Applying Supply And Demand

Question 1

What do the shapes of the supply and demand curves determine

Answer 1

By how much a shock affects the equilibrium price and quantity

Question 2

What is elasticity

Answer 2

The percentage change in one variable
In response to a percentage change in another variable

Question 3

What is price elasticity of demand

Answer 3

Percentage change in the quantity demanded
In response to a percentage change in price
At a particular point on the demand curve

Question 4

With an elastic demand, what will a higher price do to revenue

Answer 4

Reduce

Question 5

With an inelastic demand, what will a higher price do to revenue

Answer 5

Increase

Question 6

Demand elasticoties differences overtime depend on what

Answer 6

Substitution and storage opportunities

Question 7

Are the goods complements or positive if the cross price elasticity is positive

Answer 7

Substitutes

Question 8

Are the goods complements or substitutes if the cross price elasticity is negative

Answer 8

Complements

Question 9

The differences between the elasticity of supply overtime depends on?

Answer 9

The ability to convert fixed inputs into variable inputs

Question 10

What are the two types of sales tax

Answer 10

Ad valorem tax
Specific (unit tax)

Question 11

What is ad valorem tax

Answer 11

For every dollar a consumer spends the gov keeps a fraction

Question 12

What is specific tax

Answer 12

Where a specified amount is collected per unit of output

Question 13

What are the effects of specific tax on equilibrium price, quantity and tax revenue

Answer 13

Cause equilibrium price customers pay rise, quanta to fall and rise in tax revenue

Question 14

What is the incidence of tax on consumers

Answer 14

Share of tax that falls on consumers