Microeconomics

Elasicity Coeficient

% of change in quantity / % change in price

If the income elasticity of SUVs is greater than 1, what is the good considered?

A luxury

The income elasticity for peanut butter is -3. This defines peanut butter as what type of good?

An inferior good

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the products?

A negative or inverse relationship is characterized by

a line that is downward sloping and to the right

Graphs are often used in economics because they:

can simplify complex topics

Economists avoid confusion over units in the computation of elasticity by using:

percentage changes

The lowest amount a firm is legally allowed to pay an employee is known as the __________.

minimum wage

The resources provided by nature and used to produce goods and services are also known as:

natural resources

When you compute a price elasticity of demand the answer is always:

negative

Economic variables that are calculated in current year prices are referred to as __________ variables, while variables that have been corrected to account for the effects of inflation are __________ variables.

nominal, real

For all linear relationships, you will find the slope

of the line does not change.

If prices rise the quantity supplied will be greater:

the longer the time that elapses

What is the percentage change in price for a shirt that was marked down from $40 to $28?

-30%

An elasticity of demand coefficient of 0.50 indicates that the quantity demanded will fall by

.50 x 20% = 10%

Which of the following are not essential components of an economic model?

Normative statements

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity

Opportunity cost

Marlene decided to close down her retail clothing store and go back to work for a large corporation, even though she was making an accounting profit. Her decision was based on the fact that she would make more money in her old job than she was making in the retail clothing store. Marlene's decision factored in:

The opportunity cost of lost wages from keeping her store open.

When is output lower than the efficient level?

When marginal benefit is greater than marginal cost

When is output higher than the efficient level?

When marginal benefit is less than marginal cost

What is the cross-price elasticity of demand for two goods that are unrelated?

Zero

If the president of Columbia commented that "we should do something to reduce inflation in Columbia," this would be an example of:

a normative statement

both variables are moving in the same direction, it is called

a positive relationship

An increase in the price of a substitute for iPads will lead to __________ in the quantity demanded of iPads so the cross-price elasticity of demand will be __________.

an increase, positive

Economic models often simplify the real world by holding all things equal and changing one variable to determine the impact of the change. The "all things equal" assumption is also known as:

ceteris paribus

If the cross-price elasticity of demand between two products is -3.0, then the two products are:

complements

Personal computers and computer display monitors are:

complements

If your nominal wages increased by 10% and inflation was 15%, your real wage;

decreased.

Understanding economics can help policymakers devise strategies to do all of the following except:

eliminate climate change

One of the first steps in deciding whether to complete your education is to:

evaluate the marginal cost and marginal benefit of that decision

Positive economic statements are statements of

fact that imply no value judgment

If the supply of Good B is perfectly elastic and price falls the quantity supplied will:

fall to zero

The more substitutes that exist for a particular product, the __________ the price elasticity of demand

greater

Macroeconomics can be used to understand all of the topics listed below, except:

how a consumer decides between the purchase of two different cars

A perfectly inelastic supply curve:

indicates the quantity supplied does not respond to a change in price

At current prices of a highly addictive drug the demand for the drug is highly price:

inelastic

If the absolute value of any elasticity coefficient is less than 1 it is said to be

inelastic

If the price elasticity of demand is 0.33 then demand is __________ over that price range

inelastic

Economics:

is concerned with how people respond to incentives

Along a linear demand curve, the slope __________ while the price elasticity of demand __________.

is constant, changes from one point to another

Social security payments are indexed to inflation so that recipients can;

maintain their purchasing power.

Decision analysis that involves comparing marginal costs and marginal benefits to determine the best course of action is known as:

marginal analysis.

The optimal economic decision is to continue any activity, investing or otherwise, up to the point where:

marginal benefit equals marginal cost

The additional benefit resulting from a small increase in some activity is called the;

marginal benefit.

The stock of computers, factory buildings and machine tools used to produce goods is known as:

physical capital

Macroeconomics is concerned with all of the following except:

political party affiliation

The price elasticity of supply always has a:

positive value

The __________ is a measure of responsiveness of the change in quantity demanded of a good to the change in its price.

price elasticity of demand

Economics is the study of choice under conditions of:

scarcity

The principle of opportunity cost evolves from the concept of:

scarcity

Economic models are:

simplifications of reality that focus only on key relationships and ignore less relevant details

The slope of a line measures a rate of change so what you are measuring

the change in the y-variable for a given change in the x-variable.

The percentage change in quantity supplied is equal to

the elasticity of supply multiplied by the percentage change in price.

The price elasticity of demand is equal

the percentage change in quantity demanded divided by the percentage change in price

The price elasticity of supply is defined as

the percentage change in quantity supplied divided by the percentage change in price.

The slope of a straight line equals the change in the value on the __________ axis __________ by the change in the value of the other axis measured between any two points on the line.

vertical, divided

The principle of diminishing returns applies;

when at least one input is fixed.

The vertical axis on a graph is also known as the:

y-axis