ECON EXAM 2
the price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. the price elasticity of demand is equal to ____ and demand is described as ____.
0.2; inelastic
which elasticity would be the most responsive to a change in price if good A has an elasticity of 0.05, good B has an elasticity of 0.8, good C has an elasticity of 1.8, and good D has an elasticity of 47?
D
the higher the elasticity of a good, the more responsive to
a change in price
which event would cause the budget line to shift outward ?
an increase in income
the ____ graphically illustrates the possible combinations of two goods a consumer can purchase with a given income, given the prices of both products
budget line
suppose that MU_x/Price_x < MU_y/Price_y to optimize utility the consumer should:
buy more y and less x
behavioral economics examines
common behaviors that contradict the predictions of economic models
goods a and b have a negative cross-price elasticity of demand. this means goods A and B are
complements
the tax incidence of items such as gasoline, tobacco, and alcohol tends to fall heavily on ____ because these goods have ______
consumers; relatively inelastic demand
when marginal utility is negative, total utility:
decreases
according to marginal utility theory, consumers maximize satisfaction when they
equalize marginal utility per dollar for every good consumed
which of the following products would have the highest price elasticity of demand ?
hot dogs sold by a street vendor
utility measures?
how much satisfaction is gained from the consumption of a good service
normal good
income elasticity of demand between 0 and 1
luxury good
income elasticity of demand greater than 1
inferior good
income elasticity of demand less than 0
suppose a firm is selling a product at a price on the inelastic portion of the demand line. this firm could increase revenue by doing what ?
increasing the price, selling less units
suppose a firm is selling a product at a price on the inelastic portion of the demand line. this firm could increase the revenue by doing what?
increasing the price, selling less units
the price elasticity of demand for a vertical demand curve
is 0
the price elasticity of demand for a vertical demand curve..
is 0
the price elasticity of demand for a horizontal demand curve
is infinite
the price elasticity of demand for a horizontal demand curve ..
is infinite
which of the following is a major critique of marginal utility theory ?
it is difficult to measure the utility of goods consumed
the principle of diminishing marginal utility means that when Sarah eats pizza, her satisfaction from the second slice of pizza is probably:
less than that from the first
if income increases by 12% and the quantity demanded of a good increases by 14%, the good is a(n) ____ good
luxury
as an individual consumes slices of pizza, the _____ is the amount of satisfaction that he receives from each additional piece of pizza
marginal utility
the greater the number of substitutes available, the
more elastic is demand
the greater the number of substitutes available, the...
more elastic the demand
if a good is a necessity with few substitutes, then the price elasticity of demand will tend to be
more price- inelastic
the slope of the budget line is
negative, since to purchase more of one good means giving up some of the other good
elastic good
price elasticity of demand greater than or equal to 1
inelastic good
price elasticity of demand less than 1
the price elasticity of demand measures the responsiveness of the change in
quantity demanded to a change in price
If a firm sells a product that has a perfectly inelastic demand curve, then, if price doubles, it can be expected that:
total revenue will double
which of these is NOT a determinant of elasticity
sales tax rate placed on an item
when making personal buying decisions, two important issues to consider are the
satisfaction you receive from the choices that you make and the constraints of a limited budget
goods a and b have a positive cross-price elasticity of demand. this means goods A and B are
substitutes
the price elasticity of supply measures the responsiveness of quantity ____ to changes in ______.
supplied; the price of the product
which statement is FALSE ?
the consumer is assumed to maximize marginal utility
a budget line is linear because
the prices of the two goods are held constant
total utility is
the total satisfaction a consumer receives from consuming a certain amount of a good
