Homework 2

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The income elasticity of demand for wedding events is​ ______. A. negative B. positive but less than 1 C. zero D. greater than 1

D. greater than 1

The income effect influences gasoline purchases because when the price of gasoline​ rises, other things remaining the​ same, ______. Consumers​ ______. A. demand for gasoline​ increases; believe that the price may rise even further so they buy more gasoline now B. the price of gasoline rises relative to​ income; cannot afford to buy all the things they previously​ bought, so they buy less gasoline C. demand for gasoline​ decreases; buy less gasoline and more tickets for public transit D. demand for gasoline​ increases; buy more gasoline because it is a normal good

B. the price of gasoline rises relative to​ income; cannot afford to buy all the things they previously​ bought, so they buy less gasoline

The price of gasoline has increased during the past year. The law of demand applies to gasoline because when the price of gasoline​ rises, ______. A. the demand for gasoline increases B. the quantity demanded decreases C. the quantity demanded increases D. the demand for gasoline decreases

B. the quantity demanded decreases

If, as Betsy's income decreases her demand for ketchup increases​, then for Betsy​, ketchup is ​_______. A. a normal good B. a substitute C. an inferior good D. a complement

C. an inferior good

Which of the following statements illustrates income elasticity of demand​? A. A rise in​ Annie's income by 5 percent decreases supply of canned fruits by 6 percent. B. A 2 percent fall in the price of peanuts increases​ Ralph's demand for almonds by 5 percent. C. Poor economic conditions are resulting in higher unemployment and lower aggregate demand. D. A salary cut and no other changes has resulted in Mary buying less fast food.

D. A salary cut and no other changes has resulted in Mary buying less fast food. Income elasticity of demand is a measure of the responsiveness of the demand for a good to a change in​ income, when other things remain unchanged. The fact that a salary cut with no other changes has resulted in Mary buying less fast​ food, tells us about the responsiveness of demand for fast food to an income change.

Which of the following is an example of price elasticity of demand​? A. When the price of bananas increased by 5 percent and incomes​ slumped, banana sales decreased by 5 percent. B. Banana farmers enjoyed higher prices when the demand for bananas increased. C. Richer people buy fewer bananas than poorer people. D. When the price of bananas increased by 5 percent and nothing else​ changed, the quantity of bananas demanded decreased by 2 percent.

D. When the price of bananas increased by 5 percent and nothing else​ changed, the quantity of bananas demanded decreased by 2 percent.

The shorter the time that has elapsed since a price​ change, the more ________ is demand. A. Elastic B. Inelastic

Inelastic

A good with an income elasticity that is negative is __________. A. Normal B. Inferior

B. Inferior

Virginia's Fried Chicken wants to increase the quantity of fried chicken that it sells by 25 percent. The price elasticity of demand for fried chicken sold by Virginia's Fried Chicken is 3.8. What is the percentage price cut that will achieve the​ firm's objective? ((% Qx Increase)/(Ep))

6.58%

The demand for plums is unit elastic if​ _____. A. a 5 percent rise in the price of plums results in a 5 percent decrease in the quantity of plums demanded B. my demand for plums increases when the price of apples falls C. the price of plums does not change after a drought D. any increase in the price of plums results in a 1 percent decrease in the quantity of plums demanded

A. a 5 percent rise in the price of plums results in a 5 percent decrease in the quantity of plums demanded

A demand curve shows the relation between the​ _____ and​ _____ when all other influences on buying plans remain the same. A. quantity demanded of a​ good; its price B. quantity demanded​ of; its cost C. demand​ for; its price D. quantity actually​ bought; the quantity demanded

A. quantity demanded of a​ good; its price

Diet coke and regular coke are​ _______. A. substitutes or substitutes in production B. substitutes but not substitutes in production C. complements or complements in production D. complements but not complements in production

A. substitutes or substitutes in production

If the price of a pizza is​ $16, a​ ______ exists and the price​ ______. A. ​surplus; falls B. ​shortage; rises C. ​surplus; rises D. ​shortage; falls

A. ​surplus; falls

All of the following will change the demand for onions except​ _______. A. a change in the population B. a change in the price of onions C. a change in the price of tomatoes ​(tomatoes are a complement of onions) D. a change in the expected future price of onions

B. a change in the price of onions

If the cross elasticity of demand for a hot dog with respect to the price of a burger is​ positive, then hot dogs and burgers are​ ______. A. complements B. substitutes C. normal goods D. inferior goods

B. substitutes People substitute less costly hot dogs for more costly burgers.

If as the price of a sports car decreases​, the quantity of sedans that firms plan to sell increases​, then sports cars and sedans are​ _______. A. normal goods B. substitutes in production C. complements in production D. inferior goods

B. substitutes in production

The income effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______. A. demand for that food​ decreases; buy less of the food that has experienced the price rise and more of other foods B. the price rises relative to​ income; cannot afford to buy all the things they previously​ bought, so they normally buy less of the food that has experienced the price rise C. demand for that food​ increases; believe that the price may rise even further so they buy more now D. demand for that food​ increases; buy more food because food is a normal good

B. the price rises relative to​ income; cannot afford to buy all the things they previously​ bought, so they normally buy less of the food that has experienced the price rise

If the quantity of dental services demanded increases by 1010 percent when the price of dental services falls by 10​ percent, the demand for dental services is​ _______. A. elastic B. unit elastic C. inelastic D. price unit elastic when the price​ falls, but price elastic if the price rises

B. unit elastic In this​ question, the percentage change in the quantity demanded is equal to the percentage change in the​ price, so demand is unit elastic.

A rise in the price of sawdust​ _______. A. increases the supply of plywood B. decreases the quantity of plywood supplied C. decreases the supply of plywood D. increases the quantity of plywood supplied

C. decreases the supply of plywood

The price elasticity of demand is calculated by dividing the​ _______ by the​ _______ . A. change in the quantity​ demanded; change in the price B. percentage change in the​ price; percentage change in the quantity demanded C. percentage change in the quantity​ demanded; percentage change in the price D. change in the​ price; the change in the quantity demanded

C. percentage change in the quantity​ demanded; percentage change in the price

A demand curve that illustrates the law of demand​ ______. A. slopes downward to a minimum comma and then slopes upward B. shows that the quantity demanded decreases as the price falls C. shows that the quantity demanded increases as the price falls D. is upward sloping

C. shows that the quantity demanded increases as the price falls

If, as the price of orange juice increases​, the quantity of grapefruit juice that people buy increases​, then orange juice and grapefruit juice are​ _______. A. complements B. inferior goods C. substitutes D. normal goods

C. substitutes

French fries and baked potatoes are​ _______. A. complements for consumers and complements in production for producers B. complements for consumers but not complements in production for producers C. substitutes for consumers and substitutes in production for producers D. substitutes for consumers but not substitutes in production for producers

C. substitutes for consumers and substitutes in production for producers

Leather purses and leather shoes are​ _______. A. complements for consumers but not substitutes in production for producers B. substitutes for consumers C. substitutes in production for producers D. complements in production for producers

C. substitutes in production for producers

The equilibrium price is the price at which​ _____ and the equilibrium quantity is the​ _____. A. the quantity demanded equals the quantity​ supplied; quantity at which demand is less than supply. B. demand equals​ supply; quantity at which the quantity demanded equals the quantity supplied C. the quantity demanded equals the quantity​ supplied; the quantity bought and sold at the equilibrium price D. demand is not greater than​ supply; quantity at which demand equals supply

C. the quantity demanded equals the quantity​ supplied; the quantity bought and sold at the equilibrium price

With the new way to tap maple​ trees, farmers could produce 10 times as much maple syrup per acre. When farmers use the new method of tapping maple trees ​ _______, other things remaining the same. A. the quantity of maple syrup supplied will increase B. the quantity of maple syrup supplied will decrease C. the supply of maple syrup will increase D. the supply of maple syrup will decrease

C. the supply of maple syrup will increase

When a shortage​ arises, the price​ ______ to its​ equilibrium, which​ _______. A. ​falls; increases the quantity demanded and decreases the quantity supplied B. ​falls; increases demand and decreases supply C. ​rises; decreases the quantity demanded and increases the quantity supplied D. ​rises; decreases demand and increases supply

C. ​rises; decreases the quantity demanded and increases the quantity supplied Shortage and Surplus are about quantity demanded

Wedding events are more of a ______ rather than a _________ because __________.

Luxury; Necessity; Substitutions can easily be made

Which of the following statements by Aqua Springs demonstrates that the​ firm's selling plans obey the law of supply​? A. If the price of bottled water falls and all the other influences on our selling plans remain the​ same, we will cut back on production and lay off some workers B. ​We've been hit by a rise in the price of plastic bottles and will lower production. C. At a price of​ $1 bottle, we plan to sell​ 2,000 bottles per day. D. We can easily decrease the production of plain water and increase the production of sparking water.

A. If the price of bottled water falls and all the other influences on our selling plans remain the​ same, we will cut back on production and lay off some workers It is the only indirect relationship in the group

Sales of Spam are rising as consumers realize that Spam and other​ lower-cost foods can be substituted for costlier cuts of meat as a way of controlling their already stretched food budgets. Spam is​ ______ good because​ ______. A. an​ inferior; as the income available to buy meat​ decreases, consumers buy more spam B. a​ normal; over time income increases and people buy more Spam C. a​ normal; it is a complement of other foods D. an​ inferior; it is a substitute for other meats

A. an​ inferior; as the income available to buy meat​ decreases, consumers buy more spam

Bottled water and health club memberships are​ _______. A. complements B. complements in production C. substitutes D. substitutes in production

A. complements

The demand for illegal drugs is inelastic. Much of the expenditure on illegal drugs comes from crime. A campaign that successfully decreases the supply of drugs will _________ the amount of crime. A. increase B. decrease

A. increase

The substitution effect influences food purchases because when the price of a certain food​ rises, other things remaining the​ same, ______. Consumers​ ______. A. its relative price​ rises; purchase more of a different food that is less expensive B. its relative price does not change because most likely the prices of all other foods will also​ rise; continue to purchase all​ foods, but in smaller quantities C. the relative price of all food​ rises; purchase less of the food that has experienced the price increase and more of all other foods D. the relative price of all food​ rises; continue to purchase all​ foods, but in smaller quantities

A. its relative price​ rises; purchase more of a different food that is less expensive

Hybrids and SUVs are​ _______. A. substitutes or substitutes in production B. complements or complements in production C. complements but not substitutes in production D. substitutes but not substitutes in production

A. substitutes or substitutes in production

The quantity supplied of a good or service is​ ______. A. the amount producers plan to sell during a given time period at a particular price B. the same as the quantity actually sold C. the amount that producers wish they could sell if they had the resources to produce that quantity D. always equal to the quantity demanded

A. the amount producers plan to sell during a given time period at a particular price

The price elasticity of demand is a​ units-free measure of the responsiveness of​ ______. A. the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same B. the quantity demanded of a good to a change in the quantity supplied when all other influences on buying plans remain the same C. the demand for a good when​ consumers' income changes D. the demand for a good when the price of one of it substitutes or a complement of it changes

A. the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same

As gas and food prices increased and home prices​ slumped, people had less extra income to spend on home improvements. And the improvements that they made were on small inexpensive types of repairs and not major​ big-ticket items. This news clip implies that​ big-ticket home-improvement items are income​ ______ and the income elasticity of demand for these items is​ ______ than 1. A. ​elastic; greater B. ​inelastic; greater C. ​inelastic; less D. ​elastic; less

A. ​elastic; greater Home renovations and expensive improvements are luxuries and demand for these goods is income elastic. The income elasticity of demand is greater than 1.

When a surplus​ arises, the price​ ______ to its​ equilibrium, which​ _______. A. ​falls; increases the quantity demanded and decreases the quantity supplied B. ​rises; decreases demand and increases supply C. ​falls; increases demand and decreases supply D. ​rises; decreases the quantity demanded and increases the quantity supplied

A. ​falls; increases the quantity demanded and decreases the quantity supplied Shortage and Surplus are about quantity demanded

The demand for illegal drugs is inelastic. Much of the expenditure on illegal drugs comes from crime. A successful campaign that decreases the supply of drugs will​ ______ the price of illegal drugs and​ ______ the total amount spent on them. A. ​increase; increase B. ​decrease; decrease C. ​increase; decrease D. ​decrease; increase

A. ​increase; increase

The price of oil definitely rises if the demand for oil​ ______ and the supply of oil​ ______. A. ​increases; decreases B. ​decreases; increases C. ​decreases; decreases D. ​increases; increases

A. ​increases; decreases

The fewer the substitutes for a good or​ service, the more​ ______ is the demand for it. The smaller the proportion of income spent on a​ good, the more​ ______ is the demand for it. A. ​inelastic; inelastic B. ​inelastic; elastic C. ​elastic; inelastic D. ​elastic; elastic

A. ​inelastic; inelastic

Which of the following statements is an example of perfectly elastic demand​? A. A 10 percent rise in​ Rita's income decreases supply of canned fish by 5 percent. B. Sherry is overwhelmed with buyers of her peaches when she lowers their price by a penny a pound compared to other sellers in the​ farmers' market. C. A high incidence of diabetes has resulted in a large increase in demand for insulin. D. The price elasticity of demand for bottled water in Ohio is 1.5 while in Illinois it is 0.96.

B. Sherry is overwhelmed with buyers of her peaches when she lowers their price by a penny a pound compared to other sellers in the​ farmers' market.

A good with an income elasticity greater than one is​ ______. A good with an income elasticity that is positive and less than 1 is​ ______. A. a normal good that is unit​ elastic; a normal good that is income elastic B. a normal good that is income​ elastic; a normal good that is income inelastic C. an inferior​ good; a normal good that is income elastic D. a normal good that is income​ inelastic; a normal good that is income elastic

B. a normal good that is income​ elastic; a normal good that is income inelastic

In the market for chocolate bars​, the supply of chocolate bars will increase if any of the following occur except​ ______. A. a decrease in the price of cocoa B. an increase in the price of a chocolate bar C. a decrease in the future expected price of a chocolate bar D. an increase in the number of chocolate manufacturers

B. an increase in the price of a chocolate bar

Sellers want to receive the highest possible​ price, so they​ ______. A. produce as many pizzas as possible at​ $16 a pizza because they know the price will eventually rise B. are willing to accept less than​ $16 a pizza because at​ $16 a pizza they are not selling all of the pizzas that they plan to sell

B. are willing to accept less than​ $16 a pizza because at​ $16 a pizza they are not selling all of the pizzas that they plan to sell

An example of an income elastic good is​ ______ and an example of an income inelastic good is​ ______. A. ​clothing; a telephone B. a​ haircut; food C. airline​ travel; an automobile D. ​tobacco; furniture

B. a​ haircut; food

The price of food increased during the past year. The law of demand applies to food because when the price of food​ rises, there is​ ______. A. a substitution effect but no income effect B. both a substitution effect and an income effect C. an income effect but no substitution effect D. a substitution effect that offsets the income effect

B. both a substitution effect and an income effect

If the cross elasticity of demand for golf clubs with respect to the price of a golf lesson is​ negative, then golf clubs and golf lessons are​ ______. A. substitutes B. complements C. inferior goods D. normal goods

B. complements

Low-fat milk and cream are​ _______. A. substitutes B. complements in production C. complements D. substitutes in production

B. complements in production

An increase in the price of onions ​_______. A. increases the demand for onions and shifts the demand curve for onions rightward B. decreases the quantity of onions demanded and results in a movement up along the demand curve for onions C. increases the quantity of onions demanded and results in a movement down along the demand curve for onions D. decreases the demand for onionsonions and shifts the demand curve for onionsonions leftward

B. decreases the quantity of onions demanded and results in a movement up along the demand curve for onions

Dan sells newspapers. Dan says that a 10 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 12 percent. According to​ Dan, the demand for newspapers is​ _______. A. perfectly elastic B. elastic C. inelastic D. unit elastic

B. elastic

The demand for illegal drugs is inelastic. Much of the expenditure on illegal drugs comes from crime. The most effective way of decreasing the quantity of illegal drugs bought and decreasing the amount of​ drug-related crime is by​ ______. A. penalizing drug​ users, which will decrease supply B. penalizing drug​ users, which will decrease demand C. making the demand for drugs unit elastic D. penalizing drug​ dealers, which will decrease supply

B. penalizing drug​ users, which will decrease demand

Marvin loves candy bars. As the price of a candy bar increases from​ $1.00 to​ $1.25 to​ $1.50, Marvin continues to buy a dozen candy bars every week. ​Marvin's demand for candy bars is​ _______. A. unit elastic B. perfectly inelastic C. illustrated by a horizontal demand curve D. elastic

B. perfectly inelastic If the quantity demanded remains constant when the price​ changes, then the price elasticity of demand is zero and the good is said to have a perfectly inelastic demand.

Rice and noodles are substitutes. The cross elasticity of demand for rice with respect to the price of noodles is​ _______. A. negative B. positive C.−1 D. zero

B. positive If rice and noodles are​ substitutes, then when the price of noodles​ rises, the quantity of rice that people buy increases—a positive change in price brings a positive change in the quantity bought—so the cross elasticity of demand is positive.

An MP3 player is a normal good. If the price of an MP3 player is expected to fall next year​, you predict that the demand for MP3 players ​_______. now. A. will increase B. will decrease C. might increase, decrease, or remain unchanged D. will remain unchanged

B. will decrease

Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand​? I. People are buying less chicken because the price of beef has fallen. II. People are buying less chicken because the price of chicken has increased. III. People are buying more chicken because the price of chicken has fallen. IV. The cost of chicken feed has increased. A. ​I, II, and III are changes in demand and IV is a change in the quantity demanded. B. I is a change in the quantity demanded and II and III are changes in demand. C. I is a change in demand and II and III are changes in the quantity demanded. D. I, II, and III are changes in the quantity demanded and IV is a change in demand.

C. I is a change in demand and II and III are changes in the quantity demanded.

Which of the following statements describe an inelastic demand​? A. A rise in the tax rate has decreased imports of auto parts from China. B. People are buying HDTVs before the Super Bowl game begins. C. Megan did not buy too many hockey tickets even though their price dropped by 10 percent. D. Housing prices in London rose by 10 percent due to rock bottom interest rates.

C. Megan did not buy too many hockey tickets even though their price dropped by 10 percent. This statement implies that the percentage change in quantity demanded of hockey tickets is less than the percentage change in price. So the statement describes inelastic demand.

Betsy graduates from college and her income increases by ​$35,000 a year. Nothing else changes. Betsy decreases the quantity of hot dogs and chocolate chip cookies that she buys and increases the quantity of hot caramel apple cider that she buys. For Betsy, ​_______. A. hot dogs and chocolate chip cookies have become complements B. hot caramel apple cider and chocolate chip cookies have become substitutes C. hot caramel apple cider is a normal good D. hot dogs and hot caramel apple cider are inferior goods

C. hot caramel apple cider is a normal good

When a timber mill makes logs from trees it also produces​ sawdust, which is used to make plywood. A rise in the price of sawdust​ _________. A. decreases the supply of logs B. increases the quantity of logs supplied C. increases the supply of logs D. decreases the quantity of logs supplied

C. increases the supply of logs

Webster Dictionaries and Oxford Dictionaries are almost perfect substitutes. The price elasticity of demand for Webster Dictionaries​ _______. A. depends on the complements for dictionaries B. is almost zero C. is almost infinity D. is 1

C. is almost infinity

Which of the following statements describes cross price elasticity of demand​? A. A weaker rupee against the dollar has increased​ India's export competitiveness. B. A 10 percent rise in the price of ink cartridges decreases the quantity demanded of ink cartridges by 6 percent. C. A quota imposed on the production of potatoes has increased supply of onions. D. As a result of a rise in the price of spinach with all else remaining​ constant, Ralph buys more​ broccoli, a substitute for spinach.

D. As a result of a rise in the price of spinach with all else remaining​ constant, Ralph buys more​ broccoli, a substitute for spinach. Cross price elasticity of demand is a measure of the responsiveness of the demand for a good to a change in the price of a substitute or​ complement, when other things remain the same.

In a survey of caterers and event​ planners, nearly half of them said that they were seeing declines in wedding spending in response to the economic​ slowdown; 12% even reported wedding cancellations because of financial concerns. Based upon this news​ clip, wedding events are​ ______ good because the quantity demanded decreases​ ______. A. an​ inferior; over the years B. a​ normal; as income increases C. an​ inferior; as income decreases D. a​ normal; as income decreases

D. a​ normal; as income decreases

A decrease in tuition fees will decrease your​ college's total revenue if the price elasticity of demand for college education is​ ______. A. negative B. greater than 1 C. equal to 1 D. greater than zero and less than 1

D. greater than zero and less than 1 When demand is​ inelastic, a fall in price decreases total revenue.

As the average income in China continues to​ increase, we would expect the demand for beef to​ _______ and the demand for rice to​ _______. A. not​ change; not change because people need to eat regardless of their income B. ​increase; increase because the demand for any good increases when income increases C. decrease if beef is a normal​ good; increase if rice is an inferior good D. increase if beef is a normal​ good; decrease if rice is an inferior good

D. increase if beef is a normal​ good; decrease if rice is an inferior good

Ski trips and ski jackets are complements. If the price of a ski trip decreases​, the demand for ski jackets will​ _______. A. decrease​, and the demand curve for ski jackets will shift leftward B. not​ change, but there will be a movement along the demand curve for ski jackets C. increase or​ decrease, but the demand for ski trips will not change D. increase​, and the demand curve for ski jackets will shift rightward

D. increase​, and the demand curve for ski jackets will shift rightward

The substitution effect influences gasoline purchases because when the price of a gallon of gasoline​ rises, other things remaining the​ same, _______. Consumers​ _______. A. the relative prices of all car accessories​ rises; continue to purchase​ gasoline, but in smaller quantities. B. the relative price of all vehicles​ rises; purchase fewer gas guzzlers and more​ fuel-efficient cars C. its relative price does not change because most likely the prices of all other goods will also rise because fuel is a productive resource in the production of all​ goods; continue to purchase​ gasoline, but in smaller quantities. D. its relative price​ rises; look for alternate means of transportation

D. its relative price​ rises; look for alternate means of transportation

A substitute in production is a good that is​ _____ another​ good, and a complement in production is a good that is​ _____ another good. A. produced together​ with; produced in place of B. produced in place​ of; consumed with C. consumed in place​ of; produced together with D. produced in place​ of; produced together with

D. produced in place​ of; produced together with

A supply curve that illustrates the law of supply​ _______. A. slopes downward to a minimum and then slopes upward B. shows that the quantity supplied decreases as the price rises C. shows that the quantity supplied remains the same when the price rises D. shows that the quantity supplied decreases as the price falls

D. shows that the quantity supplied decreases as the price falls

A demand curve​ _______. A. tells us the minimum that someone is willing to pay for an additional unit of a good or service B. shows us that the highest price that someone is willing to pay for an additional unit of a good or service rises as the quantity increases C. tells us how much someone wants to buy comma but not necessarily how much they can afford to buy D. tells us the maximum that someone is willing to pay for an additional unit of a good or service

D. tells us the maximum that someone is willing to pay for an additional unit of a good or service

Taking an MP3 player to the gym when you work out becomes less popular. As a​ result, _______. A. the quantity of MP3 players demanded decreases B. the demand for MP3 players increases C. the quantity of MP3 players demanded increases D. the demand for MP3 players decreases

D. the demand for MP3 players decreases

Luxury car makers announce a rise in next year's price of a luxury car and an increase in the ease in which credit can be obtained. You predict that the demand for luxury cars today​ _______. A. will not change B. will decrease C. might increase, decrease, or remain the same D. will increase

D. will increase

General Motors cut its​ fourth-quarter production schedule by 10 percent because Ford​ Motor, Chrysler, and Toyota sales declined in August. This news clip illustrates a decrease in​ ______ and​ ______ in the market for cars. A. ​supply; a decrease in the quantity demanded B. ​demand; a decrease in supply C. ​supply; no change in demand D. ​demand; a decrease in the quantity supplied

D. ​demand; a decrease in the quantity supplied

Sales of Spam are rising as consumers realize that Spam and other​ lower-cost foods can be substituted for costlier cuts of meat as a way of controlling their already stretched food budgets. The income elasticity of demand for Spam is​ _______ because as income​ falls, the quantity of Spam demanded​ _______. A. positive; decreases B. ​positive; increases C. ​negative; decreases D. ​negative; increases

D. ​negative; increases When income​ decreases, people buy more Spam. So the income elasticity of demand for Spam is negative.


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