AGEC Exam #2 Study Guide 2026 | Complete Review, Practice Questions & Exam
Prep
Cross-Price Elasticity of Demand - ANS ✔✔percent change in quantity/ percent change in price
cross price elasticity of demand in other terms - ANS ✔✔Change Q/Change P x Pavg/Qavg
Change Q - ANS ✔✔(Q2 - Q1)
Change P - ANS ✔✔(P2 - P1)
P avg - ANS ✔✔(P1 + P2)/2
Q avg - ANS ✔✔(Q1 + Q2)/2
If the cross price elasticity is positive the good is classified as a - ANS ✔✔substitute good
if the cross price elasticity is negative the good is classified as a - ANS ✔✔compliment good
if the cross price elasticity is equal to zero, the good is classified as a - ANS ✔✔independent
good
price flexibility - ANS ✔✔is the reciprocal of cross price elasticity, meaning...
- %change in P/%change in Q
- if the cpe = -.25, the price flexibility would be = -4
- useful to producers when forming expectations
, if own price elasticity is elastic, cutting the price will ______ revenue and increasing the price
will ______ revenue. - ANS ✔✔increase, decrease
if own price elasticity is unitary elastic, cutting the price will ______ revenue and increasing the
price will ______ revenue. - ANS ✔✔not change, not change
if own price elasticity is inelastic, cutting the price will ______ revenue and increasing the price
will ______ revenue - ANS ✔✔decrease, increase
if elasticity coefficient is greater than 1.0, demand is said to be - ANS ✔✔elastic
if elasticity coefficient is equal to 1.o, demand is said to be - ANS ✔✔unitary elastic
if elasticity coefficient is less than 1, demand is said to be - ANS ✔✔inelastic
conditions for perfect competition - ANS ✔✔•Homogeneous products (no product
differentiation)
•No barriers to entry or exit
•Large number of sellers
•Perfect information
land - ANS ✔✔includes renewable (forests) and non-renewable (minerals) resources
labor - ANS ✔✔all owner and hired labor services, excluding management
Capital/Materials - ANS ✔✔manufactured goods such as fuel, chemicals, tractors and buildings
Prep
Cross-Price Elasticity of Demand - ANS ✔✔percent change in quantity/ percent change in price
cross price elasticity of demand in other terms - ANS ✔✔Change Q/Change P x Pavg/Qavg
Change Q - ANS ✔✔(Q2 - Q1)
Change P - ANS ✔✔(P2 - P1)
P avg - ANS ✔✔(P1 + P2)/2
Q avg - ANS ✔✔(Q1 + Q2)/2
If the cross price elasticity is positive the good is classified as a - ANS ✔✔substitute good
if the cross price elasticity is negative the good is classified as a - ANS ✔✔compliment good
if the cross price elasticity is equal to zero, the good is classified as a - ANS ✔✔independent
good
price flexibility - ANS ✔✔is the reciprocal of cross price elasticity, meaning...
- %change in P/%change in Q
- if the cpe = -.25, the price flexibility would be = -4
- useful to producers when forming expectations
, if own price elasticity is elastic, cutting the price will ______ revenue and increasing the price
will ______ revenue. - ANS ✔✔increase, decrease
if own price elasticity is unitary elastic, cutting the price will ______ revenue and increasing the
price will ______ revenue. - ANS ✔✔not change, not change
if own price elasticity is inelastic, cutting the price will ______ revenue and increasing the price
will ______ revenue - ANS ✔✔decrease, increase
if elasticity coefficient is greater than 1.0, demand is said to be - ANS ✔✔elastic
if elasticity coefficient is equal to 1.o, demand is said to be - ANS ✔✔unitary elastic
if elasticity coefficient is less than 1, demand is said to be - ANS ✔✔inelastic
conditions for perfect competition - ANS ✔✔•Homogeneous products (no product
differentiation)
•No barriers to entry or exit
•Large number of sellers
•Perfect information
land - ANS ✔✔includes renewable (forests) and non-renewable (minerals) resources
labor - ANS ✔✔all owner and hired labor services, excluding management
Capital/Materials - ANS ✔✔manufactured goods such as fuel, chemicals, tractors and buildings
