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发表于 2010-4-16 21:08 | 只看该作者

Reading 13: Elasticity LOS a习题精选

demand, factors, following, div, class
Session 4: Economics: Microeconomic Analysis
Reading 13: Elasticity

LOS a, (Part 3): Discuss the factors that influence the elasticity of demand.

Gene Bawerk, an economics professor, is lecturing on the factors that influence the price elasticity of demand. He makes the following assertions:

Statement 1: For most goods, demand is more elastic in the long run than the short run.

Statement 2: Demand for a good becomes more elastic when a close substitute for it becomes available on the market.

With respect to Bawerk’s statements:

Gene Bawerk, an economics professor, is lecturing on the factors that influence the price elasticity of demand. He makes the following assertions:

Statement 1: For most goods, demand is more elastic in the long run than the short run.

Statement 2: Demand for a good becomes more elastic when a close substitute for it becomes available on the market.

With respect to Bawerk’s statements:

A)
 only statement 1 is correct.
B)
 only statement 2 is correct.
C)
 both are correct.


 

Both of these statements are accurate. Price elasticity for most goods is greater in the long run because individuals can make long-term decisions that require different quantities of the good, such as buying more fuel efficient vehicles to use less gasoline. Price elasticity is greater the better the available substitutes because an increase in price will lead more buyers to switch to the substitute products.

[此贴子已经被作者于2010-4-16 21:17:55编辑过]

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honeycfa

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2#
发表于 2010-4-16 21:10 | 只看该作者

The demand for a product tends to be price inelastic if:

A)
 few good complements for the product are available.
B)
 people spend a large share of their income on the product.
C)
 few good substitutes for the product are available.


 

If a large price change results in a small change in quantity demanded, demand is inelastic. Cigarettes are an example of a good with inelastic demand.

 

[此贴子已经被作者于2010-4-16 21:14:53编辑过]

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honeycfa

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3#
发表于 2010-4-16 21:10 | 只看该作者

Which of the following is least likely to affect the elasticity of supply for a good?

A)
 The uniqueness of production inputs.
B)
 The time frame for making the supply decision.
C)
 The relative amount of income spent on the good.


Elasticity of supply is influenced by the time frame within which the supply decision is made and the ability to make substitutions between productive resources. Unique inputs do not have good substitutes. The relative amount of income spent on a good is a determinant of the price elasticity of demand.

[此贴子已经被作者于2010-4-16 21:15:35编辑过]

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honeycfa

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4#
发表于 2010-4-16 21:12 | 只看该作者
supply. She states the following:

Statement 1: Elasticity of supply is greater when a good or service can only be produced with unique or rare inputs.

Statement 2: Typically, a good’s momentary supply elasticity is higher than its short-run supply elasticity, which in turn is higher than its long-run supply elasticity.

With respect to Brythe’s statements:

A)
 only statement 1 is incorrect.
B)
 only statement 2 is incorrect.
C)
 both are incorrect.


Both statements are incorrect. Elasticity of supply (i.e., the responsiveness of the supply of a good to changes in its price) is low when a good can only be produced with rare or unique inputs, because the potential output of the good is constrained by the availability of those inputs. Supply elasticity is lowest in the momentary time frame because producers typically cannot change the output of a good immediately. Supply becomes more elastic as the time frame increases because long-run adjustments in capital investment and technology lead to greater changes in profit maximizing output levels.

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