Ag Eco exam #2

An isoutility curve can also be known as what?

Indifference Curve

If own-price elasticity is equal to -0.26 the demand is said to be what?

Inelastic

Often times a price increase will cause a _______________ consumer demand curve in the short run, but will shift to a ____________________ consumer demand curve in the long run.

Inelastic - Elastic

Given the following data table, calculate the marginal utility for B between 2 and 6 sodas.

MU=3

Given the following data table, calculate the marginal utility for A between 1 and 2 sodas.

MU=5

Given the table below for taco consumption, what is the marginal utility when consumption of tacos changes from 5 to 6 per week?

MU=6

Assume that a retailer sells 1,000 six-packs of Pepsi per day at a price of $3.00 per six-pack. Also assume the cross-price elasticity for Pepsi with respect to the price of Coca Cola is 0.70. If the price of Coca Cola rises by 5 percent, what impact will that have on Pepsi consumption?

Pepsi consumption will go up by 35 units for a new total of 1,035 units sold.

A perfectly elastic demand curve is what?

Perfectly horizontal

A perfectly inelastic demand curve is what?

Perfectly vertical

Measuring elasticity at a specific point on the demand curve is called the what?

Point Elasticity

Reference slides 16 and 17 from your PowerPoint. I calculated the table values for Betty. What would be the values for each of the four columns for Wilma at point D? Remember Wilma's budget was $1200

Q of Shirts= 20 Q of Shoes = 20 P of Shirts = $30 P of Shoes = $30

Reference slides 16 and 17 from your PowerPoint. I calculated the table values for Betty. What would be the values for each of the four columns for Wilma at point C? Remember Wilma's budget was $1200

Q of Shirts= 60 Q of Shoes = 10 P of Shirts = $15 P of Shoes = $30

If own-price elasticity of demand for tacos is -2.5, what will happen to the quantity of tacos purchased if price increases by 3%?

Quantity of tacos will decrease by 7.5%

If cross-price elasticity is equal to 3, the goods being compared are classified as what?

Substitutes

If own-price elasticity is equal to -1 the demand is said to be what?

Unitary Elastic

If we compare two independent goods using the cross-price elasticity of demand equation, the solution to the equation will equal what?

Zero

When the price of subsititues or compliments changes or the amount of income changes, the demand curve itself will shift. This shift is known as what?

a change in demand

When a consumer changes the amount of product they purchase because the price of the product has changed, what has occurred?

a change in quantity demand

Demand curve

a schedule that shows the inverse relation between the price of a commodity and the amount of the commodity consumed

Utility function

an algebraic expression that allows us to rank a consumption bundle by the total utility or satisfaction it provides

Giffen goods

an inferior good that causes an individuals demand curve to slope upward

What is the name associated with the following diagram?

budget line

The delta (triangle) symbol you see in economic equations represents what?

change

The condition wherein the slope of the budget line and the slope of the isoutility/indifference curve are equal is know as what?

consumer equilibrium

Assume that for a given consumer, the marginal utility of Dryer's Ice Cream is 120, and the price of Dryer's Ice Cream is $4 per gallon. Also, assume that the marginal utility of Blue Bell Ice Cream is 160, and the price of Blue Bell is $5 per gallon. Given this information and what you've learned about demand and decision making, which is true about this consumer?

consumer should buy more Blue Bell, it's provides more utility at a marginally higher price.

The schedule that shows how many units of a good the consumer will purchase at different income levels that helps us classify normal and inferior goods is known as what?

engel curve

If there were no budget constraint, consumers would move to consume all goods and services at a point at which marginal utility of each good is ten.

false

In the case of a normal or luxury good, a rise in income will lead to a downward shift in the consumer's demand curve.

false

The Law of Demand can be simplified to say that consumers demand more at a higher price.

false

These types of goods will have decreased consumption when a consumer's income increases and increased consumption when a consumer's income decreases.

inferior goods

These types of goods will have increased consumption when a consumer's income increases and will have decrease consumption when a consumer's income decreases.

normal goods

Consumption bundle

particular combinations of goods being considered

Thinking back to effects of change in price, the connection of all tangency points between multiple budget lines and indifference curves on one graph is called what?

price-consumption curve

Independent goods

products that are associated but the change in price of one won't impact the consumption of the other

Compliments

products that are typically consumed together

Substitutes

products that provide equal utility and can be exchanged equally for one another

Isoutility curve

represents the combination of consumption bundles that provide a consumer a given level of satisfaction

Utility is another word for?

satisfaction

Law of diminishing return

suggests that as consumption per unit of time increases, marginal utility decreases.

The slope of an isoutility curve represents what?

the Marginal Rate of Return

Marginal utility

the change in utility or satisfaction due to the change in consumption of that good.

Budget constraint

the feasible of consumption choices facing a consumer, essentially deciding what can you afford.

We can take the sum of the horizontal axis of all consumer demand curves for a product and derive what?

the market demand curve

Tastes and preferences

the noneconomic determinants that impact demand

On the graph below you'll see the line for the purchase of steaks and pork moved down from like 20-40, the original line, to the line 10-40. What would have caused this shift in the budget line?

the price of steak rose

Marginal rate of substitution

the rate at which the consumer is willing to substitute one good for another

Total utility

the total satisfaction derived from consuming a given bundle of goods and services

Disposable income

total personal income excluding tax obligations

In the case of an inferior good, a rise in income will lead to a leftward shift in the demand curve.

true

Marginal Utility will fall as consumption increases and will rise as consumption decreases.

true

Most economic behavior processes cannot be studied in a controlled environment.

true

Population, advertising, health and food safety all fall under tastes and preferences are noneconomic factors of demand.

true

Income effect

when the decrease in the price of a product means the consumer can afford to buy more of the product or vice versa

Substitution effect

when the price of one good declines relative to the price of another good

Price Flexibility =

% change in price / % change in quantity

Income Elasticity =

% change in quantity / % change in income

Own-Price Elasticity =

% change in quantity / % change in price

Cross-Price Elasticity =

% change in quantity of one good / % change in price of another good

If hamburger consumption increased from 5 hamburgers to 6 hamburgers and income increased from $8 to $9, what is the is the income elasticity of demand for hamburgers?

1.5

For Sydney Sunshine, the combination bundle of 4 wings and 3 bottles of Dr. Pepper provide the same utility as 6 wings and 2 bottles of Dr. Pepper. How many wings must she give up in order to get one more bottle of Dr. Pepper? Think MRS

2

The Dixie Chicken currently sells 3,000 burger platters per month for $7, and the own-price elasticity of demand for this platter is -1.3. If the Dixie Chicken raises the price by $0.70, how many platters will be sold?

2,610

Suppose a college student can spend $30 on Subway sandwiches and Chick-Fil-A sandwiches combined. The price of a Subway sandwich is $5 and the price of a Chick-Fil-A sandwich is $3. Which of the following diagrams describes the correct budget line for this student?

A

Given the table below, calculate the budget expenditure for each of the combinations.

A - $7.50 B - $6.75 C - $6

Given the table below, what is the total utility for each bundle?

A - 70 B - 66 C - 70

If steak consumption increased from 5 steaks to 6 steaks and income increased from $8 to $9. Hamburgers in this scenario are classified as what type of good?

A luxury and normal good

Measuring elasticity between two points on the demand curve is called the what?

Arc Elasticity

If cross-price elasticity is equal to -2, the goods being compared are classified as what?

Complements

If own-price elasticity is equal to -2.6 the demand is said to be what?

Elastic