ECON CHPT 4
The demand for an inferior good decreases as money income increases.
T
The demand for a good is the entire relation between price and quantities demanded.
T
The information in a demand schedule may be expressed graphically in a demand curve.
T
The law of diminishing marginal utility affects all consumption.
T
The longer the adjustment period, the greater the consumers' ability to substitute relatively higher-priced products with lower-priced substitutes.
T
The opportunity cost of a consumer's time must be explored when studying demand.
T
When calculating elasticity you do not need to focus on how output or price is measured.
T
Which of the following directly causes the substitution effect?
The price of goods change in relation to the prices of other similar goods
A change in the price of one good relative to changes in the prices of other similar goods can cause the substitution effect.
T
A rightward shift of the demand curve indicates that there is an increase in demand.
T
Demand curves may appear as straight lines.
T
Demand is almost always more elastic at higher prices and less elastic at lower prices.
T
If demand is inelastic, producers will never willingly cut the price because doing so would reduce total revenue.
T
Newspapers are substitute goods for magazines.
T
Quantity demanded is represented by one point on the demand curve, whereas demand is represented by the entire demand curve.
T
The demand elasticity for cigarettes among teenage smokers is estimated to be 1.3. How would a 7 percent increase in the price of cigarettes affect sales among teenagers?
The quantity demanded would fall by more than 7 percent.
Suppose that you have found a shampoo that works wonders for your hair. Nothing else can achieve the same results. What might you assume about that product's elasticity of demand?
The shampoo has an extremely low elasticity of demand.
An ice cream shop sells cones that can be topped with one, two, or three scoops of ice cream. Each additional scoop increases the overall price of the ice cream cone, so the shop wants to sell as many scoops as possible. How might the shop owners counteract the law of diminishing marginal utility?
They may decrease the price of each additional ice cream scoop
Which of the following terms is defined as the demand of a single consumer?
individual demand
Based on your answer for item 15, which of the following describes the elasticity of demand for the envelopes?
inelastic
Suppose the media reports that in a matter of months, downloading music from the Internet will be completely legal and free. How might this announcement affect the demand curve for music CDs?
it would shift leftward
If a population grows, the demand for food will shift leftward.
F
Market demand reflects the demand of an individual consumer.
F
Pencils are the substitute goods for erasers.
F
Products used in place of each other are referred to as complements.
F
Suppose the price of envelopes increases from $1.09 per box to $1.50 per box. The quantity demanded decreases from 2 million to 1.5 million. Which of the following is the elasticity of demand?
0.66
Suppose that when paper plates sell for $2 per package, the demand is 5 million. Which of the following is the total revenue earned?
$10 million
If a book borrowed from the library is a superior good, the same new book at a bookstore is an inferior good.
F
Which of the following is a factor in calculating the elasticity of demand?
C
Elasticity of demand is greater in the short-run.
F
Which of the following determinants has the greatest effect on demand?
D
Elasticity of demand values are sorted into four categories.
F
A change in consumer income causes a movement along the demand curve.
F
A large increase in births in one particular town would shift the demand curve for baby formula leftward.
F
Demand for cigarettes among teenage smokers is less elastic than that of adult smokers.
F
Demand is unit elastic if it is less than 1.0.
F
Economists do not usually differentiate between the short-run and long-run when estimating elasticity.
F
Elasticity of demand cannot be estimated.
F
The law of demand states that quantity demanded varies directly with price, other things constant.
F
The less important an item is as a share of a consumer's budget, other things constant, the greater is the income effect of a change in price.
F
consumer expectations rarely shift the demand curve.
F
Suppose there is an increase in the price of disposable diapers. How might the demand curve for cloth diapers be affected?
It would shift rightward
Suppose that after years of study, researchers conclude that a low-carbohydrate diet reduces cholesterol and contributes to overall health. How might the public's knowledge of such a study affect the demand curve for white bread?
It would shift to the left
Suppose that the media reports that JFK High School in Dallas is the number-one high school in the nation. How might this announcement affect the demand curve for houses in Dallas?
It would shift to the right
Suppose that the elasticity of demand of socks is 0.7. If the price of socks is reduced by 10 percent, how will sales be affected?
Sales will grow by less than 10 percent
How is a market demand curve created?
The individual demands of all consumers in the market are combined.
Which of the following situations best illustrates the substitution effect?
You had planned to buy subs for your Super Bowl party, but the price of subs increased so you instead buy pizzas
Which of the following scenarios reflects the law of diminishing marginal utility?
Your friend offers you a second piece of birthday cake, but you reply that you are full
Which of the following goods is the most price elastic?
automobiles
Suppose that your favorite gum decreases in price. Your ___?___ is most affected.
real income
If the price of a particular good changes, which of the following will result?
movement along the demand curve
When people desire more of a product regardless of price, there will be
movement down the product's demand curve
Suppose the price of glue increases during a given time period. How will the demand for glue be affected?
decreases
Suppose one group of economists is examining the market for jackets. Another group is examining the market for Stay Warm jackets, while yet another is examining the brand called Puffy jackets. Which product's demand is likely to be the least elastic?
jackets in general
Which of these would most likely cost the most?
ordering a stir-fry dish from a restaurant
Suppose a product's elasticity of demand is 1.7. How responsive is the quantity demanded to a change in price?
relatively responsive
Which of the following is not a determinant of demand?
supply
A demand curve must include which of the following items?
the type of units being used to measure the product
Which of the following goods are complements?
toothbrushes and toothpaste
Which of these pairs illustrates a normal good and a related inferior good, in that order?
transportation using your own automobile and transportation using the subway