Economics: Elasticity Concepts
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Economics: Elasticity Concepts

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Questions and Answers

What happens to efficiency when the market fails?

  • Efficiency remains unchanged.
  • Efficiency cannot be directly measured.
  • Efficiency may decrease. (correct)
  • Efficiency improves significantly.

    • How can the standard of living in a country be measured?

  • By assessing educational attainment.
  • By looking at the unemployment rate.
  • By analyzing the birth rate.
  • By comparing personal incomes. (correct)

    • What primarily explains variations in living standards among countries?

  • Population density and demographics.
  • Differences in countries’ productivities. (correct)
  • Cultural practices and traditions.
  • Geographical location and climate.

    • What is a likely result of the government printing too much money?

    <p>The value of money may fall leading to inflation.</p> Signup and view all the answers

    What does the Phillips Curve illustrate?

    <p>The tradeoff between inflation and unemployment.</p> Signup and view all the answers

    What does price elasticity of demand measure?

    <p>The sensitivity of quantity demanded to price changes</p> Signup and view all the answers

    How is price elasticity of demand calculated?

    <p>Percentage change in quantity demanded divided by percentage change in price</p> Signup and view all the answers

    Which factor typically makes supply more elastic?

    <p>Increased ability of sellers to adapt their production</p> Signup and view all the answers

    What is the effect of beachfront land on its elasticity?

    <p>It is inelastic due to limited availability</p> Signup and view all the answers

    In which time frame is supply generally considered more elastic?

    <p>Long run</p> Signup and view all the answers

    What happens to market equilibrium when new agricultural technology is introduced?

    <p>Equilibrium price typically falls</p> Signup and view all the answers

    When analyzing supply and demand, what should be examined first?

    <p>Identify whether the supply or demand curve shifts</p> Signup and view all the answers

    What is indicated by a high price elasticity of demand?

    <p>A significant change in quantity demanded with price increases</p> Signup and view all the answers

    What characterizes a trend in time series analysis?

    <p>Long term increase or decrease in a variable</p> Signup and view all the answers

    Which of the following best describes seasonal variations in demand?

    <p>Changes in demand according to time of year or season</p> Signup and view all the answers

    How does the law of demand describe the relationship between price and quantity demanded?

    <p>As the price rises, quantity demanded falls</p> Signup and view all the answers

    What does a supply curve typically demonstrate?

    <p>A positive slope indicating higher supply with higher prices</p> Signup and view all the answers

    Which of the following factors contributes to accurate demand forecasting?

    <p>Knowledge of product, customer, and environment</p> Signup and view all the answers

    Cyclical variations in demand are primarily associated with which phenomenon?

    <p>Fluctuations in the business cycle such as booms and recessions</p> Signup and view all the answers

    What result occurs when there is an increase in the price of a good, according to the law of supply?

    <p>Producers are likely to increase output</p> Signup and view all the answers

    Random fluctuations in demand are best described as resulting from?

    <p>Unexpected events such as natural disasters</p> Signup and view all the answers

    What is the result of a price ceiling set below the equilibrium price?

    <p>It leads to a shortage of goods.</p> Signup and view all the answers

    Which of the following is an example of a price floor?

    <p>Minimum wage law.</p> Signup and view all the answers

    How is price elasticity of demand calculated?

    <p>Percentage change in quantity demanded divided by percentage change in price.</p> Signup and view all the answers

    If a price floor is set above the equilibrium price, what is the likely outcome?

    <p>Surplus of the product.</p> Signup and view all the answers

    What does price elasticity of demand measure?

    <p>The responsiveness of quantity demanded to price changes.</p> Signup and view all the answers

    Why is elasticity important in analyzing demand?

    <p>It provides insight into consumer purchasing behavior.</p> Signup and view all the answers

    Which scenario is likely when a price ceiling is imposed on rental apartments?

    <p>Decreased investment in new construction.</p> Signup and view all the answers

    What is a characteristic of a capacity-constrained product when a price floor is applied?

    <p>It creates a surplus due to limited supply.</p> Signup and view all the answers

    What characterizes an equilibrium in the market?

    <p>Quantity demanded equals quantity supplied</p> Signup and view all the answers

    What occurs when quantity demanded exceeds quantity supplied?

    <p>Shortage</p> Signup and view all the answers

    Which of the following factors can shift the demand curve?

    <p>Change in consumer incomes</p> Signup and view all the answers

    What happens to equilibrium price and quantity after a shift in the demand curve to the right?

    <p>Price increases and quantity increases</p> Signup and view all the answers

    Which scenario describes a surplus in the market?

    <p>Quantity supplied exceeds quantity demanded</p> Signup and view all the answers

    Which of the following factors would likely cause a leftward shift in the supply curve?

    <p>Reduction in the industry size</p> Signup and view all the answers

    After a supply curve shifts left, what effect does it have on market equilibrium?

    <p>Price increases, and quantity decreases</p> Signup and view all the answers

    What can cause a shift in the demand curve other than price changes?

    <p>Changes in tastes and preferences</p> Signup and view all the answers

    Study Notes

    Elasticity

    • Elasticity is a measure of how much buyers and sellers respond to changes in market conditions.
    • Allows for more precise analysis of supply and demand.
    • Price elasticity of demand is the percentage change in quantity demanded given a percent change in the price.

    Price Elasticity of Demand

    • Measures how much the quantity demanded of a good responds to a change in the price of that good.

    Computing the Price Elasticity of Demand

    • The price elasticity of demand is computed as the percentage change in the quantity demanded divided by the percentage change in price.
    • Price Elasticity = Percentage Change in Qd / Percentage Change in Price

    Elasticity, Percentage Change and Slope

    • The price elasticity of demand measures how much quantity demanded responds to the price, which is closely related to the slope of the demand curve.

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    Description

    This quiz explores key concepts related to elasticity in economics, particularly focusing on price elasticity of demand. Understand how changes in market conditions affect buyer behavior and how to compute price elasticity effectively. Brush up on the relationship between elasticity, percentage change, and demand curve slope.

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