1. What does elasticity of demand measure?

whether consumers by a lot of the product

How much the quantity demanded will change when price changes by 1%

whether consumers need a product

the quality of a product

how much the price will change when the S curve shifts

2. If demand is elastic, it means...

Q never changes

Q will not change if P changes

Q will change if P changes

quantity will change by more than 1% if price changes by 1%

Q will change by 1% if P changes by 1%

Which of the following would make demand more inelastic?

If the product is very expensive

If the product is very difficult to produce

If the product is a necessity and there are not a lot of substitutes available

If there are a lot of substitutes available for the product

If the product is a luxury good

Suppose the government decides to tax people who buy a product -- e.g. if you buy a car you have to pay a $1,000 tax. How will this affect S and D curves? How will it affect P and Q?

D will increase, causing P to rise and Q to fall

S will increase, causing P to fall and Q to rise

S will decrease, causing P to rise and Q to fall

D will decrease, causing P to fall and Q to fall

D will decrease, causing P to rise and Q to fall

Suppose the government taxes companies that make a product -- e.g. for each car that Ford produces, they must pay $1,000 in taxes. Which of the following statements is true.

The tax will cause the demand curve to shift to the left -- i.e. a decrease in demand

Since the tax is on the companies, consumers are not affected.

S will decrease, causing P to rise and hurting consumers even though they don't pay the tax directly.

Companies will raise P by $1,000 to offset the tax.

Suppose the government taxes a product. Will the tax generate more revenue for the government if the D for the product is elastic or inelastic?

Why do some economists think raising the minimum wage might be a bad way to help low-income workers?

It will cause inflation

It can lead to fewer jobs

Companies will not pay higher wages.

uppose that we raise the minimum wage. Why does the impact of the new law depend on the elasticity of demand for labor?

If D for labor is elastic, the number of jobs will decrease a lot.

If D for labor is elastic, the number of jobs will not decrease very much.