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Midterm III Study Guide Chapters 5-8

# Midterm III Study Guide Chapters 5-8 - ECON 2100 Midterm...

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ECON 2100 Midterm III Study Guide Chapters 5-8 Midterm III Date: April 9th Name: __________________________ Date: _____________ 1. The income elasticity of demand of a normal good is: A) between 1 and 0. B) less than 0. C) equal to 0. D) greater than 0. 2. The cross-price elasticity of demand of complementary goods is: A) less than 0. B) equal to 0. C) greater than 0. D) between 0 and 1. 3. If the price elasticity of supply is less than 1, then supply is: A) price elastic. B) price inelastic. C) unit-price elastic. D) very responsive to price changes. Page 1

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Use the following to answer questions 4-5: Figure: Demand for Shirts 4. (Figure: Demand for Shirts) The price elasticity of demand for the segment EF using the midpoint method is: A) 1.3. B) 1. C) 0.7. D) 0.33. 5. (Figure: Demand for Shirts) The price elasticity of demand for the segment BC using the midpoint method is: A) greater than 3.33 (absolute value). B) 3.33. C) 3. D) 0.33. Use the following to answer question 6: Figure: Tax Incidence Page 2
6. (Figure: Tax Incidence) All other things unchanged, when a good or service is characterized by a relatively inelastic supply, as shown in Panel _______, the greater share of the burden of an excise tax imposed on it (shown by the tax wedge in each panel) is borne by _______. A) A; buyers B) B; sellers C) A; sellers D) B; buyers 7. The demand for agricultural output is price inelastic. This means that if farmers, taken collectively, have a bumper crop, they will experience: A) lower prices, greater quantities sold, and lower incomes. B) higher prices, greater quantities sold, and higher incomes. C) lower prices, lower quantities sold, and lower incomes. D) higher prices, higher quantities sold, and higher incomes. Page 3

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8. Price elasticity of demand measures the responsiveness of the change in: A) quantity demanded to a change in price. B) price to a change in quantity demanded. C) slope of the demand curve to a change in price. D) slope of the demand curve to a change in quantity demanded. 9. If a good has a price inelastic demand, then which of the following is not likely to be characteristic of this good? A) The good is a necessity and is relatively unimportant in the household budget. B) There are many substitutes for the good. C) Consumers spend a small percentage of their income on the good. D) Consumers do not have much time to adjust to market changes. Page 4
Use the following to answer question 10: Figure: Tax Incidence 10. (Figure: Tax Incidence) All other things unchanged, when a good or service is characterized by a relatively elastic supply, as shown in Panel _______, the greater share of the burden of an excise tax imposed on it (shown by the tax wedge in each panel) is borne by _______. A)

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Midterm III Study Guide Chapters 5-8 - ECON 2100 Midterm...

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