Micro Test 2
The income elasticity of demand for _____ goods tends to be positive.
Normal
Which of the following statements is true of the law of diminishing marginal utility?
The law of diminishing marginal utility states that as more units of a good are consumed, the marginal utility from the consumption of the next unit becomes lesser.
the most accurate definition of the price elasticity of demand?
The percentage change in quantity demanded divided by the percentage change in price
According to the law of diminishing marginal utility, the more of a product a person consumes per time period, other things constant, _____.
The smaller will be the addition to total utility
What goods tends to have a high price elasticity of demand?
A good with many close substitutes
Which of the following defines the market demand curve?
A market demand curve shows the total quantity demanded of a good per period by all consumers at various prices.
Which of the following is most likely to have a negative income elasticity of demand?
Day-old bakery products sold at a discount
What is clearly inconsistent with the law of diminishing marginal utility?
Diamond jewelry consumption having no disutility to the elite class as it signals prestige
Which of the following equations expresses consumer equilibrium when a consumer allocates his or her income between two goods, X and Y?
Marginal utility of X/Price of X = Marginal utility of Y/Price of Y
Which of the following is true of a perfectly elastic supply curve?
Horizontal
Which of the following is true of a normal good?
Its demand curve shifts rightward as the level of consumer income increases.
Identify the correct statement about the cross-price elasticity of demand.
The cross-price elasticity of demand for unrelated goods is zero.
_____, the higher the price elasticity of demand.
The greater the importance of a product in consumers' budgets
Suppose the absolute value for the price elasticity of demand for a product is a number that is too large to be defined. Which of the following correctly describes the effect of a 1 percent increase in its price on total revenue?
Total revenue falls to zero.
Which of the following goods or services is most likely to have an elastic demand curve in the short run?
Toyota 4Runner SUV
Which of the following statements is true of utility?
Utility levels across consumers cannot be compared by attaching a numerical value to utility.
Which of the following statements describes the economic concept of utility?
Utility measures the satisfaction, or pleasure, that people receive form consuming a good or service.
A perfectly price inelastic supply curve is:
Vertical
Suppose Katrina always buys exactly 5 Rain Forest Bars each week, regardless of whether they are regularly priced at $1 each or on sale for $0.50 each. Based on this information, Katrina's demand curve for Rain Forest Bars is _____.
Vertical
Which of the following is true of the price elasticity of demand for a good?
Which of the following is true of the price elasticity of demand for a good?
A horizontal demand curve has _____.
a constant slope and a constant elasticity of demand
Developing numerical values for utility allows us to:
be more specific about the utility of consumption.
If the demand curve is a linear downward-sloping curve, the price elasticity of demand:
decreases as one moves down along the curve.
At a given price, the consumer surplus in a market is the:
difference between what most consumers are willing to pay for a given quantity of the product being sold and what they actually pay.
The price elasticity of demand measures:
how responsive quantity demanded is to a change in price.
If the price elasticity of demand for a product is equal to zero, then a 5 percent increase in the price of this product:
increases total revenue by 5 percent.
If price decreases and demand is _____, then total revenue decreases.
inelastic
When the absolute value of the price elasticity of demand falls in the range 0 to 1, demand is said to be _____.
inelastic
Marginal Utility
is the change in total utility resulting from a one-unit change in consumption
A good that has a small share in a consumer's budget is likely to have a:
low price elasticity of demand.
Economists assume that individuals consume products to:
maximize total utility.
price elasticity of demand
measures the percentage change in quantity demanded divided by the percentage change in price
If a good is free, _____.
people will continue to increase consumption until marginal utility is equal to zero.
Consumer surplus is represented by:
the area under the demand curve but above the price.
The utility derived by a consumer from consuming a good depends on:
the consumer's tastes and preferences.
The ratio of the percentage change in the demand for one good to the percentage change in the price of another good is called:
the cross-price elasticity of demand.
A consumer continues to buy a product as long as:
the value that consumer places on the product is greater than the price of the product.
Total utility
total satisfaction you derive from consumption
When the percentage change in quantity supplied is equal to the percentage change in price, supply is said to be _____.
unit elastic