Economics Chapter 4 Review

Consumers are usually sensitive to price.

True

Which statement is an example of substitute goods affecting demand? a. A bumper crop of cotton lowers the price of cotton clothing. Sales of silk shirts decrease. b. As laptop computer sales increase, so do the sales of computer cases. c. An automobile maker lays off thousands. Sales of electronic goods in that city fall. d. Hi-tech companies lure people to a region. Demand for housing rises.

A bumper crop of cotton lowers the price of cotton clothing. Sales of silk shirts decrease.

A business doubled the price of a product in order to increase profits. Which of the following scenarios might have occurred? a. A sharp increase in revenues demonstrated the elasticity of the product. b. A dramatic decline in revenues demonstrated the elasticity of the product. c. A dramatic decline in revenues demonstrated the inelasticity of the product. d. A small increase in revenues demonstrated the unit elasticity of the product.

A dramatic decline in revenues demonstrated the elasticity of the product.

Which statement shows income as a factor affecting demand? a. A factory in town gives its employees bonuses, and mall purchases increase. b. Many people move into a suburb because it has affordable housing. c. Advertising convinces people that jeans make them look overweight. d. Meteorologists predict a winter with lots of snow, so shovel sales rise.

A factory in town gives its employees bonuses, and mall purchases increase.

What assumption is used when making demand curves? a. All economic factors remain constant except price. b. All consumers lie about their purchasing habits. c. Inflation always causes product prices to rise. d. Availability of product is the most important variable.

All economic factors remain constant except price.

Why doesn't the electric company ever offer sale prices? a. The government regulates electricity prices. b. A sale would encourage high usage and cause blackouts. c. Electricity is a necessity, so demand is inelastic. d. The electric company is evil, greedy, and doesn't care.

Electricity is a necessity, so demand is inelastic.

Butter and margarine can function as complements for each other.

False

Consumers have the tendency to replace a more expensive item with an even more expensive item.

False

Goods known as substitutes increase the use of another good.

False

If a company raises the price on a product with inelastic demand, the total revenue will probably decrease.

False

Macroeconomics is the area of economics that deals with behavior and decision making in small units

False

People will typically buy more of a product if the price increases.

False

Razor handles and razor blades are examples of goods that are substitutes.

False

Which of the following describes a demand curve? a. It is a horizontal line. b. It slopes downward from left to right. c. It slopes downward from right to left. d. It is bow-shaped.

It slopes downward from right to left.

Which statement shows consumer expectation affecting demand? a. Mikayla buys a new skirt style that she saw in a fashion magazine. b. Jacob's wages go up, so he buys an extra pair of basketball shoes. c. The price of fuel containing ethanol drops, so gasoline sales decrease. d. Emma buys 10 pounds of coffee because crops are failing in Kenya.

Mikayla buys a new skirt style that she saw in a fashion magazine.

According to the law of demand, what happens when prices go down? a. Demand increases. b. Quantity demanded increases. c. Demand decreases. d. Quantity demanded decreases.

Quantity demanded increases.

Which is an example of market size affecting demand? a. Restaurant visits drop after a hurricane causes a city to be evacuated. b. A computer chip maker moves to a town and hires hundreds. c. After a team wins the World Series, it becomes a fad to buy their caps. d. Sales of potato chips drop after the price of pretzels falls by half.

Restaurant visits drop after a hurricane causes a city to be evacuated.

Which statement best explains why demand for gasoline is inelastic? a. Gasoline prices are currently very high. b. There is no widely available substitute fuel for cars. c. Gasoline uses a small portion of a person's income. d. People have already cut back their driving to the minimum.

There is no widely available substitute fuel for cars.

Demand for gasoline is inelastic because there are no substitutes available.

True

Demand for products such as insulin, cancer drugs, and tobacco is usually inelastic.

True

If a company raises prices on a product with elastic demand, total revenues will probably decrease.

True

If your income goes down, you will probably purchase fewer goods and services.

True

People typically buy more of a product at low price than at a high price

True

The more substitutes that are available for a product, the more elastic the demand for that product is.

True

The number of substitutes available has hurt the business of the United States Postal Service.

True

Which statement is an example of complementary goods affecting demand? a. When diets that limited bread became popular, sales of jelly dropped. b. When studies showed that fish contained toxins, sales of chicken rose. c. As the U.S. Hispanic population grew, sales of salsa increased. d. After a fashion model shared her diet secrets, yogurt sales went up.

When diets that limited bread became popular, sales of jelly dropped.

What is a market demand curve? a. a table showing how much of a product an individual is willing and able to buy b. a table showing how much of a product a market is willing and able to buy c. a graph showing how much of a product an individual is willing and able to buy d. a graph showing how much of a product a market is willing and able to buy

a graph showing how much of a product a market is willing and able to buy

What is a market demand schedule? a. a table showing how much of a product an individual will buy b. a table showing how much of a product a market will buy c. a graph showing how much of a product an individual will buy d. a graph showing how much of a product a market will buy

a table showing how much of a product a market will buy

Which of the following is most likely to have inelastic demand? a. an expensive sports car b. experimental and unnecessary cosmetic surgery c. organic fruits and vegetables d. an effective cancer-fighting drug

an effective cancer-fighting drug

Which is a teenager most likely to have demand for? a. new sports car b. luxury condominium c. athletic shoes d. building blocks

athletic shoes

Which of the following products is likely to have inelastic demand? a. cancer-fighting drugs c. flat-screen TV's b. bologna d. fresh fruit

cancer-fighting drugs

An increase in the price of milk causes a decrease in the demand for cereal. The two products are a. demand sensitive c. demand inelastic b. substitutes d. complements

complements

As sales of digital cameras increase, so do sales of photo printers. What factor is affecting demand? a. consumer expectation b. consumer taste c. complements d. substitutes

complements

An increase in the price of cameras results in a decrease in the demand for film. The two products are a. complements. b. unrelated. c. demand elastic d. substitutes

complements.

An actress sets off a craze for wearing work boots among her fans. What factor is affecting demand? a. consumer expectation b. consumer taste c. complements d. substitutes

consumer taste

As gardeners tried to make their yards places for quiet retreat, sales of backyard fountains increased. What factor affecting demand does this illustrate? a. income b. market size c. consumer expectation d. consumer taste

consumer taste

What two factors are necessary for demand? a. desire for a good or service and its availability in the market b. desire for a good or service and the ability to pay for it c. the availability of a good or service and the ability to pay for it d. familiarity with a good or service and the desire to pay for it

desire for a good or service and the ability to pay for it

Which economic concept is defined as the measure of how responsive consumers are to price change? a. consumer expectation b. consumer taste c. decreasing marginal utility d. elasticity of demand

elasticity of demand

What does elasticity of demand measure? a. how responsive consumers are to advertising b. how responsive consumers are to price changes c. how much consumers are affected by layoffs d. how much consumers are affected by inflation

how responsive consumers are to price changes

A factory closes, laying off hundreds of workers, and consumer spending in the town falls. What factor is affecting demand? a. consumer expectation b. consumer taste c. income d. substitutes

income

What term is defined as the change in the amount consumers will buy because the purchasing power of their money changes? a. consumer taste b. consumer expectation c. income effect d. substitution effect

income effect

A coffee shop owner has surveyed all her customers about the frozen mocha drinks they will buy. What kind of table might she use the show the information? a. individual demand schedule b. market demand schedule c. individual demand curve d. market demand curve

individual demand schedule

If quantity demanded does not change significantly when price changes, how is demand described? a. elastic b. inelastic c. perfectly elastic d. unit elastic

inelastic

When a customer's need for a product is not urgent, demand tends to be a. elastic c. inelastic b. complementary d. unit elastic

inelastic

When you are hungry, you receive the most satisfaction from the first apple and less satisfaction from each additional apple. What explains this? a. income effect b. substitution effect c. law of elasticity of demand d. law of diminishing marginal utility

law of diminishing marginal utility

____________ is the extra usefulness or satisfaction that a person gets from acquiring one or more unit of a product. a. marginal utility c. income effect b. diminishing marginal utility d. change in demand

marginal utility

A snowmobile rental shop asked its best customer how often he would rent at various rates. Which of the following will show the data on a graph? a. individual demand schedule b. market demand schedule c. individual demand curve d. market demand curve

market demand schedule

How is total revenue calculated? a. multiplying price by change in demand b. multiplying price by quantity sold c. multiplying change in price by change in quantity demanded d. multiplying change in price by quantity sold

multiplying price by quantity sold

Many U.S. consumers have switched to wireless phones from traditional telephones. Which factor is affecting demand? a. income b. market size c. complements d. substitutes

substitutes

What term is defined as the change in the amount consumers will buy because they can buy a different product instead? a. inferior goods b. normal goods c. income effect d. substitution effect

substitution effect