Unit 3 Quizzes

A normal good is a good for which the demand increases as income decreases, holding everything else constant. True False

False

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 ________. A. $3 B. $2.50 C. $10 D. $2

A. $3

Which of the following best describes the difference between a demand curve and a demand schedule? A. 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. B. 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. C. 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. D. A demand curve can be derived from a demand schedule, but a demand schedule cannot be derived from a demand curve.

A. 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 statements best describes a normal good? A. A normal good is a good whose demand increases with an increase in consumers' income B. A normal good is a good that is readily available in the market. C. A normal good is a good that is rationed by the government. D. A normal good is a good whose supply increases as its price decreases.

A. A normal good is a good whose demand increases with an increase in consumers' income

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

A. A rise in the price of gasoline

If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely. A. Budget constraint B. Indifference curve C. Demand function D. Demand schedule

A. Budget constraint

_______ is the difference between the willingness to pay and the price paid for a good. A. Consumer surplus B. Producer surplus C. Seller's profit D. Revenue

A. Consumer surplus

The price elasticity of demand for a good that is a necessity is likely to be: A. Inelastic. B. Perfectly elastic. C. Unit elastic. D. Elastic, but not perfectly elastic.

A. Inelastic.

The demand schedule for a commodity illustrates how the consumption of a commodity changes with changes in: A. Its price. B. Income. C. Supply. D. Tastes and preferences.

A. Its price.

The demand by all the consumers of a given good or service is the ________ for the good or service. A. Market demand B. Law of demand C. Quantity demanded D. Scheduled demand

A. Market demand

If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price. True False

True

Cross-price elasticity of demand is calculated as the A. Percentage change in quantity demanded of one good divided by percentage change in price of a different good. B. Percentage change in quantity supplied divided by percentage change in price of a good. C. Percentage change in quantity sold divided by percentage change in buyers' incomes. D. Percentage change in quantity demanded divided by percentage change in price of a good.

A. Percentage change in quantity demanded of one good divided by percentage change in price of a different good.

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: A. Pivot leftward along the vertical axis. B. Pivot leftward along the vertical axis. C. Pivot leftward along the horizontal axis. D. Pivot rightward along the horizontal axis. pivot rightward along the vertical axis.

A. Pivot leftward along the vertical axis.

A budget constraint A. Refers to the limited amount of income available to consumers to spend on goods and services. B. Reflects the desire by consumers to increase their income. C. Represents the bundles of consumption that make a consumer equally happy. D. Shows the prices that a consumer chooses to pay for products he consumes.

A. Refers to the limited amount of income available to consumers to spend on goods and services.

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 A. Substitutes for the Apple Watch. B. Complements to the Apple Watch. C. Normal goods compared to the Apple Watch. D. Inferior goods compared to the Apple Watch.

A. Substitutes for the Apple Watch.

If the price of automobiles was to increase, then A. The demand for gasoline would decrease. B. The quantity of gasoline demanded would decrease. C. The supply of gasoline would increase. D. The demand for gasoline would increase.

A. The demand for gasoline would decrease.

Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: A. The opportunity cost of buying sweaters increases. B. The opportunity cost of buying shirts increases. C. There is no change in the opportunity cost of consuming either good. D. The opportunity cost of buying sweaters decreases.

A. The opportunity cost of buying sweaters increases

To calculate the price elasticity of demand we divide A. The percentage change in quantity demanded by the percentage change in price. B. The percentage change in price by the percentage change in quantity demanded. C. The average price by the average quantity demanded. D. Rise by the run.

A. The percentage change in quantity demanded by the percentage change in price.

If the demand for cell phone service is inelastic, then A. The percentage change in quantity demanded is less than the percentage change in price (in absolute value). B. The percentage change in quantity demanded is equal to the percentage change in price. C. The percentage change in quantity demanded is greater than the percentage change in price (in absolute value). D. The quantity demanded does not change in response to changes in price.

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

If the slope of a demand curve is equal to -0.1 then A. We don't know whether the demand is elastic or inelastic. B. The demand is elastic at low prices and inelastic at high prices. C. Demand is inelastic. D. As price increases by 10 percent quantity demanded decreases by 1 percent.

A. We don't know whether the demand is elastic or inelastic.

Which of the following examples best describes the Law of Demand? A. When the price of bread doubles, John's consumption of bread halves. B. When a new anti-tobacco commercial is released, the consumption of tobacco products decreases sharply. C. When John's income doubles, his telephone bill also doubles. D. When the price of watches increases, a local manufacturer starts offering more watches for sale.

A. When the price of bread doubles, John's consumption of bread halves.

A change in the slope of a budget constraint indicates: A. A change in the consumer's tastes and preferences. B. A change in the price of either good that causes a change in the opportunity cost. C. A change in the price of either good without a change in the opportunity cost. D. A change in the consumer's income.

B. 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. The tastes and preferences of the consumer change along the constraint. B. A consumer faces a fixed price of both goods that do not change with changes in consumption. C. The opportunity cost of buying each of the goods changes along the constraint. D. A consumer has a limited money income.

B. A consumer faces a fixed price of both goods that do not change with changes in consumption.

What is the difference between an "increase in demand" and an "increase in quantity demanded"? A. There is no difference between the two terms; they both refer to a movement downward along a given demand curve. B. 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. C. There is no difference between the two terms; they both refer to a shift of the demand curve. D. An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve

B. 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

The demand curve for most goods is normally: A. Parallel to the horizontal axis. B. Downward sloping. C. Upward sloping. D. Parallel to the vertical axis.

B. Downward sloping.

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: A. Less than 1. B. Equal to 1. C. Equal to 0. D. Greater than 1.

B. Equal to 1.

Which of the following could explain why the demand for table salt is inelastic? A. Salt is a luxury for high-income consumers but a necessity for low-income consumers. B. Households devote a very small portion of their income to salt purchases. C. Salt is a luxury good. D. Salt is a rare commodity.

B. Households devote a very small portion of their income to salt purchases.

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 A. Increase the quantity demanded for the Apple Watch. B. Increase the demand for the Gear S2. C. Decrease the demand for the Apple Watch. D. increase the quantity demanded for the Gear S2.

B. Increase the demand for the Gear S2.

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 A. Elastic. B. Inelastic. C. Perfectly inelastic. D. Unit elastic.

B. Inelastic.

Which of the following goods is likely to have the highest price elasticity of demand? A. Life-saving drugs B. Ketchup C. Salt D. Gasoline

B. Ketchup

Higher price elasticity of demand means that a consumer's demand is: A. Less responsive to income changes. B. More responsive to price changes. C. More responsive to income changes. D. Less responsive to price changes.

B. More responsive to price changes.

If the value of price elasticity of demand for a good is equal to "∞", it implies that the good has a ________ demand. A. Unit elastic B. Perfectly elastic C. Perfectly inelastic D. Relatively inelastic

B. Perfectly elastic

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: A. Shift to the right. B. Pivot rightward along the horizontal axis. C. Shift to the left. D. Pivot rightward along the vertical axis.

B. Pivot rightward along the horizontal axis.

A decrease in the price of either good will cause a consumer's budget constraint to: A. Pivot leftward. B. Pivot rightward. C. Shift leftward. D. Shift rightward.

B. 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: A. Pivots rightward without a change in the intercept on the horizontal axis. B. Pivots leftward without a change in the intercept on the horizontal axis. C. Shifts to the right. D. Shifts to the left

B. Pivots leftward without a change in the intercept on the horizontal axis.

If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is A. Unit elastic. B. Relatively inelastic. C. Relatively elastic. D. Perfectly elastic.

B. Relatively inelastic.

Tomas increased his consumption of potato chips when the price of pistachios increased. For Tomas, potato chips and pistachios are A. Complements in consumption. B. Substitutes in consumption. C. Both inferior goods. D. Both luxury goods.

B. Substitutes in consumption.

The slope of a demand curve is not used to measure the price elasticity of demand because A. The slope of the demand curve does not tell us how much quantity changes as price changes. B. The measurement of slope is sensitive to the units chosen for price and quantity. C. The slope of a line cannot have a negative value. D. The slope of a linear demand curve is not constant.

B. The measurement of slope is sensitive to the units chosen for price and quantity.

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) S D M $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: A. 9 bottles. B. 4 bottles. C. 7 bottles. D. 12 bottles.

C. 7 bottles.

Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil? A. A decrease in the consumer's income B. An increase in the consumer's income C. A twofold increase in the price of pens and a threefold increase in the price of pencils D. A twofold increase in the prices of both pens and pencils

C. A twofold increase in the price of pens and a threefold increase in the price of pencils

We can derive the market demand curve for gold earrings A. By adding vertically the quantity demanded of each gold earring consumed at each price. B. By adding the prices each gold earring consumer is willing to pay for each quantity. C. By adding horizontally the individual demand curves of each gold earring consumer. D. Only if the tastes of all gold earring consumers are similar.

C. By adding horizontally the individual demand curves of each gold earring consumer.

If smartwatches are considered substitutes for smartphones, the decline in the price of smartwatches would, all else equal, A. Increase the quantity of smartphones demanded. B. Increase the demand for smartphones. C. Decrease the demand for smartphones. D. Decrease the quantity of smartphones demanded.

C. Decrease the demand for smartphones.

If a demand curve shifts to the right, then A. Quantity demanded has decreased. B. Demand has decreased. C. Demand has increased. D. Quantity demanded has increased.

C. Demand has increased.

Holding everything else constant, the absolute value of the price elasticity of demand for Saucony tennis shoes is ________ the price elasticity of demand for tennis shoes. A. Less than B. Equal to C. Greater than D. Twice as great as

C. Greater than

The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as the: A. Shadow price of the good. B. Price multiplier. C. Price elasticity of demand. D. Consumer surplus.

C. Price elasticity of demand.

The quantity demanded of a good is: A. always determined by government intervention. B. The amount of a good that sellers are willing to supply at a given market price. C. The amount of a good that buyers are willing to purchase at a given market price. D. Determined independent of the market price.

C. The amount of a good that buyers are willing to purchase at a given market price.

Which of the following describes the substitution effect of a price change? A. The change in quantity demanded of a good that results from the effect of a change in price on consumer purchasing power, holding everything else constant. B. The change in quantity demanded of a good that results from the change in the price of a substitute for the good. C. 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. D. The change in demand 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.

C. 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.

The substitution effect of an increase in the price of peaches is A. The change in the demand for nectarines (a substitute good) that results when peaches become more expensive relative to nectarines, holding constant the effect of the price change on consumer purchasing power. B. The change in the quantity of peaches demanded that results from the effect of the change in the price of peaches on the consumer's purchasing power. C. 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. D. The change in the demand for peaches that results when the price of peaches increases.

C. 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 A. The demand for aspirin is elastic. B. Aspirin has few substitutes. C. The demand for aspirin is inelastic. D. Aspirin is a normal good.

C. 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? A. The total utility effect and marginal utility effect B. The consumption effect and expenditure effect C. The income effect and the substitution effect D. The utility effect and the budget effect

C. The income effect and the substitution effect

Which of the following statements correctly differentiates between the slope of the demand curve and price elasticity of demand along a linear demand curve? A. 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. B. The price elasticity of demand is a product, whereas the slope of a demand curve is a ratio. C. 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. D. The price elasticity of demand is a ratio, whereas the slope of a demand curve is a product.

C. 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.

Elasticity is: A. The difference of the percentage change in two variables. B. The sum of the percentage change in two variables. C. The ratio of the percentage change in two variables. D. The product of the percentage change in two variables.

C. The ratio of the percentage change in two variables.

If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as A. A change in consumer income. B. A decrease in demand. C. A decrease in consumers' taste for chocolate. D. A decrease in quantity demanded.

D. A decrease in quantity demanded.

The income effect of a decrease in the price of legal services, a normal good, results in A. An increase in the demand for legal services. B. A decrease in the demand for legal services. C. A decrease in the quantity of legal services demanded. D. An increase in the quantity of legal services demanded.

D. An increase in the quantity of legal services demanded.

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

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

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: A. Greater than 1. B. Equal to 0. C. Less than 1. D. Equal to 1.

D. Equal to 1.

The buyers of a good will want to purchase it as long as their willingness to pay for the good is: A. Less than the price. B. Equal to zero. C. Greater than zero. D. Greater than or equal to the price.

D. Greater than or equal to the price.

If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is A. One that sells a price-inelastic good. B. One that sells a necessity good. C. One that sells an inferior good. D. One that sells a luxury good.

D. One that sells a luxury good.

If the demand for a life-saving drug was perfectly inelastic and the price doubled, the quantity demanded would A. Also double. B. Be cut in half. C. Decrease by 50%. D. Remain constant.

D. Remain constant.

If the price of a good increases, ________. A. The consumer surplus increases B. The budget constraint shifts to the right C. The budget constraint shifts to the left D. The consumer surplus decreases

D. The consumer surplus decreases

Which of the following statements is true? A. The demand curve for a necessity is more elastic than the demand curve for a luxury. B. The more time that passes the more inelastic the demand for a product becomes. C. In general, if a product has few substitutes it will have an elastic demand. D. The more narrowly we define a market, the more elastic the demand for a product will be.

D. The more narrowly we define a market, the more elastic the demand for a product will be.

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

D. When the price of tea increased, the quantity demanded of tea decreased

An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant. True False

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. True False

False

If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one. True False

False

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. True 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 False

False