ECON EXAM 2

in even downwards demand curve what region is elastic

right

elasiticty

(% change in quantity)/(% change in price)

52. Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the a. demand for bicycle assembly workers will increase. b. supply of bicycles will shift to the right. c. supply of bicycles will shift to the left. d. firm must increase output to maintain profit levels.

C

. Which of the following is not a determinant of the demand for a particular good? a. the prices of related goods b. income c. tastes d. the prices of the inputs used to produce the good

D

24. When drawing a demand curve, a. demand is measured along the vertical axis, and price is measured along the horizontal axis. b. quantity demanded is measured along the vertical axis, and price is measured along the horizontal axis. c. price is measured along the vertical axis, and demand is measured along the horizontal axis. d. price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis.

D

64. When supply and demand both increase, equilibrium a. price will increase. b. price will decrease. c. quantity may increase, decrease, or remain unchanged. d. price may increase, decrease, or remain unchanged.

D

neumonic device to remember which graph is perfectly inelastic

Inelastic looks like I

cross-price elasticity > 0

substitutes

Cross-price elast. of demand

% change in quantity good 1/ % change in price good 2

AMBIGUOUS CHANGES

When the shifts match (i.e. both increase) the quantity follows but price is ambiguous. When they differ the quantity is ambiguous but price follows the demand.

midpoint method

[(change in quantity)/(average quantity)]/[(change in price)/(average price)]

cross-price elasticity < 0

complements

31. If the demand for a good falls when income falls, then the good is called a(n) a. normal good. b. regular good. c. luxury good. d. inferior good.

A

TAKE YOUR TIME AND DRAW OUT SUPPLY AND DEMAND CURVES DONT GET THEM CONFUSED

A$AP

40. You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped out by drought and that this will cause the price of peanuts to double by the end of the year. As a result, your demand for peanut butter a. will increase but not until the end of the year. b. increases today. c. decreases as you look for a substitute good. d. shifts left today.

B

58. Which of the following events must cause equilibrium quantity to fall? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase

B

graph of perfectly elastic

flat

which axis is price on

vertical

graph of perfectly inelastic

vetical