Chapter 5: Q.21 (page 130)
What is the formula for the income elasticity of demand?
Income elasticity of demand is the ratio of % change in quantity demanded upon the % change in income.
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The ability of firms to enter and exit a market over time means that, in the long run,
a. the demand curve is more elastic.
b. the demand curve is less elastic.
c. the supply curve is more elastic.
d. the supply curve is less elastic.
Because the demand curve for oil is _______ elastic in the long run, OPEC’s reduction in the supply of oil had a ________ impact on the price in the long run than it did in the short run.
a. less; smaller
b. less; lager
c. more; smaller
d. more; larger
If the price elasticity of supply is zero, the supply curve is
a. upward sloping.
b. horizontal.
c. vertical.
d. fairly flat at low quantities but steeper at large quantities.
What is the formula for the wage elasticity of labor supply?
The average annual income rises from \(25,000 to \)38,000, and the quantity of bread consumed in a year by the average person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?
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