03 Micro 2 Test Flash Cards Demand

Demand: Assume that good X is a normal good. Which of the following helps to explain why a decrease in the price of good X increases the quantity demanded of good X?

(A)Good X becomes relatively less expensive than its substitutes, so consumers buy more of good X and fewer of the substitutes.

Demand:The fifth slice of pizza is not as satisfying as the first, and as a result, a person is not willing to pay as much for it. What economic concept does that sound like?

(A)Law of diminishing marginal utility

Demand:For an inferior good, an increase in consumer income will cause

(A)the demand curve to shift to the left

Demand:Which of the following will cause the demand curve for good X to shift to the right?

(B)An increase in the price of good Y, a substitute for good X

Demand:Assume that ice cream is a normal good. If the price of ice cream decreases, the substitution effect and the income effect will lead to which of the following changes in ice cream consumption?

(B)Substitution Effect = Increase ; Income Effect = Increase

Demand:The law of demand is best represented by which of the following situations?

(B)The price of cell phones has gone down and as a result the quantity of cell phones sold has gone up.

Demand:One reason consumers typically increase the quantity of a good they purchase when the price of the good decreases is that

(B)consumers' purchasing power increases

Demand: If a bus pass is an inferior good, which of the following must be true?

(C)An increase in consumer income will decrease the demand for bus passes.

Demand:Which of the following events will cause the demand curve for apple juice to shift to the right?

(C)An increase in the price of orange juice, a substitute for apple juice

Demand: If the price of a normal good goes up, what is true of the substitution effect?

(C)It reinforces the income effect.

Demand: Which of the following will most likely happen in the market for good X if the price of good X decreases?

(C)The quantity demanded for good X will increase.

Demand: Which of the following will decrease the demand for soda?

(D)An increase in the price of pizza, if pizza and soda are complements

Demand:Which of the following is true based on the law of diminishing marginal utility?

(D)The additional satisfaction experienced from consuming extra units of a product goes down as more of the product is consumed.

Demand: Which of the following best describes the law of demand?

(D)When the price of a good decreases, its quantity demanded increases.

Demand:A normal good has a downward sloping demand curve for which of the following reasons? I. If its price goes up, consumers pursue less expensive substitutes. II. If its price goes up, consumers' purchasing power goes down. III. If its price goes up, consumers' utility from consuming that good goes up.

(E) I and II only

Demand:Based on the law of demand, if the price of apple juice goes up, which of the following will occur?

(E)The quantity of apple juice demanded will go down.

Demand:What can explain why the demand curve is downward sloping for a normal good?

(E)The substitution and income effects cause the quantity demanded to move in the same direction.

Demand:Which of the following explains why a decrease in the price of a normal good will lead to an increase in the quantity demanded of the good?

(A)A lower price will increase consumers' purchasing power.

Demand: If the demand for good A decreases as the price of good B decreases, it can be concluded that

(A)B and A are substitute goods