Assume that you are told that because of some changes, the equilibrium price increased but it is unknown if the equilibrium quantity increased, remained the same, or decreased. Which of the following would be consistent with this outcome?
a. There was a decrease in input costs and consumers expected lower income.
b. Consumers expected a lower price and firms expected a higher price.
c. There was a decrease in income (the good is inferior) and a decrease in the number of firms.
d. There was a positive change in consumer tastes and an increase in productivity.

When demand is _______ consumers are _______ to price changes and the price elasticity of demand is _______.
a. elastic, relatively sensitive, greater than one (in absolute value)
b. inelastic, completely insensitive, equal to one (in absolute value)
c. inelastic, relatively sensitive, less than one (in absolute value)
d. unit elastic, hyper-sensitive, equal to zero
e. perfectly elastic, hyper-sensitive, equal to one (in absolute value)

The price elasticity of demand for sandwiches at a deli is estimated to be 1.75 (in absolute value). This means that the demand for the sandwiches is _______ and for any given percentage change in price (in absolute value), the percentage change in quantity demanded will be _______ (in absolute value).
a. elastic, smaller
b. elastic, larger
c. inelastic, smaller
d. inelastic, larger

If demand is inelastic, a change in the selling price causes no change in the quantity demanded.
a. True
b. False

Which of the following is not correct about a price ceiling?
The amount of the good or service bought and sold under a price ceiling is less than the equilibrium quantity.
a. A price ceiling creates a persistent surplus.
b. Price ceilings cause underinvestment in the industry.
c. For it to be effective, a price ceiling is imposed below the equilibrium price.
d. Black markets often develop when a price ceiling is in place.

Question

Assume that you are told that because of some changes, the equilibrium price increased but it is unknown if the equilibrium quantity increased, remained the same, or decreased. Which of the following would be consistent with this outcome?
a. There was a decrease in input costs and consumers expected lower income.
b. Consumers expected a lower price and firms expected a higher price.
c. There was a decrease in income (the good is inferior) and a decrease in the number of firms.
d. There was a positive change in consumer tastes and an increase in productivity.

When demand is _______ consumers are _______ to price changes and the price elasticity of demand is _______.
a. elastic, relatively sensitive, greater than one (in absolute value)
b. inelastic, completely insensitive, equal to one (in absolute value)
c. inelastic, relatively sensitive, less than one (in absolute value)
d. unit elastic, hyper-sensitive, equal to zero
e. perfectly elastic, hyper-sensitive, equal to one (in absolute value)

The price elasticity of demand for sandwiches at a deli is estimated to be 1.75 (in absolute value). This means that the demand for the sandwiches is _______ and for any given percentage change in price (in absolute value), the percentage change in quantity demanded will be _______ (in absolute value).
a. elastic, smaller
b. elastic, larger
c. inelastic, smaller
d. inelastic, larger

If demand is inelastic, a change in the selling price causes no change in the quantity demanded.
a. True
b. False

Which of the following is not correct about a price ceiling?
The amount of the good or service bought and sold under a price ceiling is less than the equilibrium quantity.
a. A price ceiling creates a persistent surplus.
b. Price ceilings cause underinvestment in the industry.
c. For it to be effective, a price ceiling is imposed below the equilibrium price.
d. Black markets often develop when a price ceiling is in place.

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