Econ 202 Module 3 Quizzes

A good is said to have relatively elastic demand if the value of price elasticity is

greater than one

Opera Estate Girls' School is considering increasing its tuition to raise revenue. If the school believes that raising tuition will increase revenue it is assuming that the demand for attending the school is

inelastic

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

If a good has a negative income elasticity of demand, this indicates that the good is a complement with another good. inferior. normal. a substitute with another good.

inferior

Which of the following statements about the price elasticity of demand along a downward-sloping linear demand curve is true? It is perfectly elastic at very high prices and perfectly inelastic at very low prices. It is unit elastic throughout the demand curve. It is elastic at high prices and inelastic at low prices. It is inelastic at high prices and elastic at low prices.

it is elastic at high prices and inelastic at low prices

the demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in

its price

Johnny 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

which of the following best describes the difference between a demand curve and a demand schedule? A demand curve shows different quantities of a good demanded at different prices, whereas a demand schedule shows different quantities of a good demanded at different incomes. A demand curve can be derived from a demand schedule, but a demand schedule cannot be derived from a demand curve. 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. A demand curve shows different quantities of a good demanded at different incomes, whereas a demand schedule shows different quantities of a good demanded at different prices.

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.

Which of the following pairs of goods is most likely to have a positive cross-price elasticity? A privately-owned car and public transportation Motorcycles and typewriters Printers and ink cartridges Coffee and sugar

A privately-owned car and public transportation

Which of the following is likely to cause the demand curve for cars to shift to the left? A rise in the price of gasoline An increase in the cost of production leading to an increase in the price of cars An increase in the economy's national income A rise in the price of cars

A rise in the price of gasoline

Which of the following is the formula to calculate arc elasticity of demand? Arc elasticity of demand = [(Q2 - Q1) / (Q2+ Q1)/2] / [(P2 - P1) / (P2 + P1)/2] Arc elasticity of demand = [(Q2 + Q1) / (Q2/2)] / [(P2 + P1) / (P2/2)] Arc elasticity of demand = [(Q2 - Q1) / (Q2/2)] / [(P2 - P1) / (P2/2)] Arc elasticity of demand =[(Q1 - Q2) / (Q2 + Q1)] / [(P1 - P2) / (P2 + P1)]

Arc elasticity of demand = [(Q2 - Q1) / (Q2+ Q1)/2] / [(P2 - P1) / (P2 + P1)/2]

Which of the following statements about the price elasticity of demand is CORRECT? The elasticity of demand for a good in general is equal to the elasticity of demand for a specific brand of the good. Demand is more elastic in the long run than it is in the short run. Demand is more elastic the smaller the percentage of the consumer's budget the item takes up. The absolute value of the elasticity of demand ranges from zero to one.

Demand is more elastic in the long run than it is in the short run

Which of the following best describes a good with perfectly elastic demand? For a given price change, the percentage change in quantity demanded will be less than the percentage change in its price. The quantity demanded of the good is completely unaffected by a price change. Even the smallest increase in the price of the good will cause consumers to stop consuming it completely. The demand curve for the good initially slopes upward, reaches its maximum, and then slopes downward.

Even the smallest increase in the price of the good will cause consumers to stop consuming it completely.

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in the price of a complementary product.

False

Suppose that when the price of hamburgers decreases, the Landry family decreases their purchases of chicken nuggets. To the Landry family hamburgers and chicken nuggets are substitutes. hamburgers and chicken nuggets are complements. hamburgers and chicken nuggets are normal goods. hamburgers and chicken nuggets are inferior goods.

Hamburgers and chicken nuggets are substitutes

Which of the following statements is true? If the price of a good is raised and total revenue increases, demand is inelastic. If the price of a good is raised and total revenue does not change, demand is perfectly elastic. If the price of a good is lowered and total revenue increases, demand is inelastic. If the price of a good is lowered and total revenue decreases, demand is elastic.

If the price of a good is raised and total revenue increases, demand is elastic

Which of the following pairs of goods are likely to be considered complements? Laptops and electric heaters Nokia and Samsung cell phones Pens and writing pads Motorcycles and typewriters

Pens and writing pads

A decrease in the price of either one or the other good will cause a consumer's budget constraint to

Pivot rightward (out)

Which of the following goods is likely to have the highest price elasticity of demand? Pizza Gasoline Salt Life Saving Drugs

Pizza

Which of the following goods is likely to have the highest price elasticity of demand? Pizza Gasoline Salt Life-saving drugs

Pizza

The internet has created a new category in the book selling market, namely the "barely used" book. How does the availability of barely used books affect the market for new books?

The demand curve for new books shifts to the left

Which of the following statements is true about the income elasticity of demand? The income elasticity of demand for inferior goods is always positive. The income elasticity of demand for normal goods is always zero. The income elasticity of demand for normal goods is always positive. The income elasticity of demand for inferior goods is always zero.

The income elasticity of demand is always positive

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

If the demand for cell phone service is inelastic, then

The percentage change in quantity demanded in less than the percentage change in price (in absolute value)

Which of the following statements correctly differentiates between the slope of the demand curve and price elasticity along a linear demand curve? The price elasticity of demand for a good varies along the demand curve, whereas the slope of the demand curve remains the same at different points on the curve. The price elasticity of demand is a product, whereas the slope of a demand curve is a ratio. The price elasticity of demand for a good is the same at different points on the demand curve, whereas the slope of the demand curve varies depending on the point where it is measured. The price elasticity of demand is a ratio, whereas the slope of a demand curve is a product.

The price elasticity of demand for a good varies along the demand curve, whereas the slope of the demand curve remains the same at different points on the curve.

Which of the following statements is true? When a firm lowers its price its total revenue may either increase or decrease. Whenever a firm increases its quantity sold its revenue will increase. Whenever a firm raises its price its total revenue will increase. Total revenue will equal zero when the demand for a product is unit elastic

When a firm lowers its price its total revenue may either increase or decrease

A movement along the demand curve for toothpaste would be caused by a change in population. a change in the price of toothpaste. a change in the price of toothbrushes. a change in consumer income.

a change in price of toothpaste

Income elasticity measures how a good's quantity demanded responds to

a change in the buyer's income

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 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.

Of the following, which is the best example of good with a perfectly inelastic demand? the demand for a college education by a student who has a full scholarship to an Ivy League school the demand for tickets in New York City when the Mets or Yankees are in the World Series a diabetic's demand for insulin the demand for gasoline

a diabetic's demand for insulin

An increase in the demand for a good is represented by

a right shift to a new demand curve

Which of the following will lead to a change in the opportunity cost of buying a pen and pencil

a twofold increase in the price of pens and a threefold increase in the price of pencils

If the price of muffins, a normal good you enjoy, rises: the substitution effect which causes you to decrease your muffin consumption outweighs the income effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased. the income and substitution effects offset each other but the price effect leads you to buy fewer muffins. the income effect which causes you to decrease your muffin consumption outweighs the substitution effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased. both the income and substitution effects lead you to buy fewer muffins.

both the income and substitution effects lead you to buy fewer muffins

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

If the cross-price elasticity of demand for computers and software is negative, this means the two goods are complements. inferior. substitutes. normal.

complements

________ is the difference between the willingness to pay and the price paid for a good

consumer surplus

the ______ plots the relationship between prices and the quantity that buyers are willing to purchase

demand curve

Jonah lives in a small town where there is only one Mexican restaurant. Which of the following is likely to be true about the price elasticity of demand for meals at the Mexican restaurant?

demand is likely to be relatively inelastic

A good is said to have a relatively elastic demand if the value of price elasticity is

greater than one

A service station owner in Staten Island, New York, was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of gasoline, the demand for gasoline is

elastic

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

Suppose the absolute value of the price elasticity of demand for basketball game tickets on your campus is greater than 1. Increasing ticket prices will increase the total revenue from ticket sales

false

buyers of a good will want to purchase it as their willingness to pay for the good is

greater than or equal to the price

Price elasticity of demand measures

how responsive quantity demanded is to a change in price.

if the 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? Decorative flowers Life-saving drugs Chocolates Potato chips

life saving drugs

Higher price elasticity of demand means that a consumer's demand is

more responsive to price change

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 budges constraint to

pivot leftward (in) along the vertical axis

a decrease in the price of either one or the other good will cause a consumer's budget constraint to

pivot rightward (out)

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 (out) along the horizontal axis

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 left (in) without a change in the intercept on the horizontal axis

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 (in) without a change in the intercept on the horizontal axis

total revenue equals

price per unit times quantity sold

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

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 a firm raised its price and discovered that its total revenue fell, the demand for its product is

relatively elastic

Suppose when Nablom's Bakery raised the price of its breads by 10 percent, the quantity demanded fell by 15 percent. What was the effect on sales revenue?

sales revenue decreased

suppose when the price of strawberries decreases, Simone increases her purchase of whipped cream. To Simone,

strawberries and whipped cream are complements

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 can't exceed the income available is referred to as

the budget constraint

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 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 the budget constraint shifts to the right the consumer surplus increases the budget constraint shifts to the left

the consumer surplus decreases

If the absolute value of the price elasticity of demand for aspirin equals 0.8, then

the demand for aspirin is inelastic

a change in the price of a good has two effects on the quantity consumed. What are these effects

the income effect and substitution effect

when demand is elastic, the fall in price causes total revenue to rise because the increase in quantity sold is large enough to offset the lower price. the demand curve shifts. the percentage increase in quantity demanded is less than the percentage fall in price. when price falls, quantity sold increases so total revenue automatically rises.

the increase in quantity sold is large enough to offset the lower price

Elasticity is

the ratio of the percentage change in two variables

The slope of a demand curve is not used to measure the price elasticity of demand

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

If the demand for steak is unit elastic, then

the percentage change in quantity demanded is equal to the percentage change in price

If a good has price elasticity of demand equal to 0, ___________

the quantity demanded is completely unaffected by a change in its price

the law of demand implies, holding everything else constant, that as the price of bagels increases

the quantity of bagels demanded will decrease

The income effect explains why there is an inverse relationship between the price of a product and the quantity of the price demanded

true

Which of the following examples best describes the Law of Demand? When the price of gasoline increased, the demand for cars fell. When Alex received a pay hike, his consumption of all goods increased. When the price of Nokia phones increased, the demand for Samsung phones increased. When the price of tea increased, the quantity demanded of tea decreased.

when the price of tea increased, the quantity demanded of tea decreased

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

if the demand for a product is perfectly inelastic, a decrease in the price of the product

will decrease total revenue