Econ 4, 5, 6

What is the Law Of Demand?

If all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa. The law of demand says that the higher the price, the lower the quantity demanded, because consumers' opportunity cost to acquire that good or service increases, and they must make more tradeoffs to acquire the more expensive product.

When demand is inelastic, the price elasticity of demand is..

Less than 1, and price and TR will mive in the same direction

What is the Law Of Supply?

The law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.

The price elasticity of demand measures a) buyers' responsiveness to a change in the price of good b) the extent to which demand increases as additional buyers enter the market c) how much more of a good consumers will demand when income rises d) the movement along a supply curve when there is a change in demand

a) buyers' responsiveness to a change in the price of good

To determine whether a good is considered normal or inferior, one could examine the value of the a) income elasticity of demand for that good b) price elasticity of demand for that good c) price elasticity of suplly for that good d) cross-price elasticity of demand for that food

a) income elasticity of demand for that good

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is a) inelastic b) elastic c) unit elastic d) highly responsive to changes in income

a) inelastic

Demand is inelastic if the price elasticity of demand is a) less than 1 b) equal to 1 c) greater than 1 d) equal to 0

a) less than 1

The price elasticity of demand measures the a) magnitude of the repsonse in quality demanded to a change in price b) direction of the shift in the demand curve in response to a market event c) size of the shortage created by increase in demand d) responsiveness of quality demanded to a change in income

a) magnitude of the response in quality demanded to a change in price

Goods with many substitutes tend to have a a) more elastic demand b) less elastic demand c) price elasticities of demand that are unit elastic d) income elasticities of demand that are negative

a) more elastic demand

Which of the following is not a characteristic of a perfectly competitive market? a) sellers and their price of the product b) there are many sellers c) buyers must accept the price the market determines d) all of the above are characteristics of a perfectly competitive market

a) sellers and their price of the product

Which of the following changes would not shift the demand curve for a good or service? a) a change in income b) a change in the price of the good or service c) a change in expectations about the future price of the good or service d) a change in the price of a related good or service

b) a change in the price of the good or service

A tax on the buyers of sofas a) increaes the size of fhe sofa market b) decrease the aize od the sofa market c) has no effect on the size of the sofa maker

b) decrease the size of the sofa market

At the equilibrium price, the quantity of the good that buyers are willing and able to buy a) is greater than the quantity that sellers are willing and able to sell b) exactly equals the quantity that sellers are willing and able to sell c) is less than the quantity that sellers are willing and able to sell d) Either A or C could be correct

b) exactly equals the quantity that sellers are willing and able to sell

The midpoint method is used to compute elasticity because it a) automatically computes a positive number instead of a negative number b) results in an elasticity that is the same as the slope of the demand curve c) gives the same answe regardless of the direction of change d) automatically rounds quantities to the nearest whole unit

b) results in an elasticity that is the same as the slope of the demand curve

A monopoly is a market with one a) seller, and that seller is a price taker b) seller, and that seller sets the price c) buyer, and that buyer is a price taker d) buyer, and that buyer sets the price

b) seller, and that seller sets the price

For a good that is a luxury, demand a) tends to be inelastic b) tends to be elastic c) has unit eleasticity d) cannot be represented by a demand curve in the usual way

b) tends to be elastic

Price controls are usually enacted.. a) as a means of raising revenue for public purposes b) when policymakers believe that the market price of a good or service is unfair to buyers or sellers c) when policymakers detect inefficiencies in a market d) all above are correct

b) when policymakers believe that the market price of a good or service is unfair to buyers or sellers

The quantity demanded of a good is the amount that buyers are a) willing to purchase b) willing and able to purchase c) willing, able and need to purchase d) able to purchase

b) willing and able to purchase

If 10% decrwase in price for a good rwsults in a 20% increase in quantity demanded, the price elasticity of demand is a) 0.50 b) 1 c) 1.5 d) 2

d) 2

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue? a) 0 b) 0.2 c) 1 d) 2.1

d) 2.1

A supply curve slops upward because a) as more is produced, total cost of production falls b) an income in input prices increases supply c) the quantity supplied of most goods and services increases over time d) an increase in price gives producers an incentive to supply a larger quantity

d) an increase in price gives producers an incentive to supply a larger quantity

The cross price elasticity of demand can tell us whether goods are a) normal or inferior b) elastic or inelastic c) luxeries or necessities d) complements or substitutes

d) complements or substitutes

Which of the following is likely to have the most price elastic demand? a) dental floss b) milk c) salt d) diamond earrings

d) diamond earrings

The unique point at which the supply and demand curve intersect is called a) market harmony b) coincidence c) equivalence d) equilibrium

d) equilibrium

The law of demand states that, other things equal, when the price of a good a) falls, the demand for the good rise b) rises, the quantity demanded of the good rises c) rises, the demand for the good falls d) falls, the quantity demanded of the good rises

d) falls, the quantity demanded of the good rises

Demand is elasticif the price elasticity of demand is a) less than 1 b) equal to 1 c) equal to 0 d) greater than 1

d) greater than 1

The greater the price elasticity of demand, the a) more likely the product is a necessity b) smaller the responsiveness of quality demanded to a change in price c) greater the percentage change in price over the percentage change in quantity demand d) greater the responsiveness of quantity demanded to a change in price

d) greater the responsiveness of quantity demanded to a change in price

A competitive market is a market which a) an auctioneer helps set prices and arrange sales b) there are only a few sellers c) the forces of supply and demand do not apply d) no individual buyer or seller has any significant impact in the market price

d) no individual buyer or seller has any significant impact in the market price

If the price of gasoline rises, when is the price of elasticity of demand likely to be higher? a) immediately after the price increases b) one month after the price increase c) three months after the price increase d) one year after the price increase

d) one year after the price increase

Total revenue a) always increases as price increases b) increases as price increases, as long as demand is elastic. c) ^ is inelastic d) remains unchanged as price increases when demand is unit elastic

d) remains unchanged as price increases when demand is unit elastic

Price elasticity of demand

(Q1 - Q2)/ [(Q1 + Q2)] Over (P2 - P1)/ [(P1 + P2)]

Which of the following is likely to have the most price elastic demand? a) clothing b) blue jeans c) Tommy Hilfiger jeans d) All 3 would have the same elasticity of demand because they are all related

c) Tommy Hilfiger jeans

Which of the following causes the price paid by buyers to be different than the price received by sellers? a) binding price floor b) binding price ceiling c) a tax on a good d) all of the above

c) a tax on a good

If a tax is levied (impose) on the sellers of flour, then a) buyers will bear the entire burden of the tax b) sellers will bear the entire burden of the tax c) buyers and sellers will share the entire burden of the tax d) the Government will bear the entire burden of the tax

c) buyers and sellers will share the entire burden of the tax

Demand is said to have unit elasticity if the price elasticity of demand is a) less than 1 b) greater than 1 c) equal to 1 d) equal to 0

c) equal to 1

A key determinant of the price elasticity of suplly is the a) number of close substitues for the goods in question b) extent to which buyers alter their quantities demanded in response to chsnfes un prices c) length if the time period d) extent which buyers alter their quantities to changes in their incomes

c) length if the time period

A group of buyers and sellers of a particular good or service is called (an) a) coalition b) economy c) market d) competition

c) market

Suppose Good X has a negative income elasticity if demand. This implies that good X is a) normal good b) inferior good c) necessity d) luxuries

c) necessity

If a increase in income decreases the demand for a good, then the good is a(n) a) substitute good b) complementary good c) normal good d) inferior good

c) normal good

The term tax incidence refers to.. a) whether buyers or sellers of a god are required to send tax payments to the government b) whether the demand curve or the supply curve shifts when the tax is imposed c) the distribution of the tax burden between the buyers and sellers d) widespread view that taxes (and death) are the only certainties in life

c) the distribution of the tax burden between the buyers and sellers