What happens to supply in the long run according to the lesson?
Click to see answer
Supply is elastic because landlords have time to sell off their apartments.
Click to see question
What happens to supply in the long run according to the lesson?
Supply is elastic because landlords have time to sell off their apartments.
What does a housing shortage indicate in the long run?
The housing shortage increases in the long run.
What is the significance of landlords having time in the long run?
They can adjust supply by selling off their apartments.
What is the duration of the video tutorial for this lesson?
05:18.
Where can the video tutorial for this lesson be found?
On wizeprep.com.
What is the demand equation provided in the example?
P = 70 – 2Q.
What is the copyright status of the publication?
© Wizedemy Inc. All Rights Reserved.
What does the video tutorial demonstrate regarding taxes?
It shows that producers pay all of the tax.
At what price is demand unit elastic according to the demand equation?
To find the price, set the price elasticity of demand equal to 1.
What is the demand equation given in the lesson?
P = 70 – 2Q.
What is prohibited without prior written permission from Wizedemy Inc.?
Reproducing or transmitting any part of the publication.
How can total revenue be maximized using the demand equation?
Total revenue is maximized when the price elasticity of demand is unit elastic.
What price is used to calculate the price elasticity of demand?
$40.
What is the average percentage change in quantity between points A and B?
The specific value is not provided in the text.
What happens to demand for a narrowly defined product when its price increases?
Demand becomes elastic because consumers can switch to other products.
How do you calculate the price elasticity of demand at a specific price?
By using the demand equation to find Q and then applying the elasticity formula.
What is an example of a narrowly defined product?
Pizza.
What is being calculated between points A and B in the diagram?
The arc price elasticity of demand.
What is perfectly inelastic supply?
When the price changes, the quantity supplied does not change at all.
What are the two types of products mentioned?
Luxury product and necessity product.
What is the duration of the video tutorial for this lesson?
03:19.
What happens to demand for a broadly defined product when its price increases?
Demand becomes inelastic because there are no substitutes for essential items.
Give an example of perfectly inelastic supply.
Seats in a movie theater.
What is an example of a broadly defined product?
Food in general.
How does an increase in the price of a luxury good affect consumer sensitivity?
Consumers become more sensitive to the price (elastic).
What is the website where the video tutorial can be found?
wizeprep.com.
What is perfectly elastic supply?
When the price changes, the quantity supplied changes by an infinite amount.
Give an example of perfectly elastic supply.
Pencils.
What happens when the price of a necessity product increases?
Consumers are insensitive to the price (inelastic).
What happens to pencil production if the price increases?
The company can increase production very easily.
What does it mean when demand is described as elastic?
It is sensitive because it represents a bigger portion of your income.
What is the copyright notice for the video tutorial?
© Wizedemy Inc. All Rights Reserved.
What is the demand equation given in the lesson?
P = 70 - 2Q.
What is the copyright status of the publication from Wizedemy Inc.?
No part may be reproduced or transmitted without prior written permission.
What does 'ceteris paribus' mean?
Everything else held constant.
Where is the unit elastic point located on the demand curve?
At the middle of the demand curve (point B).
What is the price elasticity of demand for Toyota compared to the elasticity of cars in general?
The price elasticity of demand for Toyota is ____________ than the elasticity of cars in general.
What is the duration of the video tutorial for the lesson?
09:20.
What is the price range for calculating the elasticity of demand?
50.
What is the website mentioned for the video tutorial?
wizeprep.com
Where can the solution be found?
Available online.
What is the formula to calculate percentage change?
Percentage Change = ((New - Old) / Old) * 100
How should 'ceteris paribus' affect your answer in a question?
It should have no effect on your answer.
What is tax incidence?
The distribution of the tax burden between buyers and sellers.
What is the income elasticity of demand for gourmet meals compared to junk-food restaurant meals?
Higher than.
How does the demand for luxury goods compare to the demand for necessity goods?
The demand for a luxury good will be flatter than the demand for a necessity good.
What is the duration of the video tutorial for this lesson?
05:27.
Why is point B considered the unit elastic point of demand?
Because it is exactly between the elastic and inelastic portions.
What is the absolute value of Price Elasticity of Demand for inelastic demand?
Less than 1.
What is the duration of the video tutorial for the lesson?
02:42 minutes.
What are the possible answers for the elasticity of demand for Toyota?
A) less B) greater C) equal or less D) less or greater
What is the website where the video tutorial can be found?
wizeprep.com.
What is Arc Price Elasticity of Demand used for?
To calculate the average elasticity between two prices.
How do you calculate the elasticity of demand between two prices?
Using the formula for point price elasticity of demand.
What is the income elasticity of inferior goods?
The income elasticity of inferior goods is negative.
What is being measured between points A and B in the diagram?
The average percentage change in price.
What is a per unit tax?
A fixed amount of tax paid by either the buyer or seller on every good sold.
When will the burden of a tax on trucks be greater on producers?
When supply is inelastic and demand is elastic.
If the quantity changes from 40 to 50 units, what is the percentage change?
Percentage Change = ((50 - 40) / 40) * 100 = 25%
What is the duration of the video tutorial?
04:23
What type of demand curve is associated with luxury goods?
Flatter demand curve.
What is the absolute value of Price Elasticity of Demand for elastic demand?
Greater than 1.
Where can the video tutorial for this lesson be found?
On wizeprep.com.
What is the formula for Arc Price Elasticity of Demand?
Arc Price Elasticity of Demand = (Average %Δ P) / (Average %Δ Q) * (Δ P / Δ Q) * (Q average / P average)
What happens to the quantity supplied of ink cartridges when the price increases from 36?
The quantity supplied increases from 10 to 13 cartridges.
Where can the video tutorial for this lesson be found?
On wizeprep.com.
What happens to the consumption of inferior goods as income increases?
As your income increases, you will buy fewer inferior goods.
What is prohibited without prior written permission from Wizedemy Inc.?
Reproducing or transmitting any part of the publication.
What is the formula for the present value of an ordinary perpetuity?
PV = C / r, where C is the cash flow per period and r is the discount rate.
What is the main topic of the practice question?
Tax Incidence / Tax Burden.
What is the duration of the video tutorial for the lesson?
01:43 minutes.
What is a common exam question regarding per unit tax?
Determining the new equilibrium after tax is introduced.
What is the absolute value of Price Elasticity of Demand for unit elastic demand?
Equal to 1.
What happens when a tax is levied on consumers?
The burden may shift to producers depending on the elasticity of supply and demand.
What are some examples of goods mentioned?
Lettuce, wheat, gas at the gas station.
What type of demand curve is associated with necessity goods?
Steeper demand curve.
What is the copyright status of the publication?
© Wizedemy Inc. All Rights Reserved.
How is the present value of an annuity-due calculated?
PV = C × [(1 - (1 + r)^-n) / r] × (1 + r), where C is the cash flow, r is the discount rate, and n is the number of periods.
How do you calculate Average Percentage Change?
Average Percentage Change = ((Average New - Old) / Old) * 100
What is the copyright status of the publication?
© Wizedemy Inc. All Rights Reserved.
What is the initial price of ink cartridges in the example?
$32.
What type of relationship exists between income and the purchase of inferior goods?
A negative relationship.
What is the effect of a tax on the demand curve?
It can shift down the demand curve by the amount of the tax.
If consumers are willing to buy 20 units of a good at any price, what does this imply about their demand?
It implies that demand is perfectly inelastic at that price.
What is the formula for the present value of a growing perpetuity?
PV = C / (r - g), where C is the cash flow, r is the discount rate, and g is the growth rate.
What is the website associated with the video tutorial?
wizeprep.com.
What should you NOT do when calculating the new equilibrium price after a tax is introduced?
Do not simply add the tax amount to the original equilibrium price.
What is the effect of elastic supply and inelastic demand on tax burden?
Producers bear a greater burden of the tax.
What is prohibited without prior written permission from Wizedemy Inc.?
Reproducing or transmitting any part of the publication.
What is an alternative way to show the effect of a tax?
Shift up the supply curve by the amount of the tax.
What happens to the demand curve when tax is paid by consumers?
Every point on the demand curve shifts down (left) by the amount of the tax.
What is prohibited without prior written permission from Wizedemy Inc.?
Reproducing, transmitting, or storing the publication in any form.
What is the duration of the video tutorial for this lesson?
12 minutes and 16 seconds.
What is the arc cross price elasticity of demand?
It measures the responsiveness of the quantity demanded of one good to a change in the price of another good.
What is the new price of ink cartridges in the example?
$36.
What does the income yield of an investment represent?
The income yield is the annual income generated by an investment expressed as a percentage of its current market value.
In the context of tax burden, who bears a bigger portion if consumers are willing to buy 20 units at any price?
Consumers bear more but not all of the tax burden.
Who holds the copyright for the publication?
Wizedemy Inc.
What is capital gain yield?
Capital gain yield is the price appreciation of an investment expressed as a percentage of its initial purchase price.
What should you do if the question does not specify which curve to shift?
Most professors expect you to shift the supply curve.
What does the new equilibrium price represent after tax is imposed?
The amount received by sellers (producers).
How many cartridges are supplied at the initial price of $32?
10 cartridges.
What happens to total revenue when the price decreases from point A to B?
Total revenue will increase.
Where can the video tutorial for this lesson be found?
On wizeprep.com.
What is the relationship between lemonade and cola in the context of cross price elasticity?
Lemonade and cola are likely substitutes, meaning a change in the price of cola will affect the demand for lemonade.
What does an upward sloping supply line indicate?
It indicates that as price increases, the quantity supplied also increases.
What is the initial price of textbooks in the example?
$20.
What is prohibited without prior written permission from Wizedemy Inc.?
Reproducing or transmitting any part of the publication.
What is the difference between short run and long run in economic terms?
In the short run, consumers have limited options to adjust to price changes, while in the long run, they can change their behavior or make significant adjustments.
How is the new equilibrium quantity determined after tax is paid?
It is the quantity at which the new demand curve intersects the supply curve.
What is the expected outcome when shifting the demand or supply curve due to a tax?
You will get the same answers for the new price and quantity.
How many cartridges are supplied at the new price of $36?
13 cartridges.
What characterizes the demand portion from point A to B?
It is the elastic portion of demand.
What is the copyright status of the publication?
© Wizedemy Inc. All Rights Reserved.
How do you calculate the arc cross price elasticity of demand?
By using the formula: (ΔQd of lemonade / Qd of lemonade average) / (ΔP of cola / P of cola average).
What are the possible answers regarding who bears the tax burden?
A) consumers bear more but not all of the tax burden, B) producers bear more but not all of the tax burden, C) consumers bear all of the tax burden, D) producers bear all of the tax burden.
What is the elasticity of supply when the supply curve starts at the origin?
1 (unit elastic).
What is the new price of textbooks after the increase?
$30.
How do you find the price consumers pay after tax?
Plug the new quantity into the original demand curve.
What happens in the short run if the price of gas rises tomorrow?
People who drive to work will have to pay the higher price, which is considered inelastic behavior.
What is the formula for calculating arc income elasticity of demand?
Arc Income Elasticity = (% Change in Quantity Demanded) / (% Change in Income)
What happens to the quantity of plums purchased when the price of peaches rises?
The quantity of plums purchased increases from 4950 to 5050 kilos per week.
What is the formula to find the point elasticity of supply?
Point elasticity of supply = (% change in quantity supplied) / (% change in price).
What is prohibited without prior written permission from Wizedemy Inc.?
Reproducing or transmitting any part of the publication.
What happens to total revenue when the price decreases from point B to C?
Total revenue will decrease.
What is one factor that affects price elasticity of supply?
Access and availability of substitutes for its resources.
What happens to the supply curve when tax is paid by the seller?
Every point on the supply curve shifts up (left) by the amount of the tax.
What happens to the price and quantity supplied from point A to B in the example?
The price doubles from 2 and the quantity supplied doubles from 2 units to 4 units.
What is the effect of a binding rent control (price ceiling) on landlords in the short run?
Landlords will collect less rent and will not be happy.
How many units were demanded before the price increase?
100 units.
What is a price ceiling?
A maximum price that producers can legally charge consumers, set by the government.
What is the effect of a $3 per unit tax on consumers of a good?
It has the same effect as a $3 per unit tax levied on producers of the good.
What options do consumers have in the long run if gas prices keep rising?
They can switch to a hybrid car, bicycle, or use more public transportation, indicating elastic demand.
What is the amount of tax?
The difference between the consumer price and producer price at the new equilibrium quantity.
If Yasmine's income rises by 20% and her coffee consumption increases from 75 to 85, what is the % change in quantity demanded?
The % change in quantity demanded is 13.33%.
What is the initial price of peaches per kilo before the increase?
$3.95.
How do substitutes for resources affect supply elasticity?
The more substitutes a firm has, the more elastic the supply becomes.
What is a price ceiling?
A government-imposed limit on how high a price can be charged for a product.
What is a production quota?
A government-imposed limit on the quantity of a good that a firm can sell.
What characterizes the demand portion from point B to C?
It is the inelastic portion of demand.
What does the new equilibrium price represent when tax is paid by the seller?
The amount paid by consumers.
What is the Price Elasticity of Supply from point A to B?
1, calculated as 100% increase in price and 100% increase in quantity supplied.
How many units were demanded after the price increase?
90 units.
How is the supply of housing characterized in the short run under rent control?
The supply is inelastic because landlords don't have time to sell off their apartments.
Why would Fruit Loops have a lower price elasticity of demand compared to food?
Because Fruit Loops are food, but not all food is Fruit Loops.
What is the perspective from which elasticity of supply is analyzed?
From the firm's perspective rather than the consumer.
What happens to consumers' tax burden if demand is perfectly inelastic?
Consumers will pay the entire tax.
What would a $3 per unit tax on consumers be equivalent to?
A $3 per unit tax levied on producers of the good.
What is a common example of a price ceiling?
Rent control, where the government prevents landlords from charging above a certain price for rent.
What is an example of inelastic demand?
Paying higher gas prices in the short run.
What is the new price of peaches per kilo after the increase?
$4.05.
What is Yasmine's arc income elasticity of demand for coffee?
Arc Income Elasticity = 13.33% / 20% = 0.6665.
What is the rent ceiling imposed by the government in the example?
$900 per unit.
At which point is total revenue at its maximum?
At point B (unit elastic).
What happens to supply elasticity in the short run for a farmer growing apples?
The supply is inelastic because production cannot be significantly increased in a short time.
What is an example of a production quota?
A quota on the number of fishing licenses allowed to protect fish populations.
What is one of the main factors that affect the elasticity of demand?
The number of substitutes available.
What does a small percentage of your income indicate about price sensitivity?
You are likely to be inelastic and continue purchasing the item.
How is the new equilibrium quantity determined after tax is imposed?
It is the quantity at the new equilibrium with the tax.
What is the change in price and quantity supplied from point B to C?
The price increases from 3 (50% increase) and the quantity supplied increases from 4 units to 6 units (50% increase).
What is the formula for Price Elasticity of Supply?
Price Elasticity of Supply = %Δ P / %Δ Qs.
What is the point price elasticity of demand at a price of $20?
To be calculated using the formula: (ΔQ/ΔP) * (P/Q).
What happens to the housing shortage in the long run with binding rent control?
The housing shortage gets bigger.
What is a price floor?
A minimum price set by the government, such as a minimum wage.
Why does food have a lower price elasticity of demand?
Because it is more broadly defined.
What does perfectly inelastic demand mean?
When price rises, quantity demanded does not change at all.
What is NOT an effect of a $3 per unit tax on consumers?
A $3 per unit subsidy paid to producers of the good.
Why are price ceilings set below the equilibrium price?
To protect consumers.
What happens to producers' tax burden if demand is perfectly elastic?
Producers (sellers) will pay the entire tax.
What is an example of elastic demand?
Switching to alternative transportation methods in the long run as gas prices rise.
What is a price floor?
A lower limit on the price that producers can legally charge consumers.
What is a price ceiling?
A government-imposed limit on how high a price can be charged for a product.
Based on the arc income elasticity of 0.6665, what type of good is coffee?
Coffee is a normal good.
What is the arc cross-price elasticity of demand calculated in this scenario?
-1.5, -0.8, 0.8, or 1.5.
What is the formula for calculating Total Revenue?
Expenditure (Total Revenue) = P × Q.
What does income elasticity of demand indicate?
Whether a good is normal or inferior.
What happens to the supply curve when a tax is imposed?
The supply shifts left (upward) from S to S1.
Where should quotas be set in relation to equilibrium quantity?
Quotas should always be set below the equilibrium quantity.
What does a steeper demand curve indicate?
It typically represents a good with fewer substitutes.
What happens to supply elasticity in the long run for a farmer growing apples?
The supply becomes elastic because the farmer can increase production by planting more trees.
What is the initial price of textbooks in the example?
$20.
What is a binding minimum wage?
A legally established minimum wage that is above the equilibrium wage.
How does having many substitutes affect price sensitivity?
Consumers become more sensitive to price changes (elastic demand).
What happens to your sensitivity to price when it represents a large percentage of your income?
You become more sensitive to price changes, indicating elastic demand.
Do Fruit Loops have the same price elasticity of demand as food?
No, because Fruit Loops are specifically defined.
How do you find the price producers receive after tax?
Plug the new quantity into the original supply curve.
What is the elasticity value for perfectly inelastic demand?
What is the nature of elasticity of supply?
Elasticity of supply is always positive.
What must a price ceiling be to be effective?
It must be below the equilibrium price.
What is the implication of a price ceiling on the rental market?
It leads to a shortage of available housing units.
What does it mean for a price ceiling to be binding?
It is set below the equilibrium price, causing a shortage.
What happens when a minimum wage is set above the equilibrium wage?
It can lead to unemployment as the quantity of labor supplied exceeds the quantity demanded.
How does a $3 per unit tax affect the price of the good?
It raises the good’s price by $3 per unit.
What is a common example of a price floor?
The minimum wage law.
What occurs to the supply curve when a tax is imposed?
The supply shifts left (upward) from S to S1.
What is the Price Elasticity of Supply from point B to C?
1, calculated as 50% increase in price and 50% increase in quantity supplied.
What happens when a price ceiling is set below the equilibrium rent?
It creates a shortage in the market.
Is the demand elastic or inelastic at the price of $20?
To be determined based on the calculated elasticity value.
What does inelastic demand mean?
It means consumers are insensitive to price changes.
What happens to Total Revenue when price increases in an inelastic demand scenario?
Total Revenue will increase.
