ECO 112: Chapter 3 & 4

If the absolute value of slope the demand curve is 2.5, price is $6 per unit and the quantity demanded is 8 units, then the price elasticity of demand is A) 0.3 B).533 C) 1.6 D) 1.875

A) 0.3

All else equal, the price elasticity of demand for small-budget items such as soap tends to be ______ than the price elasticity of demand for big-ticket items such as flat-screen TVs. A) higher B) lower C) very high D) the same

B) lower

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by A) 0.55 percent B) 5.5 percent C) 55 percent D) 550 percent

B) 5.5 percent

The percentage change in quantity supplied that results from a 1 percent change in price is known as the A) cross-price elasticity of supply B) slope of the supply curve C) price elasticity of supply D) cross-price elasticity of demand

C) price elasticity of supply

If the demand for olives falls when the price of cheese falls, then we know that cheese and olives are A) normal goods B) complements C) substitutes D) inferior goods

C) substitutes

All else equal, a decrease in the demand for oranges will lead to a(n) ______ in equilibrium price and a(n) ______ in equilibrium quantity. A) increase; decrease B) decrease; decrease C) decrease; increase D) increase; increase

B) decrease; decrease

The demand for a good is elastic if the price elasticity of demand is A) equal to one B) greater than one C) less than one D) equal to zero

B) greater than one

What might cause a demand curve to shift to the right? A) An increase in the price of a substitute B) A decrease in the product's own price C) An increase in the price of a complement D) A decrease in the price of a substitute

A) An increase in the price of a substitute

The price elasticity of demand is a measure of : A) The change in quantity demanded of a good that results from a change in price B) The change in price of a good that results from a change in its quantity demanded C) The demand for a good D) How consumers respond to excess demand

A) The change in quantity demanded of a good that results from a change in price

A movement along a demand curve from one price-quantity combination to another is called a A) change in quantity demanded B) shift in the demand curve C) change in demand D) change in quantity supplied

A) change in quantity demanded

If the demand for gadgets increases as a result of a decrease in the price of widgets, the widgets and gadgets are A) complementary goods B) substitute goods C) normal goods D) elastically demanded

A) complementary goods

"All else constant, consumers will purchase more of a good as the price falls." This statement reflects the behavior underlying: A) demand curve B) a change in demand C) the supply curve D) a change in supply

A) demand curve

The demand for a good is unit elastic with respect to price if the price elasticity of demand is A) equal to one B) greater than one C) less than one D) equal to zero

A) equal to one

If the price of textbooks increases by 1% and the quantity demanded falls by .5%, the demand for textbooks is A) Negative B) Inelastic C) Elastic D) Unit Elastic

B) Inelastic

If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be A) elastic B) inelastic C) unit elastic D) perfectly elastic

B) inelastic

If a 1 percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ______. A) 1/5 B) 1/2 C) 5 D) 2

C) 5

The entire group of buyers and sellers of a particular good or service make up: A) The demand curve B) The supply curve C) A market D) The equilibrium price and quantity

C) a market

If the demand for computers increases as consumers' incomes rise, then computers are A) an inferior good B) a complementary good C) a normal good D) a substitute good

C) a normal good

When the price of a good changes, the amount of that good that buyers wish to buy changes: A) solely because of the substitution effect B) solely because of the income effect C) because of both the substitution and the income effects D) only if the substitution effect and the income effect do not cancel out each other

C) because of both the substitution and the income effects

As the price of flour (an input in the production of cookies) increases, firms that produce cookies will: A) increase the supply of cookies B) increase the quantity of cookies supplied C) decrease the supply of cookies D) decrease the quantity of cookies supplied

C) decrease the supply of cookies

At the midpoint of a straight-line demand curve, the price elasticity of demand is A) greater than one B) less than one C) equal to one D) zero

C) equal to one

If price is above the equilibrium price, then there will be A) both excess supply and excess demand B) neither excess supply nor excess demand C) excess supply D) excess demand

C) excess supply

The demand for a good is inelastic with respect to price if the price elasticity of demand is A) equal to one B) greater than one C) less than one D) equal to zero

C) less than one

If the demand for a good is highly elastic, that good is likely to have A) many close complements B) few close complements C) many close substitutes D) few close substitutes

C) many close substitutes

The demand curve illustrates the fact that consumers tend to purchase: A) more of a good as it becomes more popular B) name-brand products more frequently than generic products C) more of a good as its price falls D) more of a good as their incomes rise

C) more of a good as its price falls

When the price of insulin is $10, consumers demand 100 units; when the price is $15, consumers demand 100 units; and when the price is $20, consumers demand 100 units. Based on this information, the demand for insulin is A) unit elastic B) perfectly elastic C) perfectly inelastic D) elastic

C) perfectly inelastic

The price elasticity of demand for a good measures the responsiveness of A) demand to a 1 percent change in price of that good B) price to a 1 percent change in the demand for that good C) quantity demanded to a 1 percent change in price of that good D) price to a 1 percent change in the quantity demanded of that good

C) quantity demanded to a 1 percent change in price of that good

As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called: A) the income effect of a price change B) a decrease in reservation price C) the substitution effect of a price change D) a decrease in demand

C) the substitution effect of a price change

If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to A) 30 B) 0.30 C) 0.333 D) 3

D) 3

A demand curve is _____ sloping because ______ A) Downward; of increasing opportunity costs B) Upward; people prefer to purchase high-quality consumer goods C) Downward, reservation prices tend to fall over time D) Downward; fewer people are willing to buy an item at higher prices

D) Downward; fewer people are willing to buy an item at higher prices

A good example of central planning at work in the U.S. is: A) car manufacturers establishing suggested retail prices B) McDonald's fries being the same everywhere C) unions working with businesses to establish wages D) New York City's rent control program

D) New York City's rent control program

Excess demand occurs A) Whenever the market is equilibrium B) Whenever the market is not in equilibrium C) When price is above the equilibrium price D) When price is below the equilibrium price

D) When price is below the equilibrium price

The responsiveness of the quantity demanded of one good to a change in the price of a different good is measured by the A) price elasticity of demand B) income elasticity of demand C) price elasticity of supply D) cross-price elasticity of demand

D) cross-price elasticity of demand

If an increase in income leads to a decrease in the demand for ground beef, then ground beef is a(n) A) normal good B) complementary good C) substitute good D) inferior good

D) inferior good

When a market is in equilibrium A) there is either excess demand or excess supply B) both excess demand and excess supply are positive C) both excess demand and excess supply are positive and equal to each other D) there is neither excess demand nor excess supply

D) there is neither excess demand nor excess supply