Question

Match the following terms with their definition (some terms may be used more than once).

A. Inelastic demand

B. Consumer surplus

C. Elastic demand

D. Cross-price elasticity if demand

E. Price elasticity of supply

F. Deadweight loss

G. Economic efficiency

H. Producer surplus

I. None of the above

1. The difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays

2. The difference between the price a firm actually receives and the lowest price a firm would be willing to accept for a good or service

3. The reduction in economic surplus resulting from a market not being in competitive equilibrium or from a market failure

4. A market outcome in which the marginal benefit gained by consumers of the last unit exchanged is equal to the marginal cost incurred by producers

5. An outcome at which economic surplus is maximized

6. The case where percentage change in quantity demanded is greater than the percentage change in price

7. When the price elasticity of demand is greater than 1

8. When consumers’ purchasing behavior is rather responsive to changes in price

9. The case where the percentage change in quantity demanded is less than the percentage change in price

10. When the price elasticity of demand is less than 1

11. When consumers’ purchasing behavior is rather unresponsive to changes in price

12. The percentage change in quantity demanded of one good divided by the percentage change in the price of another good

13. A measure of the responsiveness of quantity demanded to changes in income

14. A measure of the responsiveness of quantity supplied to changes in price

15. The percentage change in quantity supplied divided by the percentage change in price

Answer 1

A-Inelastic Demand-11

In this case, the consumer is indifferent to change in price

B-Consumer Surplus-1

Here consumer expects a higher price than the actual.

C-Elastic Demand-7

here % change in quantity demanded is higher than that of the % change in price

D-Cross price elasticity of demand-12

This is the change in quantity demanded of a good due to change in the prices of another

E-Price Elasticity of Supply-15

This is the change in supply due to the change in prices

F-Deadweight loss-3

This is a result of market failure

G-Economic efficiency-5

This is the point where a producer maximizes its profits

H-Producer Surplus-2

This is the difference between expected selling prices Vs the actual selling prices (the later is higher in this case)