Economic Finals (Chapter 4 : Demand)

If the elasticity of demand for a good at a certain price is greater than one, we describe demand as a. elastic. b. unitary elastic. c. variable. d. inelastic.

a. elastic.

Which of the following is determined by dividing the percentage change in quantity demanded by percentage change in price? a. elasticity b. demand curve c. law of demand d. income effect

a. elasticity

A measure of how consumers react to a change in price is known as the a. elasticity of demand. b. law of demand. c. income effect. d. demand curve.

a. elasticity of demand.

Elastic demand comes from all of the following EXCEPT a. immediate need of product. b. availability of substitute goods. c. a limited budget that does not allow price changes. d. the perception of the item as a luxury item.

a. immediate need of product.

A drop in price will a. increase the quantity demanded of goods. b. decrease the quantity demanded of goods. c. not affect the quantity demanded of goods. d. change the law of demand.

a. increase the quantity demanded of goods.

Which of the following is an example of a good with inelastic demand? a. life-saving medicine b. television sets c. computers d. a particular brand of chewing gum

a. life-saving medicine

Which of the following describes the substitution effect? a. As the price of a good falls, people will substitute other products. b. As the price of a good rises, people will substitute other products. c. As demand rises, people will substitute other products. d. As demand falls, people will substitute other products.

b. As the price of a good rises, people will substitute other products.

The substitution effect and the income effect a. only apply to normal goods. b. affect how consumers change their spending patterns. c. only apply to inferior goods. d. allow economists to measure consumption.

b. affect how consumers change their spending patterns.

If a firm knows that the demand for its product is inelastic at its current price, it knows that an increase in price will a. make the demand for the product elastic. b. increase total revenue. c. have no effect. d. decrease total revenue.

b. increase total revenue.

What factor would NOT cause the demand curve to change? a. income b. price c. consumer tastes and advertising d. population

b. price

A demand curve illustrates the a. differences in price charged by different stores. b. quantities demanded at each price by consumers. c. differences in demand for different products. d. products that are most in demand.

b. quantities demanded at each price by consumers.

When factors other than price cause demand to fall, the demand curve a. does not shift. b. shifts to the left. c. shifts upward. d. shifts to the right.

b. shifts to the left.

Substitutes are goods a. that are bought and used together. b. used in place of one another. c. that cannot be replaced. d. that cause a shift in the demand curve.

b. used in place of one another.

For most goods, a rise in people's income means that there will be a(n) a. substitution effect. b. rise in prices. c. increase in demand. d. decrease in demand.

c. increase in demand.

Total revenue is defined as the amount of a. profit a company makes. b. profit a company makes after paying taxes. c. money a company receives by selling its goods. d. money affected by price elasticity.

c. money a company receives by selling its goods.

The law of demand says a. the higher the price, the more consumers will buy. b. the lower the price, the less consumers will buy. c. the lower the price, the more consumers will buy. d. the lower the price, the more consumers will substitute.

c. the lower the price, the more consumers will buy.

Which of the following is NOT an example of complements? a. skis and ski boots b. rowboat and oars c. electric shaver and charging cord d. calculator and cell phone

d. calculator and cell phone

Which of the following is an example of an inferior good? a. new car b. laptop computer c. lobster d. generic cereal

d. generic cereal

Economists measure consumption a. in the amount of money spent to buy a good. b. by reading a demand curve. c. in the amount of a good that is manufactured. d. in the amount of a good that is bought.

d. in the amount of a good that is bought.

If you keep buying despite a price increase, your demand is a. elastic. b. strong. c. normal. d. inelastic.

d. inelastic.