Econ module 3 quizzes
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 ________.
$3
The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product. T/f
False
With the increased usage of cell phone services, what has happened to the price elasticity of demand for land-line telephone services? It has become more income elastic. It has become more price inelastic. The absolute value of the price elasticity coefficient has probably gone down. It has become more price elastic.
It has become more price elastic.
Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true? It is unit elastic throughout the demand curve. It is inelastic at high prices and elastic at low prices. It is perfectly elastic at very high prices and perfectly inelastic at very low prices. It is elastic at high prices and inelastic at low prices.
It is elastic at high prices and inelastic at low prices.
Which of the following goods is likely to have the highest price elasticity of demand? Pizza Gasoline Salt Life-saving drugs
Pizza
Suppose when Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue? Sales revenue increased. Sales revenue decreased. Sales revenue remained unchanged. It cannot be determined without information on prices.
Sales revenue decreased.
Which of the following examples best describes the Law of Demand? When a new anti-tobacco commercial is released, the consumption of tobacco products decreases sharply. When the price of bread doubles, John's consumption of bread halves. When John's income doubles, his telephone bill also doubles. When the price of watches increases, a local manufacturer starts offering more watches for sale.
When the price of bread doubles, John's consumption of bread halves.
Which of the following statements is true? When a firm lowers its price its total revenue may either increase or decrease. Whenever a firm raises its price its total revenue will increase. Whenever a firm increases its quantity sold its revenue will increase. Total revenue will equal zero when the demand for a product is unit elastic.
When a firm lowers its price its total revenue may either increase or decrease.
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: less than 1. equal to 0. equal to 1. greater than 1.
equal to 1.
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: equal to 1. less than 1. greater than 1. equal to 0.
equal to 1.
When Audrina raised the price of her homemade cookies, her total revenue increased. This suggests that the demand for Audrina's cookies is elastic. T/F
false
A good is said to have a relatively elastic demand if the value of price elasticity is: between 0 and 0.5. between 0.5 and 1. equal to 0. greater than 1.
greater than 1.
A good is said to have a relatively elastic demand if the value of price elasticity is: equal to 0. between 0 and 0.5. greater than 1. between 0.5 and 1.
greater than 1.
Price elasticity of demand measures
how responsive quantity demanded is to a change in price.
If a 5 percent increase in income leads to a 10 percent increase in quantity demanded for airline travel, then airline travel is
luxury
The demand by all the consumers of a given good or service is the ________ for the good or service.
market demand
Higher price elasticity of demand means that a consumer's demand is: more responsive to income changes. more responsive to price changes. less responsive to income changes. less responsive to price changes.
more responsive to price changes.
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: pivot rightward (pivot out) along the horizontal axis. pivot leftward (pivot in) along the vertical axis. pivot leftward (pivot in) along the horizontal axis. pivot rightward (pivot out) along the vertical axis.
pivot leftward (pivot in) along the vertical axis.
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: pivot rightward (pivot out) along the vertical axis. shift to the left. shift to the right. pivot rightward (pivot out) along the horizontal axis.
pivot rightward (pivot out) along the horizontal axis.
A decrease in the price of either one or the other good will cause a consumer's budget constraint to: pivot rightward (pivot out). shift leftward. shift rightward. pivot leftward (pivot in).
pivot rightward (pivot out).
A decrease in the price of either one or the other good will cause a consumer's budget constraint to: pivot rightward (pivot out). shift rightward. pivot leftward (pivot in). shift leftward.
pivot rightward (pivot out).
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: shifts to the left. pivots rightward (pivot out) without a change in the intercept on the horizontal axis. shifts to the right. pivots leftward (pivot in) without a change in the intercept on the horizontal axis.
pivots leftward (pivot in) without a change in the intercept on 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
the budget constraint.
The substitution effect of an increase in the price of peaches is the change in the supply for peaches that results when the price of peaches increases. 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. 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. None of the Above.
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.
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: the opportunity cost of buying sweaters decreases. There is no change in the opportunity cost of consuming either good. the opportunity cost of buying shirts increases. the opportunity cost of buying sweaters increases.
the opportunity cost of buying sweaters increases.
The slope of a budget constraint represents:
the opportunity cost of one good in terms of another.
The slope of a budget constraint represents: the price of the good measured along the horizontal axis. the price of the good measured along the vertical axis. the money income of the consumer. the opportunity cost of one good in terms of another.
the opportunity cost of one good in terms of another.
If the market for a product is broadly defined, then there are many substitutes for the product and the demand for the product is relatively elastic. there are few substitutes for the product and the demand for the product is relatively inelastic. the good has many complements. the expenditure on the good is likely to make up a large share of one's budget.
there are few substitutes for the product and the demand for the product is relatively inelastic.
If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded will increase by 5 percent. will increase by 45 percent. will decrease by 45 percent. will decrease by 5 percent.
will decrease by 45 percent.
If the demand for a product is perfectly inelastic, a decrease in the price of the product will decrease total revenue. will increase total revenue. will not change total revenue. any of the above are possible.
will decrease total revenue.
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? 40 percent 25 percent 2.5 percent 0.4 percent
2.5 percent
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? 40 percent 25 percent 2.5 percent 0.4 percent
2.5 percent
Suppose the value of the price elasticity of demand is -3. What does this mean? A $1 increase in price causes quantity demanded to fall by 3 units. A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
Which of the following best describes the difference between a demand curve and a demand schedule? A demand curve can be derived from a demand schedule, but a demand schedule cannot be derived from a demand curve. 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. 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 . 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.
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.
Which of the following pairs of goods is most likely to have a positive cross-price elasticity? Coffee and sugar Motorcycles and typewriters Printers and ink cartridges A privately-owned car and public transportation
A privately-owned car and public transportation
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil? twofold increase in the prices of both pens and pencils An increase in the consumer's income A twofold increase in the price of pens and a threefold increase in the price of pencils A decrease in the consumer's income
A twofold increase in the price of pens and a threefold increase in the price of pencils
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil? A decrease in the consumer's income A twofold increase in the price of pens and a threefold increase in the price of pencils An increase in the consumer's income A twofold increase in the prices of both pens and pencils
A twofold increase in the price of pens and a threefold increase in the price of pencils
Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1. Increasing ticket prices will increase the total revenue from ticket sales. T/F
False
Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant? Demand is likely to be perfectly inelastic. Demand is likely to be perfectly elastic. Demand is likely to be relatively inelastic. Demand is likely to be relatively elastic.
Demand is likely to be relatively inelastic.
Which of the following best describes a good with perfectly elastic demand? The demand curve for the good initially slopes upward, reaches its maximum, and then slopes downward. For a given price change, the percentage change in quantity demanded will be less than the percentage change in its price. The quantity demanded of the good is completely unaffected by a price change. Even the smallest increase in the price of the good will cause consumers to stop consuming it completely.
Even the smallest increase in the price of the good will cause consumers to stop consuming it completely.
An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant. T/F
False
Which of the following describes the substitution effect of a price change? The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power. The change in quantity demanded of a good that results from the change in the price of a substitute for the good. The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. None of the above.
The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
The Internet has created a new category in the book selling market, namely, the "barely used" book. How does the availability of barely used books affect the market for new books? The supply curve for new books shifts to the left. The supply curve for new books shifts to the right. The demand curve for new books shifts to the right. The demand curve for new books shifts to the left.
The demand curve for new books shifts to the left.
Which of the following statements correctly differentiates between the slope of the demand curve and price elasticity of demand along a linear demand curve? The price elasticity of demand is a product, whereas the slope of a demand curve is a ratio. The price elasticity of demand is a ratio, whereas the slope of a demand curve is a product. 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. 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.
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.
A change in the slope of a budget constraint indicates: a change in the consumer's tastes and preferences. a change in the price of either good that causes a change in the opportunity cost. a change in the consumer's income. a change in the price of either good without a change in the opportunity cost.
a change in the price of either good that causes a change in the opportunity cost.
A change in the slope of a budget constraint indicates: a change in the price of either good without a change in the opportunity cost. a change in the price of either good that causes a change in the opportunity cost. a change in the consumer's income. a change in the consumer's tastes and preferences.
a change in the price of either good that causes a change in the opportunity cost.
A budget constraint is a straight line because:
a consumer faces a fixed price of both goods that do not change with changes in consumption.
A budget constraint is a straight line because: the tastes and preferences of the consumer change along the constraint. a consumer has a limited money income. a consumer faces a fixed price of both goods that do not change with changes in consumption. the opportunity cost of buying each of the goods changes along the constraint.
a consumer faces a fixed price of both goods that do not change with changes in consumption.
Of the following, which is the best example of good with a perfectly inelastic demand? the demand for a college education by a student who has a full scholarship to an Ivy League school the demand for tickets in New York City when the Mets or Yankees are in the World Series the demand for gasoline a diabetic's demand for insulin
a diabetic's demand for insulin
If a decrease in income leads to a decrease in the demand for mac and cheese, then mac and cheese is a normal good. a necessity. a complement. a neutral good.
a normal good.
An increase in the demand for a good is represented by:
a rightward movement along the demand curve. a left shift to a new demand curve. a leftward movement along the demand curve. a right shift to a new demand curve.
Which of the following items is likely to have the highest income elasticity of demand? a bus ride a vacation home in the Swiss Alps a meal at Taco Bell a tank of gasoline
a vacation home in the Swiss Alps
If a decrease in income leads to an increase in the demand for sardines, then sardines are a normal good. an inferior good. a necessity. a neutral good.
an inferior good.
If the price of lattes, a normal good you enjoy, falls the substitution effect which causes you to increase your latte consumption outweighs the income effect which causes you to reduce your latte consumption, resulting in more lattes purchased. both the income and substitution effects lead you to buy more lattes. the income effect which causes you to increase your latte consumption outweighs the substitution effect which causes you to reduce your latte consumption, resulting in more lattes purchased. the income and substitution effects offset each other but the price effect leads you to buy more lattes.
both the income and substitution effects lead you to buy more lattes.
If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely.
budget constrain
If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely.
budget constraint
We can derive the market demand curve for gold earrings by adding vertically the quantity demanded of each gold earring consumed at each price. only if the tastes of all gold earring consumers are similar. by adding the prices each gold earring consumer is willing to pay for each quantity. by adding horizontally the individual demand curves of each gold earring consumer.
by adding horizontally the individual demand curves of each gold earring consumer.
Income elasticity measures how a good's quantity demanded responds to producers' incomes. change in the goods price. change in buyers' incomes. change in the price of another good.
change in buyers' incomes.
The ________ plots the relationship between prices and the quantity that buyers are willing to purchase. demand curve market curve supply curve willingness to accept curve
demand curve
The demand curve for most goods is normally:
downward sloping.
A service station owner in Staten Island, New York, was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline, the demand for gasoline is
elastic
If a good has a price elasticity of demand of -3, it implies that: if the price of the good increases by 3%, the quantity demanded of the good will increase by 1%. if the income of the consumer increases by 1%, the quantity demanded of that good will increase by 3%. if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%. if the income of the consumer increases by 3%, the quantity demanded of that good will increase by 1%.
if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%.
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? consumption effect income and substitution effects income effect only or substitution effect only but not both effects price effect
income and substitution effects
If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, demand for using the toll road must be perfectly elastic. inelastic. elastic. unit elastic.
inelastic.
Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is inelastic. perfectly elastic. elastic. unit elastic.
inelastic.
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is inelastic. elastic. unit elastic. perfectly inelastic.
inelastic.
Willingness to pay: is the highest price that a buyer is willing and able to pay for a unit of good. is equal to the price of the lowest-priced goods in a consumption bundle. is the lowest price that a buyer is willing and able to pay for a unit of good. is equal to the price of the highest-priced goods in a consumption bundle.
is the highest price that a buyer is willing and able to pay for a unit of good.
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: pivots leftward (pivot in) without a change in the intercept on the horizontal axis. pivots rightward (pivot out) without a change in the intercept on the horizontal axis. shifts to the right. shifts to the left.
pivots leftward (pivot in) without a change in the intercept on the horizontal axis.
As the ________ increases, ________. quantity demanded of a good; its price decreases price of a good; its quantity demanded increases price of a good; its quantity demanded decreases quantity demanded of a good; its price increases
price of a good; its quantity demanded decreases
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. quantity; price; price price; quantity; price price; quantity; quantity quantity; price; quantity
price; quantity; price
The income effect of an increase in the price of salmon refers to the relative price effect - salmon is more expensive compared to other types of fish - which causes the consumer to buy less salmon. is the change in the demand for salmon when income increases. is the change in the demand for other types of fish, say trout, that results from a decrease in purchasing power. refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant.
refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant.
A budget constraint represents the bundles of consumption that make a consumer equally happy. reflects the desire by consumers to increase their income. shows the prices that a consumer chooses to pay for products he consumes. refers to the limited amount of income available to consumers to spend on goods and services.
refers to the limited amount of income available to consumers to spend on goods and services.
If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is relatively elastic. unit elastic. perfectly elastic. relatively inelastic.
relatively elastic.
If a firm raised its price and discovered that its total revenue fell, then the demand for its product is relatively inelastic. perfectly elastic. relatively elastic. perfectly inelastic.
relatively elastic.
If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is unit elastic. perfectly elastic. relatively inelastic. relatively elastic.
relatively inelastic.
When there few close substitutes available for a good, demand tends to be perfectly elastic. relatively inelastic. relatively elastic. perfectly inelastic.
relatively inelastic.
A change in the quantity demanded of a good is: the outcome of a change in tastes and preferences. the outcome of a change in income. represented by a movement along the demand curve. represented by a shift to a new demand curve.
represented by a movement along the demand curve.
If the price of a good increases, ________. the consumer surplus decreases the consumer surplus increases the budget constraint shifts to the right the budget constraint shifts to the left
the consumer surplus decreases
When demand is elastic, a fall in price causes total revenue to rise because the increase in quantity sold is large enough to offset the lower price. the percentage increase in quantity demanded is less than the percentage fall in price. when price falls, quantity sold increases so total revenue automatically rises. the demand curve shifts.
the increase in quantity sold is large enough to offset the lower price.
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: There is no change in the opportunity cost of consuming either good. the opportunity cost of buying sweaters decreases. the opportunity cost of buying shirts increases. the opportunity cost of buying sweaters increases.
the opportunity cost of buying sweaters increases.
If the demand for a steak is unit elastic, then the percentage change in quantity demanded is 1 percent greater than the percentage change in price. the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). quantity demanded does not respond to changes in price. the percentage change in quantity demanded is equal to the percentage change in price.
the percentage change in quantity demanded is equal to the percentage change in price.
If the demand for a steak is unit elastic, then quantity demanded does not respond to changes in price. the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). the percentage change in quantity demanded is 1 percent greater than the percentage change in price. the percentage change in quantity demanded is equal to the percentage change in price.
the percentage change in quantity demanded is equal to the percentage change in price.
If the demand for cell phone service is inelastic, then the quantity demanded does not change in response to changes in price. the percentage change in quantity demanded is equal to the percentage change in price. the percentage change in quantity demanded is less than the percentage change in price (in absolute value). the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).
the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
A change in all of the following variables will change the market demand for a product except income. population and demographics. the price of the product. tastes.
the price of the product.