Chapter 3A Demand Curves

Which of the following will not cause a demand curve to shift position?

A doubling of the good's price.

With only two goods, if the income effect is in the opposite direction as the substitution effect but the income effect dominates then the good is

Giffen

Consider the two statements: I. X is an inferior good. II. X exhibits Giffen's Paradox. Which of the following is true?

II implies I, but I does not necessarily imply II.

An increase in quantity demanded is represented by

a movement along the demand curve in a southeasterly direction in response to a decline in the good's price.

Demand functions are "homogeneous of degree zero in all prices and income." This means

a proportional increase in all prices and income will leave quantities demanded unchanged

A decrease in demand is represented by

a shift inward of the entire demand curve

A change in the distribution of income which leaves total income constant will not shift the market demand curve for a product if

a.everyone has an income elasticity of demand of zero for the product. b.everyone has the same income elasticity of demand for the product. c.individuals have differing income elasticities for the product, but the average income elasticity for income gainers is equal to the average income elasticity for income losers. d.any of the above conditions occur.

An individual's demand curve

a.represents the various quantities that a consumer is willing to purchase of a good at various prices. b.is derived from an individual's indifference curve map. c.will shift if preferences, prices of other goods, or income change. d.all of the above.

The relationship between changes in income and purchase of a good indicates

a.whether the good is a luxury or necessity. b.whether the good is normal or inferior. d. Both a and b

Two goods, X and Y, are called complements if

an increase in PX causes less Y to be bought.

Two goods, X and Y, are called substitutes if

an increase in PX causes more Y to be bought.

An increase in the price of good X will be accompanied by

b.a shift in the market demand curve for good Y (a substitute for good X). c.a movement along the market demand curve for good X. d.Both b and c.

If an individual's housing purchases are always a constant fraction of income, then the income elasticity of demand for housing is

equal to one

If demand is elastic, a decrease in quantity will cause the total spending(PxQ) to

fall

With only two goods, if the income effect is in the opposite direction as the substitution effect but the substitution effect dominates then the good is

inferior but not Giffen

If income doubles and the quantity demanded of good X more than doubles, then good X can be described as a

luxury

If goods X and Y are complements, then the cross price elasticity of demand between them will be

negative

With only two goods, if the income effect is in the same direction as the substitution effect then the good is

normal

If a good is normal and its price increases,

the income effect will be negative and the substitution effect will be negative.

If a good is inferior and its price decreases,

the income effect will be negative and the substitution effect will be positive.

If a good is Giffen and its price increases,

the income effect will be positive and the substitution effect will be negative.

If a good is inferior and its price increases,

the income effect will be positive and the substitution effect will be negative.

If a good is normal and its price decreases,

the income effect will be positive and the substitution effect will be positive.

Assume X and Y are the only two goods a person consumes. If after a rise in the quantity demanded of Y increases, one could say

the substitution effect dominates the income effect for Y.

If an individual buys only two goods and these must be used in a fixed relationship with one another (e.g., coffee and cream for a coffee drinker who never varies the amount of cream used in each cup), then

there is no substitution effect from a change in the price of coffee

If good X is a normal good and its price rises, then quantity demanded

will always fall

If a consumer purchases only two goods (X and Y ) and the demand for X is elastic, then a rise in the price of X

will cause total spending on good Y to rise.