ECO

True or False Generally speaking, the smaller the percentage of one's total budget devoted to a particular product, the more price elastic will be the demand for that product

False

True or False If the elasticity coefficient of supply is 0.7, supply is elastic.

False

True or False The smaller the number of good substitutes for a product, the greater will be the price elasticity of demand for it.

False

True or False The substitution effect suggests that, when consumers judge product quality by price, they will substitute high-priced products for low-priced products.

False

True or False When the price of a product falls, the income effect induces the consumer to purchase more of it while the substitution effect prompts her to buy less.

False

The main determinant of elasticity of supply is the:

amount of time the producer has to adjust inputs in response to a price change.

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:

relatively inelastic.

If the coefficient of price elasticity is less than 1 but greater than zero, demand is:

relatively inelastic

The coefficient of price elasticity is 0.2. Demand is thus:

relatively inelastic

Marginal utility is the:

change in total utility obtained by consuming one more unit of a good.

Which of the following statements is correct?

Demand is more elastic when a large number of substitute goods are available.

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

They all help explain the downsloping demand curve

True or False Generally speaking, the demand for luxury goods is more price elastic than is the demand for necessities.

True

True or False If price and total revenue are directly related, demand is inelastic.

True

True or Fauce If price changes and total revenue changes in the opposite direction, demand is relatively elastic.

True

The law of diminishing marginal utility states that:

beyond some point additional units of a product will yield less and less extra satisfaction to a consumer.

The price elasticity of demand coefficient measures

buyer responsiveness to price changes.

The demand for a product is inelastic with respect to price if:

consumers are largely unresponsive to a per unit price change.

If the demand for product X is inelastic, a 4 percent increase in the price of X will:

decrease the quantity of X demanded by less than 4 percent.

Marginal utility:

diminishes as more of a product is consumed.

A perfectly inelastic demand curve:

graphs as a line parallel to the vertical axis.

Price elasticity of demand is generally:

greater in the long run than in the short run.

If a demand for a product is elastic, the value of the price elasticity coeffcient is

greater than one.

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore demand for X in this price range:

is elastic.

Utility:

is want-satisfying power.

A demand curve which is parallel to the horizontal axis is:

perfectly elastic

In which of the following instances will total revenue decline?

price rises and demand is elastic

If the demand for a product is elastic, then total revenue will:

rise as price falls.

Utility refers to the:

satisfaction that a consumer derives from a good or service.

The elasticity of demand for a product is likely to be greater:

the greater the amount of time over which buyers adjust to a price change.

The more time consumers have to adjust to a change in price:

the greater will be the price elasticity of demand.

"Essential" water is cheaper than "nonessential" diamonds because:

the supply of water is great relative to demand and the supply of diamonds is small relative to demand.

The ability of a good or service to satisfy wants is called:

utility