive or negative. It depends on whether A and B are normal goods or inferior goods.

d. either positive or negative. It depends on whether the current price level is on the elastic or inelastic portion of the demand curve.

5. As the price elasticity of supply increases, the supply curve

a. becomes flatter

b. becomes steeper

c. becomes downward sloping.

d. shifts to the right.

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1. Suppose that a 10% increase in the wage results in a 5% reduction in employment. In this case, labor demand is said to be:

A. elastic

B. inelastic

C. unit elastic

2. Which of the following best explains why elasticity varies along a linear demand curve?

A. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) while the percentage change in wage increases.

B. As the quantity of labor demanded rises, the percentage change in quantity demanded rises (for a given change in labor use) as does the percentage change in the wage.

C. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) as does the percentage change in the wage.

D. As the quantity of labor demanded rises, the percentage change in quantity demanded declines (for a given change in labor use) while the percentage change in wage decreases

3. Labor demand is more elastic when:

A. the substitution effect resulting from a wage change is larger

B. the scale effect resulting from a wage change is larger

C. both are correct

D. none of the above

4. The scale effect associated with a change in the wage is larger when:

A. the demand for the final product is more elastic

B. labor costs are a smaller share of total costs

C. there are many close substitutes for this category of labor

D. economics of scale are present in the production of the good

5. The price elasticity of demand for the final products affects the own-wage elasticity of demand for labor by affecting the magnitude of:

A. the substitution effect that occurs in the labor market

B. the scale effect that occurs in the labor market

C. both substitution and scale effects

D. neither substitution nor scale effects

6. Unions are expected to attempt to:

A. make it more difficult to replace labor with other resources

B. reduce the elasticity of demand for the final product

C. support laws that reduce the elasticity of supply of other resources

D. all of the above.

E. none of the above

7. Unions are likely to be less successful in negotiating higher wages in those labor markets in which:

A. the demand for the final product is more elastic

B. there are few close substitutes for union workers

C. the price elasticity of supply for other factors of production is relatively high

D. labor costs comprise a small share of total costs

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1. Which of the following is not characteristic of the demand for a commodity that is elastic?

a. The relative change in quantity demanded is greater than the relative in price

b. Buyers are relatively sensitive to price changes

c. Total revenue declines if price is increased

d. The elasticity coefficient is less than one

2. Suppose the price elasticity of demand for bread is 0.20 if the bread falls by 10 percent, the quantity demanded will increase by:

a. 2 percent and total expenditures on bread will rise

b. 2 percent and total expenditures on bread will fall

c. 20 percent and total expenditures on bread will fall

d. 20 percent and total expenditures on bread will rise

3. If a consumer is equilibrium, an increase in money income will:

a. Move him to a new equilibrium on a lower indifference curve

b. Make his indifferent curves steeper, but will not alter the equilibrium position

c. Have no effect on the equilibrium position because product prices have not change

d. Move him a new equilibrium on a high indifferent curve

4. The larger the coefficient of price elasticity of demand for a product, the:

a. Larger the resulting price change for an increase in supply

b. More rapid the rate at which the marginal utility of that product diminishes

c. Smaller the resulting price change for an increase in supply

5. A manufactures of frozen pizzas found that total revenue decreased when price was lowed from $5to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,

a. The demand for pizza is elastic above $5 and inelastic below $5

b. The demand for pizza is elastic both above and below $5

c. The demand for pizza is inelastic above $5 and elastic below$5

d. $5 is not the equilibrium price of pizza

6. The elasticity of demand for a product is likely to be greater

a. if the product is necessity, rather than a luxury

b. the greater the amount good of time over which buyers adjust to a price change

c. The smaller the proportion of one

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ECON 102 Lecture Notes - Lecture 9: Demand Curve, Normal Good, Market Clearing

ECON 102 Full Course Notes

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