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# Supply, Demand, and Price Elasticity Quiz ECO/212 Version 3 University of Phoenix Material Supply, Demand, and Price Elasticity Quiz Student:...

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Supply, Demand, and Price Elasticity Quiz ECO/212 Version 3 1 University of Phoenix Material Supply, Demand, and Price Elasticity Quiz Student: ________________ Date: ____________________ Section One: Multiple Choice . 1. If a 20% decrease in the price of long distance phone calls leads to a 35% increase in the quantity of calls demanded, you may conclude that the demand for phone calls is a. elastic. b. inelastic. c. unit elastic. d. stretchy elastic. 2. Which of the following pairs are examples of substitutes? Popcorn and Soda Automobiles and bicycles Boats and fishing tackle Wine and cheese 3. If a price in a competitive market is “too high to clear the market,” what does this usually mean? Assume upward-sloping supply curves. .a No producer can cover the costs of production at that price. .b Quantity supplied exceeds quantity demanded at that price. .c Producers are leaving the industry. .d Consumers are willing to buy all the units produced at that price. 4. Which of the following statements is incorrect? Assume upward-sloping supply curves. .a If the supply curve shifts left and the demand remains constant, equilibrium price will rise. .b If the demand curve shifts left and the supply increase, equilibrium price will rise. .c If the supply curve shifts right and the demand curve shifts left, equilibrium price will fall. .d If the demand curve shifts right and the supply curve shifts left, price will rise.
Supply, Demand, and Price Elasticity Quiz ECO/212 Version 3 2 Section Two: Short Answer (250 words or less) 1. Define elasticity of demand. Provide an example. Define the law of diminishing marginal utility. Provide an example. Demonstrate, using supply and demand analysis, the effect on the equilibrium price and quantity of new hybrid automobiles when the following occurs. Using graphs similar to the notes in Week One, describe the change in the equilibrium price and quantity, and explain your answer. Is the equilibrium price higher or lower, or is the change indeterminate? Is the equilibrium quantity higher or lower, or is the change indeterminate? Incomes increase Interest rates decrease The price of batteries used in the production of these vehicles decreases price of gasoline decreases Determine if the demand for the following products is price elastic or price inelastic, and explain your answer. Box of cereal sold in a grocery store Gasoline as a commodity Gasoline sold at a local gasoline station Fast food sold at a restaurant Hotel rooms for people planning a vacation Hotel rooms for people on business to meet an important client Clothes sold in a discount retailer Identify three types of market systems, and provide an example of each system. Define the law of demand and the law of supply. Provide an example for each law.

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