Econ 1B Exam #1 Prep

If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is

0.67

Refer to Figure 4-1. If the market price is $2.50, what is the consumer surplus on the first ice cream cone?

1.00

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

1.62

Refer to Table 3-1. The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market. At a price of $6, the quantity demanded in the market would be

89 lbs.

Figure 4-3 shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price to P2.

A

Figure 4-3 shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price to P2.

B + D

Figure 4-3 shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price to P2.

C + E

Refer to Figure 3-1. An increase in the price of a complement would be represented by a movement from

D2 to D1.

Refer to Figure 6-1. The demand curve on which elasticity changes at every point is given in

Panel C.

Refer to Table 6-2. Assume that an economist has estimated the price elasticity of demand values in the table above. Use the data in the table to select the correct statement.

The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be.

Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). If the price of motorcycle engines increases, and the wages of motorcycle workers increase, how will the equilibrium point change?

The equilibrium point will move from A to B.

Refer to Figure 3-6. The figure above represents the market for coffee grinders. Assume that the market price is $21. Which of the following statement is true?

There is a shortage that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25.

Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a concert ticket. If the price of one of the tickets is $36

Walter will receive $4 of consumer surplus from buying one ticket.

Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a concert ticket. If the price of one ticket falls from $50 to $20

consumer surplus increases from $0 to $62.

Suppose that when the price of ice cream increases, Liza decreases her purchase of hot fudge. To Liza

ice cream and hot fudge are complements.

Refer to Table 6-5. Katie Graham owns a kayak rental service in Santa Barbara. Table 6.5 shows her estimated demand schedule for kayak rentals per week. She would like to increase her sales revenue by changing the price she charges for rentals. At present she charges $75. Based on the information in the table, Katie

is not able to increase her revenue by changing her price because the demand for kayak rentals is unit elastic.