Econ 202 Module 3
Higher price elasticity of demand means that a consumer's demand is: A) more responsive to price changes. B) less responsive to income changes. C) more responsive to income changes. D) less responsive to price changes.
A
Which of the following pairs of goods has a negative cross-price elasticity? A) Pens and paper notebooks B) Motorcycles and typewriters C) Compact Disks (CDs) and electronic music files D) Nokia and Samsung cell phones
A
________ is the difference between the willingness to pay and the price paid for a good. A) Consumer surplus B) Revenue C) Producer surplus D) Seller's profit
A
The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00. Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant. Toni's actions are explained by which of the following? A) income effect only or substitution effect only but not both effects B) price effect C) income and substitution effects D) consumption effect
C
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: A) the opportunity cost of buying sweaters decreases. B) the opportunity cost of buying shirts increases. C) There is no change in the opportunity cost of consuming either good. D) the opportunity cost of buying sweaters increases.
D
If a decrease in income leads to a decrease in the demand for mac and cheese, then mac and cheese is A) a complement. B) a necessity. C) a neutral good. D) a normal good.
D
If a demand curve shifts to the left, then A) demand has increased. B) quantity demanded has increased. C) quantity demanded has decreased. D) demand has decreased.
D
If the demand for cell phone service is inelastic, then A) the percentage change in quantity demanded is equal to the percentage change in price. B) the quantity demanded does not change in response to changes in price. C) the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). D) the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
D
If the price of a good increases, ________. A) the budget constraint shifts to the left B) the budget constraint shifts to the right C) the consumer surplus increases D) the consumer surplus decreases
D
If the price of music downloads was to decrease, then A) the quantity of MP3 players demanded would decrease. B) the demand for MP3 players would decrease. C) the supply of MP3 players would increase. D) the demand for MP3 players would increase.
D
If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint: A) shifts to the right. B) shifts to the left. C) pivots rightward without a change in the intercept on the horizontal axis. D) pivots leftward without a change in the intercept on the horizontal axis.
D
Suppose that when the price of raspberries increases, Lonnie increases his purchases of papayas. To Lonnie, a) raspberries and papayas are inferior goods. b) raspberries and papayas are normal goods. c) raspberries and papayas are complements. d) raspberries and papayas are substitutes.
D
The income effect of a decrease in the price of legal services, a normal good, results in A) an increase in the demand for legal services. B) a decrease in the quantity of legal services demanded. C) a decrease in the demand for legal services. D) an increase in the quantity of legal services demanded.
D
The quantity demanded of a good is: A) always determined by government intervention. B) determined independent of the market price. C) the amount of a good that sellers are willing to supply at a given market price. D) the amount of a good that buyers are willing to purchase at a given market price.
D
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to: A) pivot leftward along the horizontal axis. B) pivot leftward along the vertical axis. C) pivot rightward along the vertical axis. D) pivot rightward along the horizontal axis.
B
If the price of steel increases drastically, the quantity of steel demanded by the building industry will fall significantly over the long run because A) buyers of steel are less sensitive to a price change if they have more time to adjust to the price change. B) buyers of steel are more sensitive to a price change if they have more time to adjust to the price change. C) profits will fall by a greater amount in the long run than in the short run. D) sales revenue in the building industry will fall sharply.
B
The ________ measures the change in the demand of a good due to a percentage change in the consumer's income. A) substitution effect of a price change B) income elasticity of demand C) cross-price elasticity of demand D) income effect of a price change
B
The buyers of a good will want to purchase it as long as their willingness to pay for the good is: A) less than the price. B) greater than or equal to the price. C) equal to zero. D) greater than zero.
B
The income effect of an increase in the price of peaches is A) the change in the quantity of other fruit demanded that results from the impact of the price change on purchasing power, holding all other factors constant. B) the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant. C) the change in the quantity of peaches demanded that results from the price increase, making peaches more expensive than other fruit, holding constant the effect of the price change on consumer purchasing power. D) the change in the demand for peaches as a result of the change in the price of peaches, holding all other factors constant.
B
We can derive the market demand curve for gold earrings A) by adding vertically the quantity demanded of each gold earring consumed at each price. B) by adding horizontally the individual demand curves of each gold earring consumer. C) by adding the prices each gold earring consumer is willing to pay for each quantity. D) only if the tastes of all gold earring consumers are similar.
B
By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good. A) price; quantity; quantity B) quantity; price; quantity C) price; quantity; price D) quantity; price; price
C
Elasticity is: A) the product of the percentage change in two variables. B) the sum of the percentage change in two variables. C) the ratio of the percentage change in two variables. D) the difference of the percentage change in two variables.
C
Elasticity is: A) the product of the percentage change in two variables. B) the sum of the percentage change in two variables. C) the ratio of the percentage change in two variables. D) the difference of the percentage change in two variables.
C
If a good has a price elasticity of demand of -3, it implies that: A) if the income of the consumer increases by 1%, the quantity demanded of that good will increase by 3%. B) if the income of the consumer increases by 3%, the quantity demanded of that good will increase by 1%. C) if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%. D) if the price of the good increases by 3%, the quantity demanded of the good will increase by 1%.
C
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to: A) pivot rightward along the horizontal axis. B) pivot leftward along the horizontal axis. C) pivot leftward along the vertical axis. D) pivot rightward along the vertical axis.
C
If the Apple Watch and the Samsung Gear S2 are considered substitutes, then, other things equal, an increase in the price of the Apple Watch will A) decrease the demand for the Apple Watch. B) increase the quantity demanded for the Gear S2. C) increase the demand for the Gear S2. D) increase the quantity demanded for the Apple Watch.
C
If the absolute value of the price elasticity of demand for aspirin equals 0.8 then A)aspirin is a normal good. B) aspirin has few substitutes. C) the demand for aspirin is inelastic. D) the demand for aspirin is elastic.
C
If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint: A)shifts to the right. B) pivots rightward without a change in the intercept on the horizontal axis. C) pivots leftward without a change in the intercept on the horizontal axis. D) shifts to the left.
C
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as A) a decrease in demand. B) a decrease in consumers' taste for chocolate. C) a decrease in quantity demanded. D) a change in consumer income.
C
In January, buyers of gold expect that the price of gold will rise in February. What happens in the gold market in January, holding all else constant? A) The demand curve shifts to the left. B) The supply curve shifts to the right. C) The demand curve shifts to the right. D) The quantity demanded increases.
C
Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers? A) The price elasticity coefficient is 0. B) It is perfectly inelastic. C) It is perfectly elastic. D) It is elastic.
C
A change in the slope of a budget constraint indicates: A) a change in the price of either good that causes a change in the opportunity cost. B) a change in the consumer's tastes and preferences. C) a change in the consumer's income. D) a change in the price of either good without a change in the opportunity cost.
A
Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true? A) It is unit elastic throughout the demand curve. B) It is inelastic at high prices and elastic at low prices. C) It is perfectly elastic at very high prices and perfectly inelastic at very low prices. D) It is elastic at high prices and inelastic at low prices.
D
Picking the choice you want the most among the things you can do.
Optimizing
What does a perfectly inelastic demand curve look like?
Vertical line
Quantity demanded _______ as price gets lower
increases
The Law of Demand: When the price decreases, then the quantity demanded
increases
Anything below the budget constraint is
not optimal
The slope of a budget constraint represents
opportunity cost
If your budget increases, then your entire budget constraint shifts
outward
a decrease in price pivots the graph _________ along the ______ axis
rightward horizontal
Anything above the budget constraint is
unaffordable
Choices are what you ______ to do and what you _____ do
want can
The Demand curve slopes downward because
you are willing to pay less with each additional unit
At low prices, people want
more
If demand is inelastic, the absolute value of the price elasticity of demand is A) less than one. B) greater than one. C) greater than the absolute value of the slope of the demand curve. D) one.
A
If demand is perfectly elastic, the absolute value of the price elasticity coefficient is A) infinity. B) equal to the absolute value of the slope of the demand curve. C) one. D) zero.
A
If demand is perfectly inelastic, the absolute value of the price elasticity of demand is A) zero. B) more than one. C) less than one. D) equal to the absolute value of the slope of the demand curve.
A
Price elasticity of demand measures A) how responsive quantity demanded is to a change in price. B) how responsive sales are to changes in the price of a related good. C) how responsive suppliers are to price changes. D) how responsive sales are to a change in buyers' incomes.
A
The Law of Demand states that: A) the quantity demanded of a commodity varies inversely with the price of the commodity. B) the demand for a commodity is mostly influenced by consumers' income. C) the demand for a commodity always equals the supply of the commodity. D) the quantity demanded of a commodity is the same for all consumers in a perfectly competitive market.
A
The cross-price elasticity of demand measures the A) percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. B) percentage change in the price of one good divided by the percentage change in the quantity demanded of another good. C) percentage change in the quantity demanded of one good in one location divided by the price of the same good in another location. D) absolute change in the quantity demanded of one good divided by the absolute change in the price of another good.
A
The demand by all the consumers of a given good or service is the ________ for the good or service. A) market demand B) scheduled demand C) quantity demanded D) law of demand
A
What is the difference between an "increase in demand" and an "increase in quantity demanded"? A) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. B) There is no difference between the two terms; they both refer to a shift of the demand curve. C) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve. D) There is no difference between the two terms; they both refer to a movement downward along a given demand curve.
A
Which of the following best describes the difference between a demand curve and a demand schedule? A) A demand curve is a graphical representation of the relationship between the quantity of a good and its price, whereas a demand schedule is a tabular representation. B) A demand curve shows different quantities of a good demanded at different incomes, whereas a demand schedule shows different quantities of a good demanded at different prices. C) A demand curve shows different quantities of a good demanded at different prices, whereas a demand schedule shows different quantities of a good demanded at different incomes. D) A demand curve can be derived from a demand schedule, but a demand schedule cannot be derived from a demand curve.
A
A decrease in the price of either good will cause a consumer's budget constraint to: A) pivot rightward. B) shift rightward. C) shift leftward. D) pivot leftward.
A) pivot rightward.
A budget constraint is a straight line because: A) the opportunity cost of buying each of the goods changes along the constraint. B) a consumer faces a fixed price of both goods that do not change with changes in consumption. C) the tastes and preferences of the consumer change along the constraint. D) a consumer has a limited money income.
B
A good is said to have a relatively elastic demand if the value of price elasticity is: A) between 0.5 and 1. B) Correct greater than 1. C) equal to 0. D) between 0 and 0.5.
B
Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price. A) relativity B) elasticity C) efficiency D) slope
B
Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price. A) relativity B) elasticity C) slope D) efficiency
B
If a 1% change in the price of a good causes a 1% change in the quantity demanded, the good has an elasticity of demand: A) greater than 1. B) equal to 1. C) less than 1. D) equal to 0.
B
The limited amount of income available to consumers to spend on goods and services.
Budget constraint
Things I can afford
Budget constraint
A budget constraint A) represents the bundles of consumption that make a consumer equally happy. B) shows the prices that a consumer chooses to pay for products he consumes. C) refers to the limited amount of income available to consumers to spend on goods and services. D) reflects the desire by consumers to increase their income.
C
A budget constraint is a straight line because: A) the tastes and preferences of the consumer change along the constraint. B) the opportunity cost of buying each of the goods changes along the constraint. C) a consumer faces a fixed price of both goods that do not change with changes in consumption. D) a consumer has a limited money income.
C
A change in the price of a good has two effects on the quantity consumed. What are these effects? A) the consumption effect and expenditure effect B) the utility effect and the budget effect C) the income effect and the substitution effect D) the total utility effect and marginal utility effect
C
A change in the slope of a budget constraint indicates: A) a change in the price of either good without a change in the opportunity cost. B) a change in the consumer's tastes and preferences. C) a change in the price of either good that causes a change in the opportunity cost. D) a change in the consumer's income.
C
Assume that the economy is in a recession and consumers are expecting a fall in their income levels. This will cause a(n): A) increase in the total quantity demanded of all goods. B) decrease in the total quantity demanded of all goods. C) left shift in the market demand for all goods. D) right shift in the market demand for all goods.
C
The market for smartwatches has begun to grow, due in part to the success of the Apple Watch. Following the successful launch of the Apple Watch in 2015, companies such as Samsung, Sony, and LG have all developed products to compete with the Apple Watch. The smartwatches introduced to compete with the Apple Watch would be considered A) normal goods compared to the Apple Watch. B) complements to the Apple Watch. C) substitutes for the Apple Watch. D) inferior goods compared to the Apple Watch.
C
The phrase "demand has decreased" means that A) a demand curve has shifted to the right. B) there has been an upward movement along a demand curve. C) a demand curve has shifted to the left. D) there has been a downward movement along a demand curve.
C
The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded? A) 40 percent B) 25 percent C) 2.5 percent D) 0.4 percent
C
The price elasticity of demand is equal to A) the change in quantity demanded divided by the change in price. B) the percentage change in price divided by the percentage change in quantity demanded. C) the percentage change in quantity demanded divided by the percentage change in price. D) the value of the slope of the demand curve.
C
The slope of a budget constraint represents: A) the money income of the consumer. B) the price of the good measured along the vertical axis. C) the opportunity cost of one good in terms of another. D) the price of the good measured along the horizontal axis.
C
The slope of a budget constraint represents: A) the price of the good measured along the horizontal axis. B) the money income of the consumer. C) the opportunity cost of one good in terms of another. D) the price of the good measured along the vertical axis.
C
The substitution effect of an increase in the price of peaches is A) the change in the quantity of peaches demanded that results from the effect of the change in the price of peaches on the consumer's purchasing power. B) the change in the demand for peaches that results when the price of peaches increases. C) the change in the quantity demanded that results from a change in the price of peaches, making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
C
Which of the following factors will NOT cause a shift in the demand for a good? A) A change in consumer incomes B) A change in the number of consumers C) A change in the market price of the good D) A change in tastes and preferences
C
Which of the following pairs of goods is most likely to have a positive cross-price elasticity? A) Motorcycles and typewriters B) Printers and ink cartridges C) A privately-owned car and public transportation D) Coffee and sugar
C
Which of the following statements correctly differentiates between the slope of the demand curve and price elasticity of demand along a linear demand curve? A) The price elasticity of demand is a ratio, whereas the slope of a demand curve is a product. B) The price elasticity of demand is a product, whereas the slope of a demand curve is a ratio. C) The price elasticity of demand for a good varies along the demand curve, whereas the slope of the demand curve remains the same at different points on the curve. D) The price elasticity of demand for a good is the same at different points on the demand curve, whereas the slope of the demand curve varies depending on the point where it is measured.
C
Willingness to pay: A) is equal to the price of the highest-priced goods in a consumption bundle. B) is the lowest price that a buyer is willing and able to pay for a unit of good. C) is the highest price that a buyer is willing and able to pay for a unit of good. D) is equal to the price of the lowest-priced goods in a consumption bundle.
C
If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely. A) demand schedule B) indifference curve C) budget constraint D) demand function
C) budget constraint
Which of the following statements correctly differentiates between the slope of the demand curve and price elasticity of demand along a linear demand curve? A) The price elasticity of demand is a product, whereas the slope of a demand curve is a ratio. B) The price elasticity of demand for a good is the same at different points on the demand curve, whereas the slope of the demand curve varies depending on the point where it is measured. C) The price elasticity of demand is a ratio, whereas the slope of a demand curve is a product. D) The price elasticity of demand for a good varies along the demand curve, whereas the slope of the demand curve remains the same at different points on the curve.
D
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil? A) A decrease in the consumer's income B) A twofold increase in the prices of both pens and pencils C) An increase in the consumer's income D) A twofold increase in the price of pens and a threefold increase in the price of pencils
D
John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ________. A) $2.50 B) $2 C) $10 D) $3
D) $3
If quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to: A) pivot rightward along the vertical axis. B) shift to the right. C) shift to the left. D) pivot rightward along the horizontal axis.
D) pivot rightward along the horizontal axis.
The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as A) economizing behavior. B) maximizing behavior. C) the price constraint. D) the budget constraint.
D) the budget constraint.
Amount willing to buy at a given price.
Demand curve
Tables that show the relationship between the price of a product and the quantity of the product demanded.
Demand schedules
True or False? If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.
False
True or False? The demand for heating oil in the short run is more elastic than the long run demand for heating oil.
False
True or False? If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.
False
Things with few substitutes.
High Value Uses
If a price of a product falls, the quantity demanded will increase. If the price of a product rises, the quantity demanded will decrease.
The Law of Demand
True or False? The income effect results in consumers increasing the quantity of normal goods demanded when the price falls.
True
True or False? If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.
True
The optimal bundle is any point on the
budget constraint
The most successful businesses are the ones that respond the best to
consumer demand
A decrease in price allows you to purchase
more
The Law of Demand: When the price increases, then the quantity demanded
decreases
An increase in price pivots the graph _______ along the ______ axis.
leftward vertical
An increase in price forces you to purchase
less
Price along vertical axis increases ---> you are able to purchase ______ ----> pivots ______.
less leftward