Micro test 1, quiz 1
Suppose that you have received $500 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is
$525
Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is
-1.0, and X and Y are complements.
When the price of a good is $5, the quantity demanded is 100 units per month; when the rice is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about
0.67.
If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about
1.60, and supply is elastic.
If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a
50 percent decrease in the quantity demanded.
If toast and butter are complements, then which of the following would increase the demand for toast?
A decrease in the price of butter
Which of the following would not shift the demand curve for mp3 players?
A decrease in the price of mp3 players
If the demand for a product increases, then we would expect equilibrium price
And equilibrium quantity both to increase.
When the price of a good is lower than the equilibrium price,
Buyers desire to purchase more than is produced.
The price elasticity of demand measures
Buyers' responsiveness to a change in the price of a good.
A likely example of complementary goods for most people would be
Canoes and paddles.
If the quantity demanded of a certain good responds only slightly to a change in the price of the good then the
Demand for the good is said to be inelastic.
Which of the following events must cause equilibrium price to rise?
Demand increases and supply decreases
when the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is
Elastic
Suppose that demand for a good decreases and, at the same time, supply of the good decreases. What would happen in the market for the good?
Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market?
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Which of the following can lead to market failure?
Externalities and market power
Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to
Fall by 50 percent.
The "invisible hand" refers to
How the decisions of households and firms lead to desirable market outcomes.
If a good is normal, then an increase in income will result in a(n)
Increase in the demand for the good
Two goods are complements when a decrease in the price of one good
Increases the demand for the other good
Demand is inelastic if the price elasticity of demand is
Less than 1
For which of the following types of goods would the income elasticity of demand be positive and relatively large?
Luxuries
For which pairs of goods is the cross-price elasticity most likely to be negative?
Peanut butter and jelly
Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is
Positive, and the good is a normal good.
The law of demand states that, other things equal, an increase in
Price causes quantity demanded to decrease
Each of the following is a determinant of demand except
Production technology
A decrease in quantity demanded
Results in a movement upward and to the left along a demand curve
When quantity demanded decreases at every possible price, the demand curve has
Shifted to the left
A marginal change is a
Small, incremental adjustment.
Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the
Steeper the demand curve will be.
If the cross-price elasticity of two goods is positive, then the two goods are
Substitutes.
Matthew bakes apple pies that he sells at the local farmer's market. If the price of apples increases, the
Supply curve for Matthew's pies will decrease.
For a good that is a necessity, demand
Tends to be inelastic.
A movement along the demand curve might be caused by a change in
The price of the good or service that is being demanded.
