chapter 2 econ 202
Which of the following best describes the difference between a demand curve and a demand schedule?
A demand curve is a graphical representation of the relationship between the quantity of a good and its price, whereas a demand schedule is a tabular representation.
John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ________.
$3
Ep
%^Q / %^P tells us the responsiveness of the quantity demanded
make choices
- what you want to do -what you can do
Which of the following examples best describes the Law of Demand?
When the price of tea increased, the quantity demanded of tea decreased.
If a decrease in income leads to an increase in the demand for sardines, then sardines are
a inferior good
availability of substitutes
a lot of other things you can buy, then small change will have a great impact a lot; but if these are few or no substitutes than its inelastic pizza vs. gas
Which of the following is likely to cause the demand curve for cars to shift to the left?
a rise in the price of gas
changes in expectation about the future
higher future prices cause to consumer now which leads to a shift right; lower future prices shift leftward
changes in income
income goes up, most goods = normal goods; demand increases for normal goods as income rises, shift right. inferior goods= as income goes up demand for them actually goes down, shifts to left because want to buy less of it
If the Apple Watch and the Samsung Gear S2 are considered substitutes, then, other things equal, an increase in the price of the Apple Watch will
increase the demand for the Gear S2.
need
more a good is a necessity the more inelastic it'll be ; life saving drugs= inelastic
Higher price elasticity of demand means that a consumer's demand is:
more responsive to price changes
perfectly inelastic
no matter what price is quantity in demand will be the same
cross price elasticity
percent change in quantity demanded for 1 good for percent change in price in a different good
optimizing
picking the choice that you want most among the set of things you can do
If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:
pivot leftward along the vertical axis.
If quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to:
pivot rightward along the horizontal axis
A decrease in the price of either good will cause a consumer's budget constraint to:
pivot rightward.
If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint:
pivots leftward without a change in the intercept on the horizontal axis.
changes in size of market
population increases, shifts to right; if market got smaller then shifts to the left
quantity responds infinitely to
price
substitution effect
price goes down, have to substitute purchases towards it but purchasing power goes up
perfectly elastic
price increases at all consumers will stop buying all together (Ep = infinity)
law of demand
price of product falls the quantity demanded will increase
By drawing a demand curve with ________ on the vertical axis and ________ on the horizontal axis, economists assume that the most important determinant of the demand for a good is the ________ of the good.
price; quantity; price
The income effect of an increase in the price of salmon
refers to the effect on a consumer's purchasing power which causes the consumer to buy less salmon, holding all other factors constant.
A budget constraint
refers to the limited amount of income available to consumers to spend on goods and services.
demand schedule
relating price to how much is purchased
demand curve
relationship between price and quantity, lower price number increases, higher price decreases (willingness to pay)
If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is
relatively elastic
A change in the price of a good has two effects on the quantity consumed. What are these effects?
the income effect and the substitution effect
The demand by all the consumers of a given good or service is the ________ for the good or service.
the market demand
Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases
the opportunity cost of buying sweaters increases.
The slope of a budget constraint represents:
the opportunity cost of one good in terms of another.
constant
the other prices will not change nor preferences
To calculate the price elasticity of demand we divide
the percentage change in quantity demanded by the percentage change in price.
The price elasticity of demand is equal to
the percentage change in quantity demanded divided by the percentage change in price.
If the demand for a steak is unit elastic, then
the percentage change in quantity demanded is equal to the percentage change in price.
If the demand for cell phone service is inelastic, then
the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
A change in all of the following variables will change the market demand for a product except
the price of the product
The law of demand implies, holding everything else constant, that as the price of bagels increases,
the quantity of bagels demanded will decrease.
Elasticity is:
the ratio of the percentage change in two variables.
price elasticity of demand {Ep}
the response of quantity demanded to a change in price
budget constraints
things i can afford
Ep =1
unit elastic
Exa = 0
unrelated
income effect
using money up
change in quantity demanded
when price changes; quantity changes
elastic demand
when the % change in quantity is > than the % change in price; quantity demanded is very sensitive to price -use absolute values
intermediate microeconomics
where preferences came from and figure out kinds of choices adam makes under different conditions
If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3, then quantity demanded
will decrease by 45 percent.
market demand curve
willingness to pay curve; most consumers are willing to pay
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.
Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true?
It is elastic at high prices and inelastic at low prices.
A change in the slope of a budget constraint indicates:
a change in the price of either good that causes a change in the opportunity cost.
A movement along the demand curve for toothpaste would be caused by
a change in the price of toothpaste
A budget constraint is a straight line because:
a consumer faces a fixed price of both goods that do not change with changes in consumption.
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as
a decrease in quantity demanded.
ceteris paribus
all else equal
changes in preferences
all pizza diet, shift to the right. No cash- shift to the left
Holding everything else constant, a decrease in the price of bicycles will result in
an increase in the quantity of bicycles demanded.
The income effect of a decrease in the price of legal services, a normal good, results in
an increase in the quantity of legal services demanded
If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely.
budget constraint
changes in related goods
burritos are substitutes for pizza; Price for burritos falls which leads to a less demand for pizza and shifts to the left. More expensive goods shift to the right. Complements: more expensive complement shifts demand curve to left; if compliment are cheaper demand curve to the right
We can derive the market demand curve for gold earrings
by adding horizontally the individual demand curves of each gold earring consumer.
The buyers of a good will want to purchase it as long as their willingness to pay for the good is:
greater than or equal to the price.
income elasticity of demand
chang ein quantity demanded for a percent Chang ein income
Exy<
complements
feasible
constrained by budget
________ is the difference between the willingness to pay and the price paid for a good.
consumer surplus
If the price of a good increases, ________.
consumer surplus decreases
market
demand from pizza from a certain place elastic
If a demand curve shifts to the left, then
demand has decreased.
share of budget
demand is more elastic for larger share consumer budget it takes up; if a product costs very little and takes up only a tiny share of your budget and even a large relative increase in its price in demand may not change very much
holding everything constant if price increases
demand will decrease
consumer surplus
difference between the maximum price a consumer is willing to pay for a particular quantity and the market price
The demand curve for most goods is normally:
downward sloping.
If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24 home-grown orchids, the demand for her orchids is
elastic
when the price elasticity of demand is > 1
elastic demand
Economists use the concept of ________ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price.
elasticity
If the price of peaches, a substitute for plums, decreases the demand for plums will increase. true or false
false
Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets. Based on this information, the demand for Yoshi's jazz performance is elastic. true or false
false
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is
inelastic
when elasticity is less than < 1
inelastic demand
The demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in:
its price
Which of the following goods is likely to have the highest price elasticity of demand?
ketchup
Two goods are said to be complements when a fall in the price of one good:
leads to a right shift in the demand for the other good.
If demand is inelastic, the absolute value of the price elasticity of demand is
less than one
Which of the following goods is likely to have the lowest price elasticity of demand?
life-saving drug
adjustment time
longer time horizon= elastic demand (gas)
change in demand
stuff other than the price of the good changes, then the entire curve might move
Exy> 0
substitutes
The market for smartwatches has begun to grow, due in part to the success of the Apple Watch. Following the successful launch of the Apple Watch in 2015, companies such as Samsung, Sony, and LG have all developed products to compete with the Apple Watch. The smartwatches introduced to compete with the Apple Watch would be considered
substitution for an apple watch
The quantity demanded of a good is:
the amount of a good that buyers are willing to purchase at a given market price.
The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as
the budget constraint.
The substitution effect of an increase in the price of peaches is
the change in the quantity demanded that results from a change in the price of peaches, making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
If the absolute value of the price elasticity of demand for aspirin equals 0.8 then
the demand for aspirin is inelastic.
