Econ Ch 2

Income elasticity of demand

Tina has been working in the banking sector for a long time. She switched jobs and now works for Goldman Sachs and has gotten a very large salary. She used to mostly eat at her local cheap Chinese restaurant and wore normal clothing, but now she eats at expensive restaurants and wears luxurious clothing. What is the changed concept of Tina's habits called?

The wage floor

Tom is applying for a job and his potential boss wants to pay him $6 per hour, which is lower than both the federal and state minimum. What protects Tom from having to work for such a low price?

They are generally legal on an international level, but are generally combated on a domestic level.

How does the treatment of cartels on the domestic scene differ from that of the international scene?

When a company that has a large control over the market tries to drastically increase prices on products such as food, water or electricity, especially targeting underdeveloped areas.

Identify which of the following is a situation where the government should act with price ceilings:

When Thomson International receives direct money from the government so as to encourage their production of certain goods.

Identify which of the following is an example of a subsidy:

When you're buying bagels and there is a two for one sale.

Identify which of the following is an example of elastic supplies:

For oil and other products needed for the car to be functional

James has a car that drives on diesel fuel. For which of the following is there derived demand due to the fact that James is a car owner?

The supply curve shifts to the right.

A company has discovered a way of making their products more efficiently which allows them to cut spending by up to 25%. As a result of that they have significantly decreased the prices of their products. How does the supply curve respond to such events?

All the answers are correct

An IT company is very satisfied with their revenue in the past quarter. Due to the decreased taxes, more people are buying their products. They have also managed to significantly lower their production cost by making their microchip from a more resilient, but cheaper material. There have also been advancements in their industry which allow them a 10% decrease in their direct production costs. Which of the following shifts the supply curve?

quantity

Cross price elasticity of demand = % change in ____ demanded for Product A/ % change in price of Product B

the slope of the demand curve is downward

Due to the fact that people will buy larger quantities of a good as its price goes down, _____.

the law of supply

What governs the shape and foundation of the following chart? (arrow up)

When there is excess demand

When will natural market forces place upward pressure on prices and the quantity supplied?

The curve that shows how much of a good will be bought by consumers at various price points.

Which of the following BEST describes the demand curve?

The amount of money that an economy lost through price ceilings and price floors.

Which of the following best defines deadweight loss

The changes in the price of a good or service having no impact on quantity demanded.

Which of the following best defines inelastic demand?

A change in personal income and tastes

Which of the following causes the need for an entirely new demand curve to be drawn?

Producers that sell highly elastic goods are likely to impose shortages.

Which of the following is FALSE regarding shortages?

Tradable

Which of the following is NOT a standard type of good?

The amount of money that you have after you have paid your taxes.

Which of the following is an example of disposable income?

The more a good is supplied, the higher its price, all other things constant

Which of the following is relevant to and complies with the law of supply?

When buyers reject a new phone from a large company, causing them to lower prices

Which of the following is the BEST example of market forces?

upward slope graph

Which of the following reflects the law of supply?

If a company patented a new product and had to decrease its price due to lack of public interest.

Which of the following would cause a shift in the demand curve to the left?

Because they receive goods for free, making the curve shift to the left.

Why do certain illegal movements such as internet piracy cause a drastic shift in the supply curve?

Because the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers.

Why does market equilibrium cause stable prices?

because rarely does the percent change in quantity equal the percent change in price.

Why is the concept of unitary elastic goods rare in the real world?

The elasticity of products is determined

__________ based on the ratio of the percentage of increased (or decreased) demand over the percentage of change in income.

cross-price elasticity of demand

how responsive or elastic the quantity demanded for a good is in response to a change in the price of another good

price elasticity of demand

the measure of the percent change in the quantity of a good demanded divided by the percent change in the price of that good