Question

Refer to the article. The demand for hand sanitizer at the moment would be considered __________ and as Prices rise Total Revenue would ___________

Select one:

a. Inelastic : Increase

b. Elastic : Decrease

c. Inelastic : Decrease

d. Elastic : Increase

Prices of hand sanitiser have increased by 120% and Quantity Supplied has risen by 80%. Therefore the price elasticity of supply is :;

Select one:

a. 1.5 elastic

b. 1.5 inelastic

c. 0.67 Elastic

d. 0.67 Inelastic

The article indicates that both demand and supply of hand sanitizer are rising but the Demand is rising by more. The effect on the market will be

Select one:

a. Price stays the same : Increase in Equilibrium Quantity

b. Increase in Price : Increase in Equilibrium Quantity

c. Increase in Price; Decrease in Equilibrium Quantity

d. Decrease in Price : Increase in Equilibrium Quantity

Markets are inefficient when

Select one:

a. when price reaches equilibrium

b. when the market over produces

c. when all the net benefits are captured

d. demand equals supply

If prices of hand sanitizer have risen by 150% and quantity supplied has increased by 100% calculate and explain the price elasticity of supply.

Select one:

a. PES = 0.67 and Supply is elastic

b. PES = 1.5 and Supply is elastic

c. PES = 0.67 and Supply is inelastic

d. PES = 1.5 and Supply is inelastic

The article mentions that the British Drug store chain, Boots were limiting customers to 2 hand sanitizers per purchase. This is due to the market experiencing a __________ which would normally cause prices to __________

Select one:

a. Surplus : Increase

b. Shortage : Increase

c. Shortage : Decrease

d. Surplus : Decrease

If your income rises by 45% and as a result you increase your quantity demanded for restaurant meals by 60% calculate and interpret the income elasticity of demand (YED).

Select one:

a. YED= -1.33 and the good is normal and a luxury

b. YED= 1.33 and the good is normal and income elastic

c. YED = 0.75 and the good is normal and income inelastic.

d. YED = 1.5 and the good is normal and Income elastic

Setting of a price floor above equilibrium results in __________ and setting of a price floor below equilibrium results in

Select one:

a. surplus ; shortage

b. surplus ; equilibrium

c. shortage ; equilibrium

d. equilibrium ; shortage

Cigarette smoking is an example of a

Select one:

a. positive production externality

b. positive consumption externality

c. negative production externality

d. negative consumption externality

Answer 1

1. The demand for hand sanitizer at the moment would be considered Option a. Inelastic and as Prices rise Total Revenue would increase. As people will be less responsive to the change in price of the sanitizer and therefore increases the total revenue..

2. Prices of hand sanitizer have increased by 120% and Quantity Supplied has risen by 80%. Therefore the price elasticity of supply is Change on Quantity supplied / Change in prices = 80 /120 = 0.67 and supply is inelastic. So, Option d.

3.  The article indicates that both demand and supply of hand sanitizer are rising but the Demand is rising by more. The effect on the market will be Option b. Increase in Price and Increase in Equilibrium Quantity. When increase in demand> increase in supply both equilibrium price and quantity increases.

4. Markets are inefficient when Option b. when the market over produces. In other options the market is efficient.

5. If prices of hand sanitizer have risen by 150% and quantity supplied has increased by 100%,

Elasticity = Change on Quantity supplied / Change in prices = 100 /150 = 0.67 and supply is inelastic. So, Option c.

6. The article mentions that the British Drug store chain, Boots were limiting customers to 2 hand sanitizers per purchase. This is due to the market experiencing a Option b.Shortage which would normally cause prices to increase.

7. If your income rises by 45% and as a result you increase your quantity demanded for restaurant meals by 60%

Elasticity =(-) Change in Quantity demanded / Change in Income =(-) 60 / 45 =(-) 1.333

Elasticity greater than 1, so it is a luxury good. So, Option a. YED= -1.33 and the good is normal and a luxury.

8. Setting of a price floor above equilibrium results in Option a. surplus and setting of a price floor below equilibrium results in Shortage.

9. Cigarette smoking is an example of a Option d. negative consumption externality