Figure 4-16
Assume that Figure 4-16 shows the supply of new houses. An improvement in the technology for building houses will shift supply from
a.
S1 to S2.
b.
S2 to S1.
c.
S3 to S2.
d.
S3 to S1.
a
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Other things being equal, demand is more elastic if
A) the good is less expensive the good. B) the time period for adjustment is shorter. C) a family spends a larger percentage of its budget on the good. D) the good is more unique.
A local doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:
A. elastic. B. inelastic. C. unitary elastic. D. indeterminate; more information is needed to determine the price elasticity of demand.