Unit 2 ap econ EC

The market system corrects a shortage by

Raising product price to increase production

When a consumer consumes more of a good that has become cheaper in place of a good that has become relatively more expensive, that is known as the

Substitution effect

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to____ and demand is described as _____

0.2 (less then 1) ; inelastic

You are told that the income elasticity for pinwheels is -3,.0. This means that

10 percent increase in income produces a 30 percent decrease in consumption of pinwheels. Pinwheels are an inferior good.

An increase in the supply of wheat in the United States is most likely to result from:

A change in farming technology that improves the soil for wheat.

Assume that tomatoes are at an equilibrium price of $35 per bushel. If the demand for tomatoes decreases, which of the following will occur?

A surplus at $35, leading to a decrease in price and in quantity supplied.

When the economy suffers a downturn, vacationers are more likely to take car trips then to fly. Which provides the reasonable explanation for this phenomenon?

Air travel is a normal good and vacation travel by car is an inferior good

The law of demand states that, other things equal:

As the price increases, the quantity demand will decrease.

If a university decrease the price of tickets to football games to collect more revenue, it is assuming that the demand for tickets is

Price-elastic

If growing corn becomes more profitable then growing wheat, which of the following will occur?

The price of corn will decrease

The cross-price elasticity of demand between good X and good Z measures the percentage change in the quantity demanded of good X in response to a percentage change in

The price of good Z

An increase in the price of gasoline will cause the demand curve for tires ti shift in which direction?

To the left, because gasoline and tires are complements

An increase in demand and an increase in supply will

affect price in an indeterminate way and increase the equilibrium quantity.

An increase in the supply of phones lowered the price of phones in the market. The substitution effect of the price decrease will motivate consumers to

decrease the quantity of other electronics demanded and increase the quantity of phones demanded.