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If a product is narrowly defined, it is likely to A. have many substitutes and therefore its demand is elastic. B. have few substitutes, and therefore its demand is less elastic. C. be unique, and therefore its demand is inelastic. D. be unique and have many substitutes.

Answer: Narrowly Defined Products Likely Have Few Substitutes and Therefore Have Less Elastic Demand When a product is narrowly defined, it means that there are few substitutes for it. This means that the demand for the product is less elastic,

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Say the bus authority in your city increased the typical bus fare from €1.00 to €1.50, and that due to this increase total revenue increased by 20%. Based on this we know that the price elasticity of bus rides in your neighborhood is (assume demand curve is linear):

Answer: The price elasticity of demand for bus rides in the neighborhood is -0.2, which means that the demand for bus rides is inelastic. This means that a 1.5 euro increase in bus fare causes a 0.2 decrease in the

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You have €20,000 of current income and €45,000 of future income. The interest rate between the current and future period is 2 per cent. According to the life-cycle hypothesis, if a person received a payment roughly equal to her current income, her consumption would: Multiple Choice roughly double. increase, but not by as much as the increase in income. increase by more than the increase in income. would not increase at all.

Answer: Calculating Consumption According to the Life-Cycle Hypothesis The life-cycle hypothesis suggests that when a person receives a payment roughly equal to their current income, their consumption will increase, but not by as much as the increase in income. This

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The demand for women’s clothing is, in general: 
 A. more elastic than the demand for clothing. B. less elastic than the demand for clothing. C. equally elastic to the demand for clothing. D. neither more elastic, less elastic, nor equally elastic to the demand for clothing.’

Answer: The demand for women’s clothing is generally more elastic than the demand for clothing Women’s clothing is generally more elastic than the demand for clothing. This means that the demand for women’s clothing is affected more by changes in

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Suppose the government imposes a small carbon tax on automakers. But the price of gasoline has doubled due to a Middle East crisis which has reduced oil production. In the market for autos, these changes mean that supply and demand have both changed with the effect on the demand larger than the effect on the supply. The result is that the price of autos will ________ and the number of autos sold will ________. A. rise; perhaps change but we can’t say if it increases, decreases, or stays the same B. rise; increase C. rise; decrease D. fall; perhaps change but we can’t say if it increases, decreases, or stays the same E. fall; decrease

Answer The result of the government imposing a small carbon tax on automakers in combination with the price of gasoline doubling due to a Middle East crisis is that the price of autos will rise and the number of autos

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During 2008 the supply of gasoline decreased while at the same time the demand for gasoline increased. If the magnitude of the increase in demand was greater than the magnitude of the decrease in supply, then the equilibrium price of gasoline ________ and the equilibrium quantity ________. A. increased; increased B. increased; decreased C. increased; did not change D. decreased; did not change E. did not change; increased Reset Selection

Answer The equilibrium price of gasoline and the equilibrium quantity both increased when the magnitude of the increase in demand was greater than the magnitude of the decrease in supply. This means the correct answer is A: increased; increased. Explanation

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Assume declining profits in the market for internet service force several firms in the area to drop out of the market. Which of the following best describes the effect of the reduction in the number of service providers and the subsequent adjustment of the market to the new equilibrium price and quantity? A. Quantity supplied would decrease, creating excess supply at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal. B. Quantity supplied would decrease, creating excess demand at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal C. Supply would increase, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached D. Supply would decrease, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached Reset Selection

Answer: Option D: Supply Decreases, Creating Excess Demand When the number of providers of internet services decreases due to declining profits in the market, the supply of these services decreases. This creates an excess demand at the initial equilibrium price,

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A competitive market is in equilibrium. Then there is an increase in demand and an increase in supply. The equilibrium price ________, and the equilibrium quantity ________. A. rises; increases B. perhaps changes but we can’t say if it rises, falls, or stays the same; does not change C. falls; increases D. perhaps changes but we can’t say if it rises, falls, or stays the same; increases E. falls; perhaps changes but we can’t say if it increases, decreases, or stays the same

Answer: A competitive market in equilibrium When a competitive market is in equilibrium, there is a balance between demand and supply. If the demand and supply of a good or service is equal, then the equilibrium price will remain the

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If the demand curve for desktop computers shifts rightward and at the same time the supply curve shifts leftward, then A. the equilibrium price definitely rises. B. the equilibrium price definitely falls. C. the equilibrium price definitely remains the same. D. More information is needed to determine the effect on the equilibrium price. E. the equilibrium quantity definitely increases.

Answer: Answer The correct answer is D. More information is needed to determine the effect on the equilibrium price. When the demand curve shifts rightward and the supply curve shifts leftward, the equilibrium price could either increase, decrease, or remain

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Economists use elasticity to measure the responsiveness of quantity to a change in price rather than the slope of the demand curve because elasticity is A. independent of the units of measurement. B. dependent on the units of measurement. C. easier to calculate. D. harder to calculate. E. always negative whereas the slope is always positive.

What is Elasticity? Elasticity is a measure of the responsiveness of a given quantity to a change in a price. It measures the percentage change in quantity in response to a given percentage change in price. It is used by

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Which of the following explains why supply is more elastic as more time passes? A. It is difficult or impossible to increase the quantity produced in a short period of time. B. Consumers have more time to search for substitutes. C. Sellers try to take advantage of a high price in the short term. D. The supply curve becomes generally steeper as more time passes. E. There is no explanation for this phenomenon.

Answer: Supply Elasticity Supply elasticity is the degree to which the quantity of a good supplied responds to a change in the price of that good. The more elastic the supply, the more responsive the quantity supplied is to changes

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If the price elasticity of supply for a good is 0.75, then A. the percentage change in the quantity supplied is less than the percentage change in price. B. the supply is elastic. C. an increase in the price boosts the quantity supplied by a larger percentage. D. the supply is inelastic so the demand must also be inelastic. E. None of the above answers is correct.

Answer The correct answer is B. The price elasticity of supply for a good is 0.75, meaning the supply is elastic. This means that a change in price will result in a larger percentage change in the quantity supplied, in

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c. How is the tax divided among sellers and buyers?The proposal is to place a 100% tax on charcoal briquets. Suppose the daily demand for charcoal was P = 120 – 2Q and the supply was P = 30 + Q, where P is in euros per bag and Q is the number of 10 kg bags of charcoal sold weekly.

Answer: Tax Division Among Sellers and Buyers The proposal is to place a 100% tax on charcoal briquets. This means that sellers and buyers must split the tax, by an amount that is determined by the market demand and supply.

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If you spend a large portion of your income on a good, A. supply of that good would be price elastic. B. demand for that good is more elastic than if you spent a smaller portion of your income on the good. C. supply of that good is price inelastic. D. demand for that good is less elastic than if you spent a smaller portion of your income on the good. E. the good must be able to be produced at a constant (or gently rising) opportunity cost.

Price Elasticity of Demand (PED) Price elasticity of demand (PED) is a measure of how sensitive the demand for a good or service is to changes in its price. It is calculated by dividing the percentage change in the quantity

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Many studies on rats and mice have established that charred meat grilled over hot coals causes cancer. Since the government cannot easily regulate home cooking methods, an alternative method has been proposed to discourage the consumption of barbecued meat. The proposal is to place a 100% tax on charcoal briquets. Suppose the daily demand for charcoal was P = 120 – 2Q and the supply was P = 30 + Q, where P is in euros per bag and Q is the number of 10 kg bags of charcoal sold weekly. a. What is the before-and after-tax price of charcoal? (Round your answers to the nearest whole number.) Before-tax price is P = After-tax price is P = b. What is the before-and after-tax quantity of charcoal? (Round your answers to the nearest whole number.) Before-tax quantity is Q = After-tax quantity is Q = c. How is the tax divided among sellers and buyers? (Round your answers to 2 decimal places (e.g.,32.16).) The sellers’ share of the burden of the tax is The buyers share of the burden of the tax is

Answer: Tax on Charcoal Briquets The government has proposed placing a 100% tax on charcoal briquets, as a way to discourage the consumption of barbecued meat. The daily demand for charcoal is P = 120 – 2Q, where P is

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Suppose the demand curve for DVDs is P = 24 – Q and the supply curve is P = Q/2. The government levies a tax of €9 on each DVD sold, collected from sellers. Based on the given information, answer the following questions. (Round your answers to 2 decimal places (e.g.,32.16).) a. What fraction of the tax does the seller bear? b.What fraction of the tax does the buyer bear?

Answer The demand curve for DVDs is P = 24 – Q and the supply curve is P = Q/2. The government levies a tax of €9 on each DVD sold, collected from sellers. When the tax is applied, the

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In the mid-1970s, Newsweek magazine reported that the city of Atlanta lowered its city bus fares from 40 cents to 15 cents a passenger. The number of bus riders increased by 15 percent after the fare cut. This set of results indicates that the demand for bus rides in Atlanta at that time was A. unit elastic. B. perfectly inelastic. C. elastic. D. inelastic. E. perfectly elastic.

Answer The correct answer is C. elastic. This means that when the price of the bus ride decreased, the demand for the bus ride increased. This indicates that the demand was elastic, which means that when the price of the

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When a firm raises the price of its product, what happens to its total revenue? A. If demand is elastic, total revenue decreases. B. If demand is unit elastic, total revenue increases. C. If demand is inelastic, total revenue decreases. D. If demand is elastic, total revenue increases. E. If demand is unit elastic, total revenue decreases.

Answer The correct answer is D. If demand is elastic, total revenue increases. When the price of a product is increased, total revenue may increase or decrease depending on the elasticity of demand. If the demand is elastic, an increase

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Suppose the demand curve for DVDs is P = 24 – Q and the supply curve is P = Q/2. The government levies a tax of €9 on each DVD sold, collected from sellers. Based on the given information, answer the following questions. (Round your answers to 2 decimal places (e.g.,32.16).) a. What fraction of the tax does the seller bear? 9.50 Numeric Response 1.Edit Unavailable. 9.50 incorrect. b.What fraction of the tax does the buyer bear? 9.50/13.5 Numeric Response 2.Edit Unavailable. 9.50/13.5 incorrect. Explanation The before-tax equilibrium price is 8. Thus, the tax burden on buyers is given by (14 – 8)/9 = 2/3 = 0.67 and that on sellers is (8 – 5)/9 = 0.33. explain how did you find the 14 and the 8 on the fraction of the tax paid by seller

Answer: Tax Burden on Buyers and Sellers in the DVD Market The demand curve for DVDs is given by P = 24 – Q while the supply curve is given by P = Q/2. The government levies a tax of

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Suppose the demand curve for DVDs is P = 24 – Q and the supply curve is P = Q/2. The government levies a tax of €9 on each DVD sold, collected from sellers. Based on the given information, answer the following questions. (Round your answers to 2 decimal places (e.g.,32.16).) a. What fraction of the tax does the seller bear? 9.50 Numeric Response 1.Edit Unavailable. 9.50 incorrect. b.What fraction of the tax does the buyer bear? 9.50/13.5 Numeric Response 2.Edit Unavailable. 9.50/13.5 incorrect. Explanation The before-tax equilibrium price is 8. Thus, the tax burden on buyers is given by (14 – 8)/9 = 2/3 = 0.67 and that on sellers is (8 – 5)/9 = 0.33.

Answer: Understanding the Tax Burden in the Equilibrium Price of DVDs The demand curve for DVDs is given by P = 24 – Q and the supply curve is given by P = Q/2. If the government levies a tax

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The demand for women’s clothing is, in general: A. more elastic than the demand for clothing B. less elastic than the demand for clothing C. equally elastic to the demand for clothing D. neither more elastic, less elastic, nor equally elastic to the demand for clothing

Answer: The Demand for Women’s Clothing is Generally More Elastic than the Demand for Clothing It is generally accepted that the demand for women’s clothing is more elastic than the demand for clothing in general. Elasticity measures how responsive the

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Demand is price inelastic if ________ percentage change in the price leads to a ________ percentage change in the quantity demanded. A. a small; large B. a large; small C. any; large D. Both answers A and B are correct. E. None of the above answers is correct. Reset Selection

Answer The answer to this question is D. Both answers A and B are correct. Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. If the percentage change in the price is small, then

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If a small percentage change in the price brings a very large percentage change in the quantity supplied, then the supply is almost perfectly ________ and the supply curve is almost ________. A. elastic; vertical B. elastic; horizontal C. inelastic; horizontal D. inelastic; vertical E. elastic; 45 degrees

Answer The correct answer is D. inelastic; vertical. This means that if a small percentage change in the price brings a very large percentage change in the quantity supplied, the supply is almost perfectly inelastic and the supply curve is

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Which of the following explains why supply is more elastic as more time passes? A. It is difficult or impossible to increase the quantity produced in a short period of time. B. Consumers have more time to search for substitutes. C. Sellers try to take advantage of a high price in the short term. D. The supply curve becomes generally steeper as more time passes. E. There is no explanation for this phenomenon.

Answer: Elasticity of Supply and Time The answer to the question is B: Consumers have more time to search for substitutes. Elasticity of supply is a measure of how responsive producers are to price changes. Generally, an increase in the

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When the price of a textbook is $95, the quantity of textbooks supplied is 90 million a year and when the price rises to $105, the quantity of textbooks supplied is 110 million a year. The supply of textbooks is A. elastic B. perfectly elastic C. inelastic D. perfectly inelastic E. unit elastic.

Answer: The Supply of Textbooks is Elastic The supply of textbooks is elastic when the price of the textbook is $95 and the quantity of textbooks supplied is 90 million a year and when the price rises to $105, the

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Suppose the demand for rescue services in our national parks is perfectly inelastic. This fact would mean that a 31 percent increase in rescue fees leads to A. a 31 percent decrease in the quantity demanded. B. a 31 percent increase in demand. C. no change in the quantity demanded. D. a decrease in the quantity demanded to 0 rescues.

Answer: Demand for Rescue Services in National Parks The demand for rescue services in national parks is perfectly inelastic when a 31 percent increase in rescue fees leads to no change in the quantity demanded. In other words, a 31

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Which of the following statements is correct for the price elasticity of demand along a linear, downward-sloping demand curve? A. The price elasticity of demand is constant because the slope is constant. B. At low prices, demand is elastic but at high prices demand is inelastic. C. At high prices, demand is elastic but at low prices demand is inelastic. D. The price elasticity of demand is not defined for a linear demand curve because the slope is constant. E. None of the above answers is correct.

Answer: Price Elasticity of Demand Along a Linear, Downward-Sloping Demand Curve The correct answer is C. At high prices, demand is elastic but at low prices demand is inelastic. Price elasticity of demand is an economic measure that is used

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If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent, then supply is A. elastic and the elasticity of supply equals 1.5. B. inelastic and the elasticity of supply equals 1.5. C. elastic and the elasticity of supply equals 0.66. D. inelastic and the elasticity of supply equals 0.66. E. either elastic or inelastic, but more information about the elasticity of demand is needed to determine which.

Answer: E. either elastic or inelastic, but more information about the elasticity of demand is needed to determine which. In economics, the elasticity of supply is a measure of how much the quantity supplied of a good changes in response

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If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent, then supply is A. elastic and the elasticity of supply equals 1.5. B. inelastic and the elasticity of supply equals 1.5. C. elastic and the elasticity of supply equals 0.66. D. inelastic and the elasticity of supply equals 0.66. E. either elastic or inelastic, but more information about the elasticity of demand is needed to determine which.

Answer The answer is option E. If the price of corn increases by 20 percent and the quantity supplied of corn increases by 30 percent, then supply is either elastic or inelastic, but more information about the elasticity of demand

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Many manufactured goods have an ________ supply if production plans have only a short period to change and as time passes and all production adjustments are made, the supply of the good ________ from the initial response. A. inelastic; increases B. elastic; decreases C. elastic; increases D. inelastic; decreases E. inelastic; does not change

Answer: The Correct Answer Is C. Elastic; Increases Many manufactured goods, such as cars or electronics, have an elastic supply if production plans are made with only a short period to change. This is because the demand for these goods

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Alan purchases 10 percent fewer bags of chips when his income decreases by 5 percent. Based on only this information, we know that for Alan A. chips are a normal good. B. chips are a complement to salsa. C. chips are a substitute for pretzels. D. chips are an inferior good.

Answer: Alan Purchases 10% Fewer Bags of Chips when his Income Decreases by 5% The question is asking which of the four given options, A, B, C, and D, best describes the relationship between Alan’s income and the number of

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If the demand for insulin is inelastic, an increase in insulin prices leads to A. less total revenue for insulin makers. B. more total revenue for insulin makers. C. no change in total revenue for insulin makers. D. first a decrease, then an increase in total revenue for insulin makers. E. Total revenue probably changes, but we need more information about the change in total expenditures on insulin to determine if the total revenue rises, falls, or stays the same.

Answer: The correct answer is B. An increase in insulin prices leads to more total revenue for insulin makers when the demand for insulin is inelastic. Explanation In economics, elasticity is a measure of the responsiveness of demand to changes

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In an attempt to boost their incomes, many barbers raised the price of a haircut and yet their total revenue fell even more. What can explain this result? A. The demand for haircuts by barbers is elastic because of many substitutes. B. The demand for haircuts by barbers became inelastic after the increase in price. C. Haircuts are inferior products. D. The demand for haircuts by barbers is inelastic because most people need haircuts. E. None of the above can explain the phenomenon.

Answer: E. None of the Above Can Explain the Phenomenon Barbers increased their prices in an attempt to increase their total revenue, however, their total revenue fell even more. None of the given options can explain this result. Reasons Why

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All of the following statements are true EXCEPT A. the demand for food is less elastic than the demand for a Hawaiian vacation. B. the demand for clothing is less elastic than the demand for blue jeans. C. the smaller the proportion of income spent on a good, the more inelastic demand will be. D. the demand for Nike running shoes is less elastic than the demand for shoes.

Answer: What is Elastic Demand? Elastic demand is when changes in the price of a product will lead to a significant change in the amount of the product that is purchased. Elastic demand is often seen in luxury items, or

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If the percentage change in price is 20 percent and the demand is elastic, then the percentage change in the quantity demanded A. is greater than 0 percent but less than 20 percent. B. is larger than 20 percent. C. equals 0 percent. D. equals 20 percent. E. More information is needed to determine the magnitude of the change in the quantity demanded.

Answer The correct answer is B, which states that the percentage change in the quantity demanded is larger than 20 percent. This is because when demand is elastic, a small change in price results in a larger change in quantity

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Moving downward along a linear (straight-line) downward-sloping demand curve, the A. price elasticity of demand does not change. B. quantity demanded decreases. C. demand becomes more elastic. D. demand becomes less elastic. E. total revenue never changes.

Answer: The correct answer is D. Demand becomes less elastic. Explanation Demand elasticity measures how sensitive the quantity demanded is to a change in price. When prices increase and move along a linear demand curve, the demand elasticity decreases. This

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