Study Guide for Mankiw's Principles of Microeconomics, 7th
7th Edition
ISBN: 9781285864242
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Textbook Question
Chapter 5, Problem 1CQQ
A life-saving medicine without any close substitutes will tend to have
a. a small
b. a large elasticity of demand.
c. a small elasticity of supply.
d. a large elasticity of supply.
Expert Solution & Answer
To determine
Demand elasticity and substitute.
Answer to Problem 1CQQ
Option ‘a’ is the correct answer.
Explanation of Solution
Option (a):
Lower the availability of substitute, lesser will be the elastic demand. This is because if the price of the good were to increase, people are left with little or no choice but to pay the higher price for it. Since life saving medicine has no close substitute and it has smaller demand elasticity. Thus, option ‘a’ is correct.
Option (b):
More the availability of substitute, more elastic the demand will be. Since life saving medicine has no close substitute, it does not have larger demand elasticity. So option ‘b’ is incorrect.
Option (c):
More the availability of substitute, more elastic the demand will be, and it does not affect elasticity of the supply. So option ‘c’ is incorrect.
Option (d):
More the availability of substitute, more elastic the demand will be, and it does not affect elasticity of the supply. So option ‘d’ is incorrect.
Economics Concept Introduction
Concept Introduction:
Elasticity of demand: It measures how much quantity demanded responds to the changes in the price or income.
Substitutes: Substitute goods: Substitute goods are those goods that can be used for the same purpose.
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Chapter 5 Solutions
Study Guide for Mankiw's Principles of Microeconomics, 7th
Ch. 5.1 - Define the price elasticity of demand. Explain...Ch. 5.2 - Define the price elasticity of supply. Explain...Ch. 5.3 - Prob. 3QQCh. 5 - A life-saving medicine without any close...Ch. 5 - The price of a good rises from 8 to 12, and the...Ch. 5 - A linear, downward-sloping demand curve is a....Ch. 5 - Prob. 4CQQCh. 5 - An increase in the supply of a good will decrease...Ch. 5 - Prob. 6CQQCh. 5 - Prob. 1QR
Ch. 5 - List and explain the four determinants of the...Ch. 5 - Prob. 3QRCh. 5 - Prob. 4QRCh. 5 - If demand is elastic, how will an increase in...Ch. 5 - What do we call a good with an income elasticity...Ch. 5 - How is the price elasticity of supply calculated?...Ch. 5 - If a fixed quantity of a good is available, and no...Ch. 5 - Prob. 9QRCh. 5 - Prob. 1PACh. 5 - Prob. 2PACh. 5 - Suppose the price elasticity of demand for heating...Ch. 5 - A price change causes the quantity demanded of a...Ch. 5 - Prob. 5PACh. 5 - Suppose that your demand schedule for DVDs is as...Ch. 5 - Maria has decided always to spend one third of her...Ch. 5 - The New York Times reported (Feb. 17, 1996) that...Ch. 5 - Prob. 9PACh. 5 - Prob. 10PACh. 5 - You are the curator of a museum. The museum is...Ch. 5 - Prob. 12PA
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Price Elasticity of Supply; Author: Economics Online;https://www.youtube.com/watch?v=4bDIm3j-7is;License: Standard youtube license