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ECON 203 Exam 2 || All Answers Are Correct 100%.
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  • ECON 203

Elastic Demand correct answers Change in price (%) causes a relatively large change in the quantity demanded (%) Quantity changes faster than price Total revenue increases when price decreases, consumers are more responsive to change >1.0 is elastic Inelastic Demand correct answers C...

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  • August 16, 2024
  • 8
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • elastic demand

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  • ECON 203
  • ECON 203

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ECON 203 Exam 2 || All Answers Are Correct 100%.
Elastic Demand correct answers Change in price (%) causes a relatively large change in the
quantity demanded (%)

Quantity changes faster than price

Total revenue increases when price decreases, consumers are more responsive to change

>1.0 is elastic

Inelastic Demand correct answers Change in price (%) causes a relatively small change in the
quantity demanded (%) aka QD is not very sensitive to a change in price

Also occurs if the percentage change in QD is less than the percentage change in price

Quantity changes slower than price

Total revenue increases when price increases, consumers are not as responsive to change

<1.0 is inelastic

Equation to find Elasticity of Demand correct answers percentage change in quantity /
percentage change in price

absolute value

Unitary Elasticity correct answers elasticity = 1

Price Elasticity of Demand correct answers Percentage of income spent on good, length of time
spent for adjustment

Total Revenue correct answers Total amount received as firms sell their products

quantity sold times price

Price Elasticity of Supply correct answers The effect of change in price on change in quantity
supplied

Primary influence is the producer's ability to increase production

Inelastic Price Elasticity of Supply correct answers More effort to increase output

<1.0

Elastic Price Elasticity of Supply correct answers Less effort to increase output

, >1.0

Equation to calculate Price Elasticity of Demand correct answers percentage change in quantity
supplied / percentage change in price

Price Ceiling correct answers Legal maximum price

The amount producers can make is the amount that consumers are able to buy

Shortage will develop, QS in market will be less than the equilibrium supply (QD will exceed
QS)

Below the equilibrium price to be effective

Price Floor correct answers Minimum price set by law or regulation

Must be above equilibrium pride

Taxes correct answers Required payments to a government for buying a specific good

Sin tax correct answers Trying to discourage consumption (drugs, alcohol)

Raise government revenue

Price Ceilings & Price Floors vs. Taxes & Subsidies correct answers Price Ceilings & Price
Floors: distort the equilibrium price and quantity

Taxes & Subsidies: create/manipulate outcomes that would not otherwise exist

Subsidy correct answers A government payment that supports a business or market

Impact depends on market elasticity

Direct Subsidy correct answers Direct payment from government to producer

e.g. to farmers in encouragement to produce more or less or a certain good

Indirect Subsidy correct answers Provision of infrastructure (better roads, transportation, etc)

Attract more business to area

Production Function correct answers T relationship between quantity of inputs used to make a
good and the quantity of output of that good

Physical Capital correct answers Equipment, software, structure

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