Econ 202 Chapter 3: Demand
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?
A twofold increase in the price of pens and a threefold increase in the price of pencils
________ is the difference between the willingness to pay and the price paid for a good.
Correct Consumer surplus
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 ________.
$3
The following table shows the demand schedules of three consumers of wine. Assume that these three buyers constitute the entire market. Price ($/Bottle) Sandra's Demand (Bottles) David's Demand (Bottles) Mary's Demand (Bottles) $8 2 10 $6 14 15 18 $4 23 24 $2 24 27 28 Refer to the table above. If the market price of wine is $8/bottle, and the market demand for wine is 19 bottles, David's consumption of wine is:
7 bottles
Which of the following examples best describes the Law of Demand?
When the price of bread doubles, John's consumption of bread halves.
Which of the following examples best describes the Law of Demand?
When the price of tea increased, the quantity demanded of tea decreased.
An increase in the demand for a good is represented by:
a right shift to a new demand curve.
If a good has a price elasticity of demand of -3, it implies that:
if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%.
The French Bakery ran a special which decreased the price of its croissants from $1.50 to $1.00. Although her money income had not changed, Toni decided to buy 2 croissants instead of her usual 1 bagel and 1 croissant. Toni's actions are explained by which of the following?
income and substitution effects
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.
Which of the following pairs of goods has a negative cross-price elasticity?
pens and paper notebooks
At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised his price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is
perfectly inelastic
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.
A decrease in the price of either good will cause a consumer's budget constraint to:
pivot rightward
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.
The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as the:
price elasticity of demand.
As the ________ increases, ________.
price of a good; its quantity demanded decreases
A budget constraint
refers to the limited amount of income available to consumers to spend on goods and services.
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
If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would
remain constant
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 slope of a demand curve is not used to measure the price elasticity of demand because
the measurement of slope is sensitive to the units chosen for price and quantity.
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.
To calculate the price elasticity of demand we divide
the percentage change in quantity demanded 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.
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.
If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.
true
The income effect results in consumers increasing the quantity of normal goods demanded when the price falls.
true
A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand.
vertical; downward sloping
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%
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.
If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.
FALSE
If consumers believe the price of LCD televisions will decrease in the future, this will cause the demand for LCD televisions to increase now.
False
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.
Which of the following goods is likely to have the highest price elasticity of demand?
Ketchup
If demand is inelastic, the absolute value of the price elasticity of demand is
Less than 1
Which of the following describes the substitution effect of a price change?
The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
In January, buyers of gold expect that the price of gold will rise in February. What happens in the gold market in January, holding all else constant?
The demand curve shifts to the right.
Which of the following statements is true about the price elasticity of demand?
The price elasticity of demand for a good is generally higher in the long run than in the short run.
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 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.
If, in response to a decrease in the price of grapes, the quantity of grapes demanded increases, economists would describe this as
an increase in quantity demanded.
Demand for a luxury item, such as a yacht, is likely to be
both income elastic and price elastic.
Which of the following goods would have the most inelastic demand?
bread
If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely.
budget constraint
We can derive the market demand curve for gold earrings
by adding horizontally the individual demand curves of each gold earring consumer.
________ is the difference between the willingness to pay and the price paid for a good.
by adding horizontally the individual demand curves of each gold earring consumer.
Luxury goods have income elasticity:
greater than 1
A good is said to have a relatively elastic demand if the value of price elasticity is:
greater than 1.
Which of the following products comes closest to having a perfectly inelastic demand?
cholesterol medication in general
Suppose that when the price of hamburgers decreases, the Ruiz family increases their purchases of ketchup. To the Ruiz family,
hamburgers and ketchup are complements.
The ________ plots the relationship between prices and the quantity that buyers are willing to purchase.
demand curve
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
If a 1% change in the price of a good causes a 1% change in the quantity demanded, the good has an elasticity of demand:
equal to 1.
If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.
false
The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.
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
The demand for gasoline in the short run is
inelastic because there are no good substitutes for gasoline.
If demand is inelastic, the absolute value of the price elasticity of demand is
less than 1
The demand by all the consumers of a given good or service is the ________ for the good or service.
market demand
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
substitutes for the Apple Watch.
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 price of a good increases, ________.
the consumer surplus decreases