ECON 2001 Quiz 3

Which of the following would shift the demand curve for CDs?

an increase in consumers incomes

When demand is elastic, a decrease in price will cause

an increase in total revenue

College students living off campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

inferior goods

Suppose that tacos and pizzas are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to:

reduce the demand for soda and increase the demand for tacos

As we move downward and to the right along a linear, downward-sloping demand curve,

slope remains constant but elasticity changes

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

the availability of close substitutes in determining the price elasticity of demand

Other things equal, which of the following might shift the demand curve for gasoline to the left?

the development of a low-cost electric automobile

What would happen to the equilibrium price and quantity of lattes if the cost to produce steamed milk, which is used to make lattes, increased, and scientists discovered that lattes cause heart attacks?

the equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic

Which is consistent with the law of demand?

An increase in the price of hamburgers causes a decrease in the quantity of hamburgers demanded

Which of the following is likely to have the most price elastic demand?

Haagen-Dazs vanilla bean ice cream

If the market price is above the equilibrium price:

a surplus will occur and producers will produce less and lower prices

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to:

decrease by approximately 12 percent

If the price of gasoline rises, when is the price elasticity of demand likely to be the highest?

one year after the price increase

what would happen to the equilibrium price and the quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decide to produce peanut butter, and health officials announced that eating peanut butter was good for you?

price will rise, and the effect on quantity is ambiguous

The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should

raise the price of the cinnamon rolls

If the quantity supplied responds only slightly to changes in price, then

supply is said to be inelastic

Suppose chocolate-dipped strawberries are currently selling for $30 per dozen, but the equilibrium price of chocolate-dipped strawberries is $20 per dozen. We would expect a

surplus to exist and the market price of chocolate dipped strawberries to decrease

If the cross-price elasticity of demand for two goods is 1.25, then

the two goods are substitutes

Change in quantity demanded is caused by the change in its own price, ceteris paribus, and is shown by the movement along the demand curve

true