Question

7. Consider a good known as Aburtos. If the quantity supplied increases by 0.08% when the price increases by 2%, what is the PES?

a. 4

b. 0.4

c. 0.04

d. -4

e. Not enough information

8. Again, consider a product known as Zabirs whose PES has been calculated as 0.2. What happens if there is an increase in buyers’ incomes?

a. There will be a greater effect on price than quantity

b. There will be a greater effect on quantity than price

c. There will be no effect on quantity or price

d. There will be a decrease in the price of the good

e. The supply curve shifts left

9. According to the lecture slides, what is a major reason for why housing prices in California have increased so much?

a. The supply curve for housing is elastic

b. The supply curve for housing is inelastic

c. The demand curve for housing is elastic

d. The demand curve for housing is inelastic

e. The demand curve has shifted left over time

Answer 1

a) PES = 0.08% / 2%

the answer is "C".

b) As the good is income inelastic and a necessity there will be greater effect on the price than on the quantity. the answer is "A".

c) "B"

THe supply curve for housing is inelastic.