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Questions and Answers
If the demand curve for a given product is a straight line, what does this indicate?
If the demand curve for a given product is a straight line, what does this indicate?
- Demand is unit elastic.
- Demand is more elastic at higher prices.
- Demand is inelastic at higher prices.
- Elasticity is constant along the demand curve. (correct)
If a good has elastic demand, what will a small price decrease cause?
If a good has elastic demand, what will a small price decrease cause?
- A smaller increase in quantity demanded.
- A larger increase in quantity demanded. (correct)
- No change in the quantity demanded.
- A larger decrease in the quantity demanded.
When household incomes go down and the quantity of a product demanded goes up, what type of good is the product?
When household incomes go down and the quantity of a product demanded goes up, what type of good is the product?
- A luxury good.
- An inferior good. (correct)
- A Veblen good.
- A normal good.
A firm in a perfectly competitive industry that seeks to maximize profit is most likely to continue production in the short run as long as which of the following conditions exists. Price is equal to or greater than:
A firm in a perfectly competitive industry that seeks to maximize profit is most likely to continue production in the short run as long as which of the following conditions exists. Price is equal to or greater than:
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Study Notes
Demand Analysis
- A straight line demand curve indicates that the elasticity of demand is constant at all points on the curve.
- If a good has elastic demand, a small price decrease will cause a large increase in the quantity demanded.
Income and Demand
- When household incomes decrease and the quantity of a product demanded increases, the product is an inferior good.
Perfect Competition
- In a perfectly competitive industry, a firm will continue production in the short run as long as the price is equal to or greater than average variable cost.
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