# ECON 213 InQuizitive ch. 4 Liberty University Solution

Label each pair of products with the correct cross-price elasticity of demand.

What graph would you expect to illustrate the price elasticity of demand for life-saving heart surgery?

2.

As the prices in markets change, buyers and sellers respond in different ways according to how much time they have to react. Match the time period to its correct description. Buyers have a significant amount of time to adjust to a change in the market. Demand is elastic. Buyers have no time to adjust to a change in the market. Demand is inelastic. Demand is somewhat elastic. Buyers have some time to adjust to a change in the market.

3.

Consider the market for oil. As shown, a shift in the demand curve causes a price increase, followed by a price drop because long-run supply is more elastic than short-term supply. What role does the elasticity of demand play in the second price movement?

4.

Consider the supply curve for bottles of soda. Identify each event as causing either a shift in supply or a movement along the supply curve.

5.

Fill in the blanks to complete the passage comparing the cross-price elasticity of demand for two products that are substitutes with that of two products that are complements.

Consider two goods that are substitutes. A price increase for one good will cause the quantity demanded of that good to –. The quantity demanded of the substitute good will –. When two goods are complements of each other, a price – for either product will cause – of both goods to decline.

6.

The cross-price elasticity of demand for jeans and textbooks is zero because the two products have no particular relationship.

7.

Determine the price elasticity of demand for a microwave that experienced a 20% drop in price and a 50% increase in weekly demand quantity.

8.

Drag the products to the demand curve that might represent their price elasticity of demand.

9.

The graph shows the short- and long-run price elasticity of demand and supply in a situation where demand for corn has increased. Match each label on the graph to the appropriate description.

10.

How does an increase of income affect spending on necessities and luxuries? As income increases, spending on luxuries increases slowly, but spending on necessities increases dramatically. As income increases, spending on luxuries increases dramatically, but spending on necessities increases slowly. As income increases, spending on luxuries increases dramatically and spending on necessities remains unchanged. As income increases, spending on necessities increases dramatically and spending on luxuries remains unchanged.

11.

How does the existence of substitutes affect the price elasticity of demand? If there are many substitutes, the price elasticity of the good will be elastic, The existence of substitutes leads to a situation with perfect elasticity, the existence of substitutes makes the price elasticity of demand inelastic, the existence of substitutes leads to higher prices in the marketplace.

12.

Explain how price elasticity of demand is related to total revenue.

If a business sees that demand for its product is –, it makes sense to lower the price in order to – revenue. However, if demand is –, lowering the price will not increase revenue.