Micro Unit 3

For a normal good, the income effect of a price change refers to the change in the consumption of the good that occurs because of the change in

consumers' purchasing power

The graphs above show Mary's demand for hamburgers and Mark's demand for hamburgers. Suppose Mary and Mark are the only two consumers in the market. Which of the following is a point on the market demand curve for hamburgers?

Price = $4 ; Quantity = 7

This table lists the monthly individual demand schedules for text messages for the only three buyers in the market: Allison, Bill, and Chang. Which of the following combinations of price and quantity lies on the market demand curve?

Price = 16 cents ; Quantity = 270

Assume that ice cream is a normal good. If the price of ice cream decreases, the substitution effect and the income effect will lead to which of the following changes in ice cream consumption?

Substitution Effect = Increase ; Income Effect = Increase

Which of the following will most likely happen in the market for good X if the price of good X decreases?

The quantity demanded for good X will increase

In a given time period, a person consumes more and more of a good or service and, as a result, enjoys each additional unit less and is willing to pay less for each additional unit. This behavior is consistent with the law of

diminishing marginal utility

For an inferior good, an increase in consumer income will cause

the demand curve to shift to the left

Which of the following explains why a decrease in the price of a normal good will lead to an increase in the quantity demanded of the good?

A lower price will increase consumers' purchasing power

If bologna is an inferior good, which of the following must be true?

An increase in consumer income will decrease the demand for bologna

Which of the following will increase the demand for pizza, a normal good?

An increase in consumers' income

Which of the following events will cause the demand curve for hamburgers to shift to the right?

An increase in the price of pizza, a substitute for hamburgers

Which of the following will decrease the demand for beef?

An increase in the price of potatoes, if potatoes and beef are complementary goods

Assume that good X is a normal good. Which of the following helps to explain why a decrease in the price of good X increases the quantity demanded of good X?

Good X becomes relatively less expensive than its substitutes, so consumers buy more of good X and fewer of the substitutes.

All of the following cause a rightward shift in the demand schedule for a normal good EXCEPT

a decrease in the price of the good

According to the law of demand, an increase in the price of grape juice will result in

a decrease in the quantity of grape juice demanded