Problem Sets 2-5
Assume that a combination of 10 bottles of wine and 2 liters of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one liter of milk is $1, what is the consumer's income?
$102
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If Maria borrows her parents' car and pays for only the gasoline, what is her total cost of driving to destination A?
$340
Scenario: Maria has to choose between driving and taking a train to a destination A. Traveling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. What is the total cost involved if Maria chooses to travel by train?
$460
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If Maria's opportunity cost of time increases to $80 per hour, the cost involved in taking the train is:
$720
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If Maria's opportunity cost of time increases to $80 per hour, the cost of driving to destination A is:
$730
Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $800,000 next year playing for a minor league baseball team, $700,000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is _________.
$800,000
Draw a perfectly inelastic supply curve. The price elasticity of supply when supply is perfectly inelastic is _____.
(a vertical line) 0
In 1916, the Ford Motor Company sold 500,000 Model T Fords at a price of $440. Henry Ford believed that he could increase sales of the Model T by 1,000 cars for every dollar he cut the price. Use this information to calculate the price elasticity of demand for Model T Fords. Assuming the price decreases by $1 and the quantity increases by 1000 cars, the price elasticity of demand for Model T Fords is _______________.
-0.88
A study of the consumption of beverages in Mexico found that: "Overall, for soft drinks a 10% price increase decreases the quantity consumed by 10.6%." Given this information, the price elasticity of demand for soda in Mexico is ____________. Is demand price elastic or price inelastic? Briefly explain.
-1.06 Elastic, because the percentage change in quantity demanded is greater than the percentage change in price.
Economists' estimates of price elasticities can differ somewhat, depending on the time period and on the markets in which the price and quantity data used in the estimates were gathered. An article in the New York Times contained the following statement from the Centers for Disease Control and Prevention: "A 10 percent increase in the price of cigarettes reduces consumption by 3 to 5 percent." Given this information, compute the range of price elasticity of demand for cigarettes. According to the article, the price elasticity of demand for cigarettes ranges from _______ (the lowest end of the range in absolute value) to _____. Explain whether the demand for cigarettes is elastic, inelastic, or unit elastic. The price elasticities in this range If cigarette manufacturers raise prices, will their revenue increase or decrease? Briefly explain. If manufacturers raise prices, then their revenue will
.3,.5 are inelastic because they are less than one (in absolute value) increase because the percentage increase in price will be larger than the percentage decrease in quantity
If a 22 percent increase in the price of Cheerios causes a 13 percent reduction in the number of boxes of cereal demanded, the price elasticity of demand for Cheerios is -_________. The demand for Cheerios is __________.
.59 inelastic
Tacos Enchiladas Ben 9 6 Madysen 6 12 15 18 Using Table 2, assume the price of enchiladas is $3. The quantity supplied of tacos at a price of $1 will be
0
When quantity demanded is completely unresponsive to price, what is the value of price elasticity of demand? If demand is perfectly elastic, then what is the effect of an increase in price?
0 a decrease in quantity demanded to zero
Tacos Enchiladas Katherine 10 5 Josh 8 12 18 17 Using Figure 1 and Table 1, what is the opportunity cost (in terms of tacos given up) of producing an extra enchilada at point E on the graph?
0.667
Suppose the price of salt increases by 25 percent and, as a result, the quantity of pepper demanded (holding the price of pepper constant) increases by 33 percent. The cross-price elasticity of demand between salt and pepper is ________. In this example, salt and pepper are ________________. Instead, suppose salt and pepper were complements. If so, then the cross-price elasticity of demand between salt and pepper would be ____________.
12 substitutes negative
Suppose the demand for a Czech novel translated into English is perfectly inelastic. Assume the initial price of the translated novel is $22.00 and the quantity demanded is 150150 copies per year. If the price of the translated novel increases by $2.00, then the quantity demanded will be _______ copies per year. Next, suppose the demand for a mystery novel by John Grisham is infinitely elastic. In this example, assume the initial price of the novel is $23.00 and the quantity demanded is 1010 thousand copies per year. If the price of the mystery novel increases by $1.00, then the quantity demanded will be _______ copies per year.
150 0
Assume that a consumer can spend $20 on two goods: pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumer's budget constraint? a) 2 pens and 5 pencils b) 2 pens and 3 pencils c) 1 pen and 10 pencils d) 3 pens and 2 pencils
2 pens and 5 pencils
According to the law of supply, a) there is a positive relationship between price and quantity supplied. b) as the price of a product increases, firms will supply less of it to the market. c) as the price of a product increases, firms will supply more of it to the market. d) A and C only
A and C only
Which of the following is most likely to be an example of causation? a) A soccer player scores 4 goals when he wears red socks. He concludes that the red socks helped him score the goals. b) A firm producing CFLs installs new machinery. The per-day production of CFLs increases. c) A student wins money by scratching a ticket with a particular coin. He decides to scratch all tickets with the same coin in the future. d) The crime rate is high in a country. The literacy rate is high as well.
A firm producing CFLs installs new machinery. The per-day production of CFLs increases.
Which of the following illustrates the law of supply? a) A change in price causes a shift of the supply curve. b) An increase in the number of firms in an industry causes a shift of the supply curve. c) An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied. d) All of the above illustrate the law of supply.
An increase in price causes an increase in the quantity supplied, and a decrease in price causes a decrease in the quantity supplied
Consider the markets for BP supreme-grade gasoline, all BP grades of gasoline, and all gasoline. For which of these three markets will demand be most elastic? Demand will be most elastic for
BP supreme-grade gasoline, then for all BP grades of gasoline, and then for all gasoline.
In a market system, how does society decide what goods and services will be produced?
Consumers, firms, and the government determine what goods and services will be produced by the choices they make.
Which of the following statements identifies a difference between correlation and causation? a) Correlation implies a mutual relationship between two things, whereas causation occurs when one thing directly affects another. b) Correlation occurs when one thing directly affects another, whereas causation implies a mutual relationship between two things. c) A causal relationship exists between two variables when they are correlated, but correlation does not necessarily exist if there's a causal relationship between two variables. d) Causation cannot arise when correlation is present, and correlation cannot arise when causation is present.
Correlation implies a mutual relationship between two things, whereas causation occurs when one thing directly affects another.
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for walnuts if the Centers for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol?
D increases, S no change, P and Q increase
Consider the following statement: "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes mistakes." What is the most correct response to this statement?
Economics assumes that consumers and firms are rational, not that they always make the right decisions.
In a paper written by Bentley College economists Patricia M. Flynn and Michael A. Quinn, the authors state: "We find evidence that Economics LOADING... is a good choice of major for those aspiring to become a CEO [chief executive officer]. When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an S&P 500 CEO than any other major." A list of famous economics majors published by Marietta College includes business leaders Warren Buffet, Donald Trump, Ted Turner, and Sam Walton, as well as former presidents George H.W. Bush, Gerald Ford, and Ronald Reagan. Why might studying economics be particularly good preparation for being the top manager of a corporation or a leader in government?
Economics teaches us how to look at the tradeoffs involved in every decision.
Which of the following statements is true of the scientific method? a) Empirical arguments are more credible when they are based on a large data set. b) The larger the size of the data set, the greater the scope of inaccuracy in an analysis. c) Arguments based on a few anecdotes are mostly true. d) When a researcher looks at a large data set, she is more likely to jump to the wrong conclusions.
Empirical arguments are more credible when they are based on a large data set.
Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety. Similarly, using all its resources in the production of liquor chocolates, the firm can produce 8,000 bars per month. However, during a given month, the firm produces both varieties. Which of the following, if true, would suggest that the firm is operating on its PPF? a) In an attempt to cut costs, the company is planning to fire its unproductive resources. b) The opportunity cost of shifting resources from the production of liquor chocolates to dark chocolates is marginal. c) Most domestic consumers prefer the better quality Swiss chocolates imported by the country. d) Even though the demand for both liquor and dark chocolates has increased, the company can increase the production of only one variety. e) Medical reports earlier this year indicated that higher chocolate consumption increases the risk of heart attack.
Even though the demand for both liquor and dark chocolates has increased, the company can increase the production of only one variety.
T/F: Utility refers to how much consumers utilize a product or service.
False
What does increasing marginal opportunity costs mean? What are the implications of this idea for the shape of the production possibilities frontier?
Increasing the production of a good requires larger and larger decreases in the production of another good. The production possibilities frontier will be bowed outward.
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour. Refer to the scenario above. If the opportunity cost of time increases to $80 per hour, which of the following statements is true?
Maria should choose to travel by train as it saves her $10.
According to a news story about the International Energy Agency, the agency forecast that "the current slide in [oil] prices won't [reduce] global supply." Would a decline in oil prices ever cause a reduction in the supply of oil?
No, a decline in oil prices would reduce the quantity of oil supplied, not the supply of oil.
Tacos Enchiladas Paige 15 10 Gage 7 14 22 24 Use the information in Table 2. When the price of tacos is $2, and the price of enchiladas is also $2, then
Paige will supply only tacos, and Gage will supply only enchiladas.
Which of the following claims is most likely to suffer from reverse causality? a) Relatively wealthy people tend to be relatively healthy. b) Higher income increases consumption. c) Crime rate is seen to be lower in countries having a higher level of poverty. d) More hours of study is likely to lead to better results.
Relatively wealthy people tend to be relatively healthy.
Let D= demand, S = supply, P = equilibrium price, and Q= equilibrium quantity. What happens in the market for tropical hardwood trees if the governments restrict the amount of forest lands that can be logged?
S decreases, D no change, P increases, Q decreases
Soo Jin shares a one−bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics student, you rightly conclude that
Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250.
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 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 the change in the price of a substitute for the good. 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.
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.
What happens if a country produces a combination of goods that efficiently uses all of the resources available in the economy?
The country is operating on its production possibilities frontier.
Positive technological change in the production of LCD televisions caused the price of LCD televisions to fall. Holding everything else constant, how would this affect the market for Blu
The demand for blu-ray players would increase and the equilibrium price of blu-ray players would increase
Economists assume that people are rational in the sense that
They use all available information as they take actions intended to achieve their goals
For which of the following products is the price elasticity of demand ( in absolute value) the largest? a) milk b) automobiles c) Tide liquid detergent d) cigarettes
Tide liquid detergent
Which of the following best describes scarcity? Scarcity is central to the study of economics because it implies that________________.
Unlimited wants exceed the limited resources available. Every choice involves an opportunity cost.
The three economic questions that every society must answer are Centrally planned economies allocate resources based on decisions by __________, while market economies answer these questions through decisions made by __________.
What goods will be produced, how will they be produced, and who will receive the goods? government, households and firms
Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
When we assume the managers at Microsoft have used all available information and have weighted all known benefits and costs, we are assuming rationality.
Causation occurs when:
a change in one variable is the reason for the change in another variable.
The substitution effect is the change in the quantity demanded of a good that results from ______________, holding constant the effect of the price change on consumer purchasing power. The income effect causes quantity demanded to ________ when the price of a normal good decreases, and causes quantity demanded to ________ when the price of an inferior good decreases.
a change in price making the good more or less expensive relative to other goods increase; decrease
A production possibilities frontier (PPF) is
a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
The income effect of a decrease in the price of macaroni and cheese (assume this is an inferior good) results in
a decrease in the quantity of macaroni and cheese demanded
In many cities, firms that own office buildings can renovate them for use as residential apartments. According to a news story, in many cities "residential rents are surpassing office rents." The response to an increase in residential rents would be
a decrease in the supply of office space, shifting it to the left.
Which of the following is the textbook's definition of a supply schedule? a) the quantity of a good or service that a firm is willing to supply at a particular price b) a curve that shows the relationship between the price of a product and the quantity of the product demanded c) a table that shows the relationship between the price of a product and the quantity of the product supplied d) None of the above. Which of the following is the textbook's definition of a supply curve? a) the quantity of a good or service that a firm is willing to supply at a particular price b) a table that shows the relationship between the price of a product and the quantity of the product supplied c) a curve that shows the relationship between the price of a product and the quantity of the product supplied d) None of the above.
a table that shows the relationship between the price of a product and the quantity of the product supplied a curve that shows the relationship between the price of a product and the quantity of the product supplied
When economists speak of a surplus, they mean a situation in which a) the quantity supplied exceeds quantity demanded. b) firms have unsold goods piling up c) the market price is above the equilibrium price. d) all of the above. e) A and B only.
all of the above
The grading system plays an important role in student learning. In their book Effective Grading: A Tool for Learning and Assessment in College, Barbara Walvoord and Virginia Anderson state that "grading infuses everything that happens in the classroom." They also argue that grading "needs to be acknowledged and managed from the first moment that an instructor begins planning a class." The grading system used by a teacher can affect the incentives of students to learn the course material by If teachers put too much weight in the grading scale on a certain part of the course, like readings outside the textbook, students might respond by ______________ other parts of the course. Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by _________________ the grade weight assigned to being prepared
altering the payoffs to achieve success on the various components of the course de-emphasizing increasing
Consider firms selling three goodslong dash—one firm sells a good with an income elasticity of demand less than zero, one firm sells a good with an income elasticity of demand greater than zero but less than one, and one firm sells a good with an income elasticity of demand greater than one. In a recession, sales of a good with
an income elasticity of demand greater than one will decline the most and sales of a good with an income elasticity of demand less than zero will increase the most.
Assume that cotton is a normal good. Which of the following would cause both the equilibrium price and equilibrium quantity of cotton to increase? a) a drought that sharply reduces cotton output b) a decrease in consumer income c) an increase in consumer income d) unusually good weather that results in a bumper crop of cotton
an increase in consumer income
Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum. What is the opportunity cost of his decision?
at least $80,000
Complete the following statement: "When there is a shortage of a good _______________. The process continues until the market is finally in equilibrium."
consumers compete against one another by bidding the price upward.
Which of the following statements is true? a) It is not necessary to consider the risks of a particular alternative while making an optimal decision. b) An individual does not require information to make optimal decisions. c) The principle of optimization is only accurate when it comes to making monetary decisions. d) Rational economic agents maximize more than just monetary income.
d) Rational economic agents maximize more than just monetary income
Suppose Wendy's hamburger have many close substitutes available. If so, then an increase in the price of Wendy's hamburgersWendy's hamburgers will likely
decrease the quantity of Wendy's hamburgers demanded by a relatively large amount.
Oil prices plummeted from over $100 per barrel in mid- 2014 to under $30 in early 2016. According to a Reuters article, oil traders in 2015 and 2016 put massive amounts of oil in storage (even on tankers at sea), anticipating higher prices in the future. The article noted that in early 2017, "traders are turning the spigots to drain the priciest storage tanks holding U.S. crude stockpiles as strengthening markets make it unprofitable to store for future sale." Holding some oil in storage rather than selling it would
decrease the supply of oil, shifting it to the left.
An article in the Wall Street Journal in early 2001 noted two developments in the market for laser eye surgery. The first development concerned side effects from the surgery, including blurred vision. The second development was that the companies renting eye
decreased demand and increased supply, resulting in a decrease in the equilibrium price and an uncertain effect on the equilibrium quantity of laser eye surgeries.
An article in the Wall Street Journal notes that although U.S. oil production has increased rapidly in recent years, the increase has still amounted to only 5 percent of world production. Still, that increase has been "enough to help trigger a price collapse." A small increase in supply can lead to a large decline in equilibrium price when
demand is relatively inelastic
Which of the following goods is likely to have an income elasticity of demand greater than one? a) diamond jewelry b) bread c) salt d) gasoline
diamond jewelry
Scenario: Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour.
drive, as it will save her $120
Amazon allows authors who self-publish their e-books to set the prices they charge. One author was quoted as saying: "I am able to drop prices and, by sheer volume of sales, increase my income." The demand for this author's books was price ___________________________________.
elastic because a decrease in price resulted in higher revenue.
If the market price "Pmkt" is above the price "P0" then quantity supplied is _________ quantity demanded and the market is in _______________.
greater than, surplus
An omitted variable is a variable that:
has been left out, and if included, would explain why the variables considered in a study are correlated.
Consider an organization that exists to help the poor. The members of the organization are discussing alternative methods of aiding the poor, when a proponent of one particular method asserts that: "If only one poor person is helped with this method, then all our time and money would have been worth it." If you were a member of the organization, what reply best represents clear economic thinking? This attitude
ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people
A news story from 2017 about the oil market stated, "crude oil prices fell ... in part [due to] renewed concerns about the global supply glut." a) In referring to a "global glut," the article describes the result of a significant ____________________. This change resulted in a ___________. b) In response to the global glut of oil, the market price will _________________________. c) The glut will start to shrink when crude oil producers ___________________>
increase in supply of, relative to the demand for, crude oil. a surplus of oil such that there is a greater quantity supplied than quantity demanded for crude oil. fall to a new, lower equilibrium price at which the quantity demanded would equal the quantity supplied. reduce the amount that they offered for sale, and buyers increase the amount they buy.
An article in the New York Times about the New York Metropolitan Opera (the Met) suggests that the popularity of opera might be increased if the Met reduced its ticket prices. But the article observes that such ticket price cuts would only be possible if the Met received a gift from "a very deep-pocketed donor." The authors of the article are assuming a cut in ticket prices, and assuming there is no gift from a "very deep-pocketed donor," __________________ increase the Met's revenue. The authors are assuming the price elasticity of demand for tickets to the Met is ______________.
inelastic
According to a news story about the bus system in the Lehigh Valley in Pennsylvania, "Ridership fell 14 percent in 2012 after a 33 percent increase" in bus fares. Given this information , the demand for bus trips is ___________. The best explanation for this result is that _______________________.
inelastic bus trips are a necessity for those without cars.
The price elasticity of demand in the United States for crude oil has been estimated to be minus−0.061 in the short run and minus−0.453 in the long run. The demand for crude oil
is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found.
When the price of a product changes,
it changes the relative price of the product causing a substitution effect and at the same time it changes the purchasing power of the buyer causing an income effect as well.
If a market is in equilibrium, is it necessarily true that all potential buyers and sellers are satisfied with the market price?
no
Which of the following statements is true? a) Normative economic statements can be confirmed or disproven. b) Normative statements depend on personal preferences. c) Positive economics deals with issues that are subjective. d) Positive economics recommends what people ought to do.
normative statements depend on personal preferences.
Indicate which of the following statements represent positive analysis and which represent normative analysis a) A 50-cent-per-pac tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents __________________. b) The federal government should spend more on AIDS research. This represents __________________. c) Rising paper prices will increase textbook prices. This represents __________________. d) The price of coffee at Starbucks is too high. This represents __________________.
positive analysis normative analysis positive analysis normative analysis
A sportswriter writing about the Cleveland Indians baseball team made the following observation: "If the Indians suddenly slashed all tickets to $10, would their attendance actually increase? Not all that much and revenue would drop dramatically." The sportswriter is assuming that the demand for Indians tickets is
relatively price inelastic
____________ occurs when the direction of cause and effect is mixed up in a study.
reverse causality
One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls _____________.
scarcity
A consumer has $100 to spend on tables and chairs. If his income increases to $200, the prices of the goods remaining unchanged, his budget constraint
shifts outward
Like many other cities, Denver experienced a sharp decline in construction of new houses in the years following 2006. Many carpenters, roofers, and other skilled workers left the area or found jobs in other industries. In addition, builders stopped buying and preparing home lots for construction. According to an article in the Wall Street Journal, by 2014, as consumers increased their demand for new homes in Denver, "New-home prices have surged over the past two years ... amid a shortage of home lots and skilled construction workers." In the future, the price increases of new houses in Denver can be expected to be
smaller because supply is more elastic over time.
Economist X. M. Gao and two colleagues have estimated that the cross-price elasticity of demand between beer and wine is 0.31. If so, then beer and wine are _______________. Gao and colleagues have estimated that the cross-price elasticity of demand between beer and spirits is 0.15. If the price of spirits increases by 10 percent, then the quantity of beer demanded will ______________ by ________ percent. In addition, Gao and colleagues have estimated the income elasticity of demand for beer to be -0.09. if so, then beer is ______________________.
substitutes increase, 1.5 an inferior good
Lawrence Summers served as secretary of the treasury in the Clinton administration and as director of National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach. "There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs." It would be more moral to reduce pollution,
taking the cost into account because money spent on pollution reduction is not available for other worthy activities
From the list below, select the variable that will cause the supply curve to shift: a) the cost of raw materials b) population and demographics c) consumer income d) prices of related goods
the cost of raw materials
An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise. Holding everything else constant, how would this affect the market for gasoline - powered automobiles ( a substitute for electric automobiles)
the demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase
Assume that the hourly price for the services of tarot card readers has risen and sales of these services have also risen. One can conclude that
the demand for tarot card readers has increased
What is the economic definition of utility? Utility is Is it measurable?
the enjoyment or satisfaction people receive from consuming goods and services No.
the demand curve for canned peas is downward sloping. If the price of canned peas, an inferior good, rises
the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in the quantity demanded
The demand curve for corn is downward sloping. If the price of corn, an inferior good, falls,
the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded.
The cross-price of elasticity of demand is If the cross-price elasticity of demand is negative, then the products are:
the percentage change in quantity demanded of one good divided by the percentage change in the price of another good. complements, but if it is positive, then the products are substitutes.
In 2004, hurricanes destroyed a large portion of Florida's orange and grapefruit crops. In the market for citrus fruit,
the supply curve shifted to the left resulting in an increase in the equilibrium prices
The demand for plums is highest during summer and lowest during winter. Yet plum prices are normally lower in summer than in winter. What must be happening to the supply of plums, from winter to summer, for the equilibrium price to fall?
the supply increases more than the demand increases
Over the past 30 years, the price of oil has been relatively unstable, fluctuating between $11 and well over $100 per barrel. Which of the following potentially contributes to oil-price instability? Oil prices are relatively unstable because a) OPEC has been successful in controlling the quantity of oil its members supply. b) the supply of oil is inelastic. c) the demand for oil is elastic. d) the income elasticity of demand for oil is negative. e) the market for oil is relatively competitive.
the supply of oil is inelastic.
Consider the supply of zinczinc. What would make the supply of zinczinc more elastic? The supply of zinc would become more elastic if
the time horizon becomes longer
We can show economic efficiency: We can show economic inefficiency: The production possibilities frontier will shift outward
with points on the production possibilities frontier with points inside the production possibilities frontier if resources are used to produce capital goods
Leonard Fleck, a philosophy professor at Michigan State University, has written, "When it comes to health care in America, we have limited resources for unlimited health care needs. We want everything contemporary medical technology can offer that will improve the length or quality of our lives as we age. But as presently healthy taxpayers, we want costs controlled." Is it necessary for all economic systems to limit services such as health care? A market system prevents people from getting as many goods and services as they want due to which of the following?
yes their income