Microeconomics

Consider Sam and Linda both drive a relatively inefficient sport utili

Consider Sam and Linda both drive a relatively inefficient sport utility vehicle (SUV). Sam has a lease that doesn’t expire for three years whereas Linda owns her sport utility vehicle free and clear. If the price of gasoline was to increase by fifty percent, which of these statements is most likely TRUE? A) Linda will […]

Read full post

Date: September 9th, 2020

When comparing elasticities between two different linear demand curves

When comparing elasticities between two different linear demand curves, the curve that is flatter has greater price elasticity at every given price. Indicate whether the statement is true or false   ANSWER False. This statement confuses slope with elasticity. Elasticity is calculated by multiplying the slope times (p/Q). As a result, the vertical intercept (along […]

Read full post

Date: September 9th, 2020

The price elasticity of demand for gasoline is estimated to be -0.2. T

The price elasticity of demand for gasoline is estimated to be -0.2. Two million gallons are sold daily at a price of $3. Use this information to calculate a demand curve for gasoline assuming it is linear. What will be an ideal response?   ANSWER Elasticity = slope (p/Q), -0.2 = slope (3/2). The slope […]

Read full post

Date: September 9th, 2020

An agricultural corn market faces a positive supply shock due to a ben

An agricultural corn market faces a positive supply shock due to a beneficial rainy season and the use of new genetically modified seeds. As a result, farmers face the largest crop harvest in decades. Which answer below explains how a farm could actually go bankrupt under this scenario. A) The elasticity of supply for corn […]

Read full post

Date: September 9th, 2020

Because demand curves slope downward according to the Law of Demand, t

Because demand curves slope downward according to the Law of Demand, the price elasticity of demand is a negative number. Indicate whether the statement is true or false   ANSWER True . The price elasticity of demand measures the change in quantity demanded when a price change occurs. If price increases, the change in the […]

Read full post

Date: September 9th, 2020