ECO TEST #1

a movement along the demand curve from one price-quantity combination to another is called what?

a change in quantity demanded

a shift to either the left or right of a demand curve is called what?

a change in quantity supplied

if the price of computers increases and the demand for monitors decreases as a result, then...

computers and monitors are compliments

price elasticity of demand is a measure of what?

consumer response to a change in a good's price

if the price elasticity of demand of a good is greater than one, then the demand for that good, with respect to the price is what?

elastic

to increase total revenues, firms with ______ demand should lower price and firms with ______ demand should increase price

elastic; inelastic

the supply curve illustrates what?

increases the quantity supplied of a good when its price falls

if both supply and demand increase simultaneously, the new equilibrium price is _____ and the new equilibrium quantity is _______

indeterminate; higher

if the consumers cannot switch to a close substitute when the price of a good increases, the demand for that good is likely to be what?

inelastic

suppose a 10% increase in the price of pain relievers leads to a 5% decrease in quantity demanded of pain relievers. the demand for pain relievers, with respect to price, is what?

inelastic

if the demand for a good decreases as income decreases, it is a(n)...

normal good

PPC for large economies generally have an outward bow shape because....

opportunity costs tend to increase in production

if the percent change in quantity is zero for any percent change in the price, demand is classified as what?

perfectly inelastic

a shortage occurs when...

quantity demanded exceeds quantity supplied

almost every holiday season at least one gift idea achieves fad status. when this happens prices increase dramatically, why?

quantity demanded exceeds quantity supplied

if the market for sport utility vehicles has excess supply, then one can say that...

quantity supplied is greater than the quantity demanded

if the slope of demand curve is -1.4, price is $5 and quantity demanded is 13 units, the priceelasticity of demand is what?

0.27

what might cause a demand function to shift to the right?

an increase in the price of a substitute

a market compromised of a downward sloping demand curve that intersects an upward sloping supply curve is said to be stable because why?

at any price other than equilibrium, forces in the market move price towards the equilibrium

a market compromised of a downward sloping demand curve that intersects an upward sloping supply curve is said to be stable because...

at any price other than equilibrium, forces in the market move price towards the equilibrium

"as the price of personal computers continues to fall, demand increases"... why is this statement inaccurate?

because the falling prices for personal computers increases quantity demanded, not demand

in a free market, if the price of a good is below the equilibrium price then....

demanders, to aquire the good, will be the price higher

the demand curve is _____ sloping because _______

downward; fewer people are willing to buy item at higher prices

gertie saw a pair of jeans that she was willing to buy for $35. the price tag, though, said they were $29.99. therefor....

gertie should buy the jeans because the price is lower than her reservaation price

shelly purchases a purse for $400. what can we infer?

her reservation price was at least $400

big-ticket items such as refrigerators have a ______ price elasticity of demand compared to low budget items such as paper towels

higher

a decrease in the demand for bananas with no noncurrent change in the supply of bananas will result in a _______ equilibrium price and a _______ equilibrium quantity

lower; lower

if the demand for a good is elastic, that good is likely to have what?

many close substitutes

buyers reservation price is?

max amount the buyer is willing to pay for a given quantity

clothing has fewer close substitutes than a specific brand clothing such as abercrombie and fitch. therefor the demand curve for clothing would be _______ than the demand for a specific brand

more elastic

on a linear demand curve, at high prices demand is ______ than at low prices

more elastic

as the price of a good rises...

more firms can cover their opportunity costs of producing the good

demand tends to be _______ in the short run than in the long run

more inelastic

sellers tend to offer ______ for sale as price increases, and so the supply curve is _____ sloping

more; upward

according to the principle of increasing opportunity cost, expanding production requires using resources in which order?

starting with resource with the lowest opportunity cost and proceeding to the higher opportunity cost resources

the demand curve illustrates the fact that consumers....

tend to purchase more of a good as its price falls

"holding all other relevant factors constant, consumers will purchase more of a good as its price falls" this statement reflects the behavior underlying what?

the demand curve

suppose one could either rent a car or take a train to travel to chicago from washington, D.C. If the price of the train tickets increases then....

the demand for rental cars will increase

suppose the price of gasoline increases and that sport utility vehicles get poor gas mileage compared to other available cars, one would expect...

the demand for sport utility vehicles to decrease

supply curves are generally _______ sloping because _____________

upward; of the principle of increasing opportunity cost

for two goods X and Y to be classified as substitutes, it must be the case that...

when the price of X rises, the demand for Y increases

whether or not a good can be classified as a complement depends on what?

whether an increase in demand for one good follows a decrease in the price of the other