A good with inelastic supply generates no deadweight loss when taxed. Is it: a. somewhat inelastic b. somewhat elastic c. slowly increasing d. perfectly elastic e. perfectly inelastic QUESTION 11: If a local merchant raises the price of his good and finds that his total revenues increase, the demand for this good is: a. unit elastic b. inelastic c. relatively price-sensitive d. elastic e. perfectly elastic QUESTION 12: Because the demand for a product's input depends on the decision to produce this product, it is called: a. input demand b. indirect c. dependent d. production e. derived demand

The correct answer for each question is as follows:

QUESTION 10: e. perfectly inelastic

A good with perfectly inelastic supply means that the quantity supplied does not change regardless of the price. When such a good is taxed, quantity remains constant, so there is no distortion in the market that would create a deadweight loss. Therefore, no deadweight loss occurs when a good with a perfectly inelastic supply is taxed.

QUESTION 11: b. inelastic

When a local merchant raises the price of his good and finds that his total revenues increase, it implies that the percentage decrease in quantity demanded is less than the percentage increase in price. This indicates that the demand for the good is inelastic because consumers are relatively unresponsive to price changes.

QUESTION 12: e. derived demand

The demand for a product's input is called derived demand because it depends on the demand for the final product. Producers only demand inputs if there is demand for the output they produce. Thus, the input demand is derived from the demand for the final product.

Extra: In economic terms, elasticity measures how much the quantity demanded or supplied of a good responds to a change in price. Understanding elasticity is critical for analyzing how changes in the market can affect supply, demand, and pricing.

For goods with inelastic demand, people will continue to buy roughly the same amount even if the price goes up. Examples might include essential medications or basic utilities. Conversely, goods with elastic demand will see a significant change in quantity demanded if the price changes; luxury items often fit this description.

As for "derived demand," this is an important concept in labor and resource markets. It highlights the idea that the demand for factors of production such as labor, raw materials, or capital is contingent on the demand for the goods and services they produce. If there is a high demand for cars, for example, there will also be a high demand for steel and the labor required to manufacture the cars. This reflects a derived demand for inputs based on the output market's needs.