Micro Quiz 1
a product that buyers demand more of at every price when their incomes increase and less of when their incomes decrease.
What is a normal good?
a product that buyers demand less of at every prove when their incomes increase and more of when their income decrease.
What is an inferior good?
cost benefit principle
What is this an example of: "You're hungry and are considering buying a granola bar from a vending machine after class. The granola bar costs $2. Do you buy the granola bar?"
the phrase "holding everything else constant."
When asked to write the definition of the "Law of Demand" on an exam, Chris wrote, "When the price of a good increases, consumers will decrease the amount that they purchase." Chris's professor deducted one point for this response. The professor most likely deducted one point because Chris forgot to include
when a change occurs that causes consumers to purchase either more or less of a good at all price levels
When does a demand curve shift?
when their is change in the price of a product
When is there movement along the demand curve?
A change in one the determinants of demand
Which can cause a shift in the demand curve?
incentive
what motivates us to do something, the reward or penalty that is associated with a particular decision
farming effect
when a decision is affected by how a choice is described or framed
congestion effect
when a good becomes less valuable because other people use it
network effect
when a good becomes more useful because other people use it. if more people buy such a good, your demand for it will also increase
economic surplus
-the total benefits minus the total costs flowing from a decision -measures how much a decision has improved your well-being
time he spent cooking the dinner
Alan is a college student living alone in a campus apartment. He finished cooking dinner when his friends text him asking to meet him at the dining hall on campus for dinner. He must decide whether to eat the dinner he prepared or meet his friends at the dining hall. Alan should consider all these costs when making this decision EXCEPT:
7 percentage points
Andre plays pickleball three nights a week, and his current grade in economics is 85 percent. He decides to play for a fourth night each week, and his economics grade falls to 78 percent. The marginal cost to Andre of playing pickleball one more night each week is_______
a normal
Billys mom increases his weekly allowance by $5. As a result, Billy increases the number of apps he downloads on his phone. Smartphone apps are_____ good.
161, the law of demand states that when the price of a good increases buyers will less of that good
Consider the table below. Assuming the law of demand holds, the cell lables "?" could be which of the following quantities?
shift in demand curve
Decide whether the following scenario will cause a shift in the demand curve or movement along a demand curve: Out in in a burger joint with an absurd National following in the u.s. sells more Burgers as the price of chicken increases
shift of the demand curve
Decide whether the following would cause a shift in the demand curve or movement along a demand curve: After it earns first prize in the spicy category of a Ramen tasting competition college students buy more remain brand ramen noodles
movement along the demand curve
Determine whether the following would cause a shift in the demand curve or movement along a demand curve: Labor Bureau at Chase offers a one weekend clearance sale on his old model of desks which causes students to rush to upgrade their dorm furniture
movement along the demand curve
Determine whether the following would cause a shift in the demand curve or movement along a demand curve: Natori raises the price for its laundry detergent which results in Less sales and strange sense around the college dorm floors
What he could buy with $3,000 and what he would alternatively do with his time
Fabio would love to go to India, and he says his willingness to pay for the trip is $5000. Happily the trip will only cost him $3,000. What is his opportunity cost of going to India?
marginal benefits equal marginal costs
Following the Rational Rule, the maximum economic surplus occurs when:
1. cost benefit principle 2. opportunity cost principle 3. marginal principle 4. interdependence principle
What are the four core principles of economics?
normal good
Hair stylist Molly loses a few of her clients. Molly cuts back on the number of smoothies she buys during the week. Smoothies are a(n):
walk and less
It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but die to the weather it is trippy the regular cost. You should ______ because the benefit to you of taking the Uber is _____ than the cost.
inferior good
Mike is an appliance salesman. Refrigerator sales in his store have fallen and so has his commission. Mike decides to switch from name brand cereal to generic cereal. Generic cereal is a______
breaking down a choice into a series of smaller choices and comparing additions costs additional benefits each action
What best describes the use of the marginal rule?
pat wants to buy more candy bars at $1 than $2
What demonstrates the law of demand?
$12900
Over the summer, you decided to take summer school, which precludes you from working at your usual summer job that earns you $7000 over the summer. Your summer school tuition is $2000, textbooks are $400, and room and board is $3500. The opportunity cost of attending summer school is _______
the ski lift ticket her parents have already purchased for her
Rose's parents have booked and paid for a family trip to Aspen, Colorado, during her spring break. Rose's friends recently decided to drive to Destin, Florida for spring break. Rose needs to decide whether to join her parents in Aspen or drive to the beach with her friends. The opportunity costs of joining her friends on the trip to Destin include each of these EXCEPT:
clementines will decrease
Suppose oranges and clementines are substitutes. Holding everything else constant, if the price of oranges decreases, then the demand for _____ will______.
third round was greater than the marginal benefit of the third round
Suppose you and a friend are playing a game online. After two rounds, your friend says she has to go study for an exam tomorrow and will see you later. Using the rational rule, explain your friends' decision.
inferior good
Susan gets a 15 percent performance bonus at work. She can finally stop eating so many frozen pizzas and eat something more tasty. Frozen pizzas are _______
the additional cost of hiring one more worker
The marginal cost of an additional worker is:
maximize their economic surplus
Using the rational rule in junction with the marginal principle allows a design-maker to
The increase in the price causes an increase in demand; therefore, they are substitutes
You are the manager for Frito-Lay's Cheese Puffs account, and you notice that when the price of Cheetos increases there is an increases in demand for Cheese Puffs. What is the economic relationship between these goods that explain this behavior?
$100 you spent on the season tickets
You have paid of $100 for student season tickets to the football games at your university. It is halfway through the season and your team has not won any games. You are considering whether you will attend any future games this season. All of these are costs or benefits you should consider when making this EXCEPT the:
you should buy the set because buying earns $220 worth of economic surplus
You just moved into your new apartment, which has a washer and dryer hookups, but your apartment complex doesn't come with a washer or dryer. You do not want to go to the laundromat. You can rent a washer and dryer set from an appliance rental company for $30 per month. Alternatively, you could buy a set for $1,000, which you could sell after one year for $700 or $600 after two years. You plan to stay in this apartment for two years, since new your job. Should you buy or rent the set?
sunk cost
a cost that has already been incurred and cannot be reversed
inferior good
a good for which higher income causes a decrease in demand
normal good
a good in which higher income causes an increase in demand
market demand curve
a graph plotting the total quantity of an item demanded by the entire market at each price
individual demand curve
a graph that plots the quantity of an item that an individual plans to purchase at each price
demand
captures the willingness and ability of a buyer to purchase different quantities of a good at difference prices
willingness to pay
convert non financial costs or benefits into their monetary equivalent by asking yourself: "what is the most I am willing to pay to get this benefit (or avoid that cost)?
marginal principle
decisions about quantities are best made incrementally, break "how many" questions into a series of smaller, or marginal decisions weighing the marginal benefits and marginal costs
diminishing marginal benefit
each additional item yields a smaller marginal benefit than the previous item
complementary goods
good that go well together. your demand for a good will decrease if the price of a complimentary good rises
substitute goods
good that replace each other. your demand for a good will increase if the price of a substitute good rises, and it will fall if the price of a substitute good falls
rational rule
if something is with doing, keep doing it until your marginal benefits equals your marginal costs
rational rule
if something is worth doing keep doing it until your marginal benefits equals your marginal costs
quantity of demand
refers to the willingness and ability of a buyer to purchase a specific quantity at a specific price
scarcity
resources are limited, therefore any resources you spend pursing one activity leaves fewer resources to pursue others. You will always face a trade-off
all sunk costs are fixed costs but not all fixed costs are sunk costs. Sunk costs CANNOT be recovered. If equipment can be resold or retuned at the purchase price then its not a sunk cost
sunk cost vs. not a sunk cost
regardless of which decision is made
sunk costs are costs that are incurred:
are incurred in the past and cannot be reversed
sunk costs are costs that:
marginal benefit
the extra benefit from one extra unit (of goods purchased, hours studied, etc)
marginal cost
the extra cost from one extra unit
cost-benefit principle
the incentives that shape decisions
law of demand
the tendency for quantity demanded to be higher when the price is lower
opportunity cost
the true cost of something is the next best alternative you have to give up to get it
