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Questions and Answers
An increase in the price of wheat, a substitute crop, would cause a rightward shift in the supply curve for corn.
An increase in the price of wheat, a substitute crop, would cause a rightward shift in the supply curve for corn.
False (B)
If two goods have a positive cross-price elasticity of demand, they are most likely complements.
If two goods have a positive cross-price elasticity of demand, they are most likely complements.
False (B)
Consumer surplus is defined as the area above the supply curve and below the equilibrium price.
Consumer surplus is defined as the area above the supply curve and below the equilibrium price.
False (B)
When demand is inelastic and a tax is imposed, most of the tax burden is borne by producers.
When demand is inelastic and a tax is imposed, most of the tax burden is borne by producers.
Setting a price floor above the equilibrium price leads to a surplus of the good.
Setting a price floor above the equilibrium price leads to a surplus of the good.
Implementing a tax that reduces the quantity of a good bought and sold results in a surplus above the market equilibrium.
Implementing a tax that reduces the quantity of a good bought and sold results in a surplus above the market equilibrium.
If the price elasticity of demand for a product is -0.5, this indicates that the demand for the product is elastic.
If the price elasticity of demand for a product is -0.5, this indicates that the demand for the product is elastic.
Producer surplus is defined as the area below the supply curve and above the price received by sellers.
Producer surplus is defined as the area below the supply curve and above the price received by sellers.
If an increase in income leads to a decrease in demand for a good, that good is referred to as a normal good.
If an increase in income leads to a decrease in demand for a good, that good is referred to as a normal good.
A leftward shift in the demand curve for coffee can be caused by a health report linking coffee to adverse health effects.
A leftward shift in the demand curve for coffee can be caused by a health report linking coffee to adverse health effects.
A vertical supply curve indicates that the price elasticity of supply is perfectly elastic.
A vertical supply curve indicates that the price elasticity of supply is perfectly elastic.
Total revenue will increase when the price of a product rises if the demand for that product is elastic.
Total revenue will increase when the price of a product rises if the demand for that product is elastic.
The income elasticity of demand for a normal good is always negative.
The income elasticity of demand for a normal good is always negative.
Flashcards
Rightward shift in supply curve for corn
Rightward shift in supply curve for corn
A decrease in the cost of a key input (like fertilizer) leads to increased production and supply of corn.
Positive cross-price elasticity
Positive cross-price elasticity
Indicates that an increase in the price of one good leads to an increase in the demand for another good; the goods are substitutes.
Consumer Surplus
Consumer Surplus
The difference between what consumers are willing to pay and what they actually pay for a good.
Inelastic demand and tax burden
Inelastic demand and tax burden
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Price floor above equilibrium
Price floor above equilibrium
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Tax Impact on Quantity
Tax Impact on Quantity
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Price Floor Elimination
Price Floor Elimination
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Inelastic Demand
Inelastic Demand
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Producer Surplus
Producer Surplus
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Inferior Good
Inferior Good
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Demand Curve Shift (Coffee)
Demand Curve Shift (Coffee)
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Perfectly Inelastic Supply
Perfectly Inelastic Supply
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Tax Incidence (Elastic Demand)
Tax Incidence (Elastic Demand)
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