Econ Exam 2

When product A's price is increased from $3.5- $4 quantity demanded of product B lowers from 350 to 200 units. Their cross elasticity of demand is _________ A and B are _________

-4 , complements

A local restaurant has estimated that the price elasticity of demand for meals is equal to 2. If the restaurant increases menu price by 5% they can expect the number of customers to decrease by _________ and total revenue to __________

10 % , fall

Egg producers know that the elasticity of demand for eggs is 0.1. If they want to increase sales by 5%, they will have to lower price by:

50

Suppose Will receives 52 units from consuming one banana and 92 units from consuming two bananas. What is the marginal ultility of the second banana

92-52 = 40 40 is the answer

The price elasticity of demand is lowest for which of the following goods

Cars Toyatas Fords Chervolets a.) Cars

t/f If a good is a normal good, it can not also be income inelastic

False

Assuming only two goods X and Y if MUx/Px= MUy/Py then I. the consumer is in equilibrium II. the consumer cannot be made better off by redirecting his purchases. III. the consumer is deriving the same marginal utility per dollar for all goods.

I , II and III

T/F the price elasticity of demand for gasoline is likely to be higher in the long run than in the short run.

True

James noticed his products price elasticity of demand varies among different seasons. When he raises price by 10% during summer , his quantity demanded lowers by 15. When he raises price by 10% during winter , his quantity demanded lowers by 5% only. Jame's product demand is _________ during summer and __________ during winter

elastic , inelastic

The income elasticity of demand of a normal good is

greater than 0

To say that two goods are substitutes , their cross-price elasticities of demand should be :

greater than 0

A consumer is in equilibrium if he or she derives the same

marginal utility per dollar spent on each good consumed

if a person is receiving greater marginal utility per dollar from consuming one good than another , it follows that he or she is

not maximizing utility

If the quantity supplied responds substantially to a relatively small change in price, supply would be :

price- elastic

law of diminishing marginal utility says that

the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases

When an economist talks about utility she is talking about

the satisification that results from the consumption of a good