Perfect Competition/Inelastic Demand Quiz

If the market demand curve for a given commodity—say beef—shifts upward and to the right, this is an indication that...

• technology for that market is expanding.
• consumers are willing to pay more for the commodity.
• production is shifting to keep pace with demand.
• consumers want more of the commodity at the current price.

The price elasticity of demand is essentially a measure of how...

• much prices of one commodity tend to shift year to year.
• sensitive market demand is to changes in price.
• long it takes for shifts in market demand to affect prices.
• much the price of one commodity affects the price of another.

Checking figures provided by the U.S. Department of Agriculture, we find that the estimated price elasticity of demand for canned tomatoes is 2.5, while the estimated price elasticity of demand for corn is .5. These figures suggest that...

• canned tomatoes will always be more expensive than corn.
• the price of canned tomatoes will always tend to rise, while the price of corn will occasionally come down.
• market demand for corn is not very much affected by price.
• consumers feel there are few if any substitutes for canned tomatoes.

Which of the following factors is probably MOST important in determining whether the price elasticity of a given product is high or low?

• What percentage of their total budgets consumers generally spend on the item.
• The length of time that the item has been on the market.
• The amount of money producers spend on advertising.
• The quality of the product.

Which of the following statements regarding the demand and supply curves for farm products is MOST accurate?

• The demand curve has tended to shift very slowly to the right, and the supply curve very rapidly to the right.
• The demand curve has tended to shift very slowly to the right, and the supply curve very rapidly to the left.
• The demand curve has tended to shift very slowly to the left, and the supply curve very rapidly to the left.
• The demand curve has tended to remain constant, and the supply curve to shift both left and right in unpredictable patterns.

The expression “the farmer is a price taker not a price maker” refers to the fact that...

• in perfect competition, prices seldom change.
• demand for agricultural products has declined steadily through the twentieth century.
• prices of farm goods are generally set by government.
• in perfect competition, no one producer can control prices.