ECON 1501 Test 2 questions and
answers Rated A+
Price Elasticity of Demand - answersthe responsiveness of quantity demanded to a
change in price.
Price Elasticity of Supply - answersthe responsiveness of quantity supplied to a change
in price
Income Elasticity of Demand - answersthe responsiveness of quantity demanded to a
change in income
Cross-Price Elasticity of Demand - answersthe responsiveness of quantity demanded of
one good to a change in the price of another good.
The mathematical representation of Elasticity - answers
Elastic - answersthe condition of demand when the percentage change in quantity is
larger than the percentage change in price.
Inelastic - answersthe condition of demand when the percentage change in quantity is
smaller than the percentage change in price.
Unitary Elastic - answersthe condition of demand when the percentage change in
quantity is equal to the percentage change in price.
Perfectly Elastic - answersthe condition of demand when price cannot change.
Perfectly Inelastic - answersthe condition of demand when price changes have no effect
on quantity.
If demand is price elastic - answersprice and total expenditure move in the opposite
direction (Price increases, and then TE decreases)
If demand is price inelastic - answersprice and total expenditure move in the same
direction (Price increases, and then TE increases)
, If demand is price unit elastic - answersthen when price increases, TE doesn't change
since quantity demanded will decrease by exactly the same percentage)
Consumer Surplus - answersthe value you get that is in excess of what you pay to get
it.
Producer Surplus - answersthe money the firm gets that is in excess of its marginal
costs.
Consumer Surplus Graph - answersOn a graph, consumer surplus is the area below the
demand curve and above the price line.
Producer Surplus Graph - answersOn a graph, producer surplus is the area below the
priceline and above the supply curve.
Deadweight Loss - answersAway from equilibrium, the sum of producer and consumer
surplus is smaller. The degree to which it is smaller is called deadweight loss. It is the
loss in societal welfare associated with production being too little or too great.
deadweight loss graph - answers
Characteristics of US agriculture sector - answersSR inelastic demand and fluctuating
supply cause price fluctuation
LR technological advance increases supply and lowers price, leading to falling incomes
Immobile resources
Table of Elasticity of Demand and Total Revenue - answersWhen demand is Inelastic, a
decrease in price will cause farm income to fall, while an increase in price will cause
farm income to rise. Likewise, when demand is elastic, the inverse is true.
Government policies to support US agriculture - answersPrice floor (resulting in surplus)
Supply restriction (Supply decreases and price increases)
Increase demand (Demand increases and price increases)
Evaluations of US agriculture polices - answers1. Over-allocation of resources to
agricultural production and declining long-run price
2. Our agricultural programs largely assist large farmers and corporate agribusiness, not
the small- to medium-sized farmer
3. The market characteristic of short-run price fluctuation should be addressed
4. Climate change will exacerbate price fluctuation and may cause declining production
and famines
answers Rated A+
Price Elasticity of Demand - answersthe responsiveness of quantity demanded to a
change in price.
Price Elasticity of Supply - answersthe responsiveness of quantity supplied to a change
in price
Income Elasticity of Demand - answersthe responsiveness of quantity demanded to a
change in income
Cross-Price Elasticity of Demand - answersthe responsiveness of quantity demanded of
one good to a change in the price of another good.
The mathematical representation of Elasticity - answers
Elastic - answersthe condition of demand when the percentage change in quantity is
larger than the percentage change in price.
Inelastic - answersthe condition of demand when the percentage change in quantity is
smaller than the percentage change in price.
Unitary Elastic - answersthe condition of demand when the percentage change in
quantity is equal to the percentage change in price.
Perfectly Elastic - answersthe condition of demand when price cannot change.
Perfectly Inelastic - answersthe condition of demand when price changes have no effect
on quantity.
If demand is price elastic - answersprice and total expenditure move in the opposite
direction (Price increases, and then TE decreases)
If demand is price inelastic - answersprice and total expenditure move in the same
direction (Price increases, and then TE increases)
, If demand is price unit elastic - answersthen when price increases, TE doesn't change
since quantity demanded will decrease by exactly the same percentage)
Consumer Surplus - answersthe value you get that is in excess of what you pay to get
it.
Producer Surplus - answersthe money the firm gets that is in excess of its marginal
costs.
Consumer Surplus Graph - answersOn a graph, consumer surplus is the area below the
demand curve and above the price line.
Producer Surplus Graph - answersOn a graph, producer surplus is the area below the
priceline and above the supply curve.
Deadweight Loss - answersAway from equilibrium, the sum of producer and consumer
surplus is smaller. The degree to which it is smaller is called deadweight loss. It is the
loss in societal welfare associated with production being too little or too great.
deadweight loss graph - answers
Characteristics of US agriculture sector - answersSR inelastic demand and fluctuating
supply cause price fluctuation
LR technological advance increases supply and lowers price, leading to falling incomes
Immobile resources
Table of Elasticity of Demand and Total Revenue - answersWhen demand is Inelastic, a
decrease in price will cause farm income to fall, while an increase in price will cause
farm income to rise. Likewise, when demand is elastic, the inverse is true.
Government policies to support US agriculture - answersPrice floor (resulting in surplus)
Supply restriction (Supply decreases and price increases)
Increase demand (Demand increases and price increases)
Evaluations of US agriculture polices - answers1. Over-allocation of resources to
agricultural production and declining long-run price
2. Our agricultural programs largely assist large farmers and corporate agribusiness, not
the small- to medium-sized farmer
3. The market characteristic of short-run price fluctuation should be addressed
4. Climate change will exacerbate price fluctuation and may cause declining production
and famines
