Econ 202 module 3
Which of the following best describes the difference between a demand curve and a demand schedule?
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 factors is likely to lead to an increase in the quantity demanded of pens?
A fall in the price of pens
Which of the following factors is expected to cause the demand curve for coffee to shift to the right?
A higher tax on the sale of tea, a substitute for coffee
What is the difference between an "increase in demand" and an "increase in quantity demanded"?
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.
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.
________ is the measure of the sensitivity of one variable to a change in another.
Elasticity
Which of the following best describes a good with perfectly elastic demand?
Even the smallest increase in the price of the good will cause consumers to stop consuming it completely.
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.
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.
In order to prove that Motrin and Ibuprofen are substitutes, one should measure the ________ and get a ________.
cross-price elasticity; positive number
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
The price elasticity of demand for a good that is a necessity is likely to be:
inelastic.
Suppose you are considering buying stock in the stock market, and your objective is to maximize your net worth. Furthermore, your study of the market reveals that the economy will be slowing down over the next several months. Under these conditions, it would be best to purchase stock in companies that produce
inferior goods.
Willingness to pay:
is the highest price that a buyer is willing and able to pay for a unit of good.
Two goods are said to be complements when a fall in the price of one good:
leads to a right shift in the demand for the other good.
The demand by all the consumers of a given good or service is the ________ for the good or service.
market demand
If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is
relatively inelastic.
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
substitutes for the Apple Watch.
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 cannot 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 income effect of an increase in the price of peaches is
the change in the quantity of peaches demanded that results from the effect of the change in price on consumer purchasing power, holding all other factors constant.
If the price of a good increases, ________.
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 the substitution effect
The slope of a demand curve is not used to measure the price elasticity of demand because
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.
To calculate the price elasticity of demand we divide
the percentage change in quantity demanded by the percentage change in price.
The price elasticity of demand is equal to
the percentage change in quantity demanded divided by the percentage change in price.
If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one.
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.
false
The absolute value of the price elasticity of demand for telescopes is 1.5. Therefore, telescopes can be classified as a luxury.
false
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
The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.
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.
fasle
A good is said to have a relatively elastic demand if the value of price elasticity is:
greater than 1.
If a good has a price elasticity of demand of -3, it implies that:
if the price of the good increases by 1%, the quantity demanded of the good will decrease by 3%.
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
increase the demand for the Gear S2.
As the number of available substitutes increases, the price elasticity of demand for a good:
increases
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 ________.
$3
Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil?
A twofold increase in the price of pens and a threefold increase in the price of pencils
________ is the difference between the willingness to pay and the price paid for a good.
Consumer surplus
Jenna runs a small boutique in Capitola. She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more. On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?
It is perfectly elastic.
Which of the following goods is likely to have the highest price elasticity of demand?
Ketchup
Which of the following examples best describes the Law of Demand?
When the price of bread doubles, John's consumption of bread halves.
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.
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. the opportunity cost of buying each of the goods changes along the constraint.
If, in response to an increase in the price of chocolate the quantity of chocolate demanded decreases, economists would describe this as
a decrease in quantity demanded.
Holding everything else constant, a decrease in the price of bicycles will result in
an increase in the quantity of bicycles demanded.
The substitution effect of a decrease in the price of movie tickets results in
an increase in the quantity of movie tickets demanded.
The demand curve for most goods is normally:
downward sloping.
Higher price elasticity of demand means that a consumer's demand is:
more responsive to price changes.
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:
pivot leftward along the vertical axis
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:
pivot leftward along the vertical axis.
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 along the horizontal axis.
A decrease in the price of either good will cause a consumer's budget constraint to:
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:
pivots leftward without a change in the intercept on the horizontal axis.
The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as the:
price elasticity of demand.
As the ________ increases, ________.
price of a good; its quantity demanded decreases
A budget constraint
refers to the limited amount of income available to consumers to spend on goods and services.
If the demand for cell phone service is inelastic, then
the percentage change in quantity demanded is less than the percentage change in price (in absolute value).
The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated by dividing
the percentage change in the quantity demanded of Coca-Cola by the percentage change in the price of Pepsi-Cola.
A change in all of the following variables will change the market demand for a product except
the price of the product.
The law of demand implies, holding everything else constant, that as the price of bagels increases,
the quantity of bagels demanded will decrease.
If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.
true
The substitution effect of a price increase causes a decrease in the quantity of an inferior good demanded.
true
A demand curve which is ________ represents perfectly inelastic demand, and a demand curve which is ________ represents inelastic demand.
vertical; downward sloping
If the slope of a demand curve is equal to -0.1 then
we don't know whether the demand is elastic or inelastic.
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.