# Choose the BEST answer Determining the price elasticity of demand involves all of the following fact

Determining the price elasticity of demand involves all of the following factors, but NOT

Aluxuries versus necessities

Bslope of the supply curve

Cavailability of substitutes

Elasticity is relevant when trying to understand

A how a change in quantity demanded affects price and how a change in quantity supplied affects price

B how a change in price affects quantity supplied, how a change in price affects quantity demanded, and how raising a tax on a good affects the revenue from the tax

C the burden of taxes on consumers

Using the midpoints method, calculate the price elasticity of demand of Good X using the following information: When the price of good X is \$50, the quantity demanded of good X is 400 units When the price of good X rises to \$60, the quantity demanded of good X falls to 300 units

A The price elasticity of demand for good X = 064

B The price elasticity of demand for good X = 123

C The price elasticity of demand for good X = 157

When the demand for a good or service does NOT vary when there is a change in price, the good is ________?

E perfectly inelastic

D unitarian

C perfectly elastic

If consumers find cola and iced tea good substitutes, then it is likely that

A the goodsâ€™ price elasticities of demand are less than one

B the goodsâ€™ cross price elasticities are greater than zero

C the goodsâ€™ income elasticities are less than zero

If wage increases by 10%, a(n) ________ worker is likely to supply 7% more labor because elasticity of labor supply is assumed to be ________

C teenager; elastic

You are the manager of the public transit system You are informed that the system faces a deficit, but you cannot cut service, which means you cannot cut costs Your only hope is to increase revenue by increasing fares You are advised that the estimated price elasticity of demand, several years after the price change, will be about ?15 Select the statement that best describes the results of raising the fare in the long run

A Total revenue falls, since demand changes and becomes price elastic

B Total revenue will fluctuate as the demand fluctuates

C Total revenue rises immediately, since demand will remain price inelastic

Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair Assume that the company wants to earn as much revenue as possible from this drug If the elasticity of demand for your companyâ€™s product at the current price is 14, what would you advise the company to do?

A lower the price

B raise the price

C keep the price the same

A government decides to set a price ceiling on bread so that bread is affordable to the poor The conditions of demand and supply are given in the table below What is the equilibrium price before the price ceiling? What will the excess supply or the shortage be if the price ceiling is set at \$240?

Price Qd Qs

\$160 9,000 5,000

\$200 8,500 5,500

\$240 8,000 6,400

\$280 7,500 7,500

\$320 7,000 9,000

\$360 6,500 11,000

\$400 6,000 15,000

A \$280; 1,600 excess supply

B \$280; 1,600 shortage

C \$240; 1,600 shortage

Price ceilings attempt to make consumer prices ________

lower

higher

at equilibrium

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A price ceiling creates ________ when it is set ________ the equilibrium price

A excess supply — below

B excess demand — below

C excess demand — above

A price floor attempts to keep prices ________

A at the equilibrium price

B lower than the equilibrium price

C higher than the equilibrium price

When supply is elastic and demand is inelastic, the tax incidence falls on the ________

A producer

B government

C consumer

The demand for cigarettes is highly inelastic This suggests that the incidence of a higher tax on cigarettes will fall primarily on:

A Cigarette consumers

B Cigarette sellers

C Government

Which of the following example(s) describe a regressive tax?

ASocial Security tax rate of 62% on earned income below \$117,000 and 0% on income earned above \$117,000

B Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households

C Medicare payroll tax of 29% of income for everyone, regardless of how much they earn

16Choose ALL that apply

Property taxes are:

A generally considered to be regressive

B generally considered to be progressive

C imposed based on ownership of assets such as real estate and autos