Questions and Answers
In economics, if a good is inelastic, what does this mean?
its supply or demand is not sensitive to price changes.
What does a price floor set above equilibrium indicate?
Which statement best describes incentives?
Incentives can be positive or negative.
What is likely to happen when the government sets a price floor on bread at $5.00?
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Which is an example of a product that is considered a need?
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How does the price change affect the amount produced according to the supply graph?
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Why might a consumer respond to a negative incentive?
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What does the graph showing the price of green tea compared to the amount supplied suggest? Check all that apply.
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A(n) ____________ is a reward or punishment that encourages people to behave in certain ways.
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Goods that are considered to be needs tend to be what in terms of price changes?
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Study Notes
Elasticity and Incentives
- Inelastic goods have supply or demand that is unaffected by price changes.
- Price floor is a minimum price set above market equilibrium, causing shifts in demand and supply.
Price Controls and Effects
- Government price floor on bread prevents sales below $5.00, leading to decreased quantity demanded and increased quantity supplied.
Understanding Incentives
- Incentives are mechanisms that motivate behavior, classified as positive (rewards) or negative (penalties).
Necessities and Price Sensitivity
- Breakfast food exemplifies a product that is classified as a necessity.
- Essential goods typically exhibit inelastic demand, meaning price changes do not significantly alter their quantity demanded.
Supply Response to Price Changes
- Supply graphs illustrate significant changes in produced quantity in response to price variations.
Consumer Behavior and Incentives
- Consumers might react to negative incentives to avoid extra charges, indicating cost awareness and decision-making strategies.
Graphical Analysis
- Specific graphs can reveal the relationship between price and quantity supplied, as well as trends related to particular goods like green tea.
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Description
This quiz covers key concepts in economics, focusing on elasticity and incentives. Understand how price controls like price floors affect supply and demand, and explore the consumer behavior influenced by incentives. Test your knowledge on necessities and the sensitivity of demand to price changes.
