Exam 1 review
Because there are numerous choices for fast food purchases, the price elasticity of demand for Taco Bell food is likely
elastic.
When the price is below the equilibrium price, the quantity demanded
exceeds the equilibrium quantity but the quantity supplied is less than the equilibrium quantity.
If technological advances lower the cost of computer chips, in the market for computers the equilibrium price will ________ and the equilibrium quantity will ________.
fall; increase
When the demand for a good decreases, its equilibrium price ________ and equilibrium quantity ________.
falls; decreases
The figure above shows the demand for fruit snacks. Which movement reflects a decrease in demand?
from point a to point c
The figure above shows the demand for fruit snacks. Which movement reflects a decrease in population?
from point a to point c
The figure above shows the demand for fruit snacks. Which movement reflects an increase in income if fruit snacks are an inferior good?
from point a to point c
The figure above shows the demand for fruit snacks. Which movement reflects an increase in demand?
from point a to point d
The figure above shows the demand for fruit snacks. Which movement reflects an increase in income if fruit snacks are a normal good?
from point a to point d
The figure above shows the demand for fruit snacks. Which movement reflects how consumers would react to an increase in the price of a fruit snack that is expected to occur in the future?
from point a to point d
The figure above shows the demand for fruit snacks. Which movement reflects a decrease in quantity demanded but NOT a decrease in demand?
from point a to point e
Which goods have more elastic demands?
goods with many substitutes
Normal goods are those for which demand decreases as
income decreases.
If demand is inelastic, an increase in the price will
increase total revenue.
As a result of an increase in the supply of a good, the equilibrium quantity ________ and the equilibrium price ________.
increases; falls
If OPEC, a group of oil producing nations, cuts oil production to increase the total revenue, OPEC presumes that the demand for oil is
inelastic
If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded, then the demand for used cars is
inelastic.
If the price elasticity is between 0 and 1, demand is
inelastic.
If the demand for a good is perfectly elastic, the price elasticity of demand is ________ and the demand curve is ________.
infinite; horizontal
A straight-line demand curve along which the price elasticity of demand equals 0 is one that
is vertical.
A local transit authority charges $1 for a bus ride. An economics study suggests that in the price range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the transit authority should
lower the fare.
If the price of a CD is equal to the equilibrium price, there will be ________ of CDs and the price will ________.
neither a shortage nor surplus; not change
If the demand for a good is elastic, then
people substantially decrease the quantity of the good they buy if its price increases by a small percentage.
The price elasticity of demand is defined as the magnitude of the
percentage change in quantity demanded divided by the percentage change in price.
The price elasticity of supply is calculated as the
percentage change in quantity supplied divided by the percentage change in price.
Marvin loves chocolate truffles. As the price of a chocolate truffle increases from $1 to $2 to $3, Marvin continues to buy a dozen chocolate truffles every week. Marvin's demand for chocolate truffles is ________.
perfectly inelastic
In a supply and demand figure, the equilibrium price and quantity are found at the
point where quantity supplied equals quantity demanded.
If the demand curve for bottled water shifts rightward and the supply curve of bottled water shifts leftward, the equilibrium
price of bottled water definitely increases.
The price elasticity of demand for furniture is estimated at 1.3. This value means a one percent increase in the
price of furniture will decrease the quantity of furniture demanded by 1.3 percent.
If the demand for a good is elastic, when the price increases, the
quantity demanded will decrease by a greater percentage than the price increased.
The elasticity of supply measures the sensitivity of
quantity supplied to a change in price.
An increase in the number of suppliers in a market results in a
rightward shift in the supply curve.
If good A is a normal good and income increases, the equilibrium price of A ________ and the equilibrium quantity of A ________.
rises; increases
The above table gives the demand schedule for Billy Bob's BBQ ribs. If the price of a pound of ribs falls from $3 per pound to $1 per pound, what is the change in Billy Bob's total revenue?
-$24
Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is
0.5.
Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month. The ________ percent change in price lead to a ________ percent change in the quantity demanded.
12.5; 10.5
A 20 percent increase in the quantity of pizza demanded results from a 10 percent decline in its price. The price elasticity of demand for pizza is
2.0.
The "law of demand" predicts that, other things being equal,
An increase in the price of pizza decreases the quantity of pizza demanded.
Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ________.
Elastic
The quantity demanded is
The amount of a good that consumers plan to purchase at a particular price.
Which of the following decreases the supply of restaurant meals?
Waiters get a pay raise.
Which of the following shifts the supply curve rightward?
a decrease in the price of a factor of production used to produce the good
A price below the equilibrium price results in
a shortage.
If the quantity supplied exceeds the quantity demanded, then there is
a surplus and the price is above the equilibrium price
Ham and eggs are complements. If the price of ham rises, the demand for eggs will
decrease and the demand curve for eggs will shift leftward.
The demand curve for a normal good shifts leftward if income ________ or the expected future price ________.
decreases; falls
The above figure shows the market for oil. Because of the development of a new deep sea drilling technology, the
demand curve does not shift, and the supply curve shifts from S1 to S2
The above figure shows the market for french fries at fast food joints. If the price of potatoes rises and simultaneously people become concerned that french fries can cause heart attacks, the
demand curve for french fries shifts from D2 to D1 and the supply curve of french fries shifts from S2 to S1.
The figure above shows the market for candy. People become more concerned that eating candy causes them to gain weight, which they do not like. As a result, the
demand curve shifts from D2 to D1 and the supply curve does not shift.
Suppose that people find out that eating more fish improves their health, leading them to increase their demand for fish. As a result, the equilibrium price of fish ________ and the equilibrium quantity ________.
rises; increases
When demand increases, the equilibrium price ________ and the equilibrium quantity ________.
rises; increases
The law of demand implies that demand curves
slope down.
The law of demand states that, other things remaining the same, the higher the price of a good, the
smaller is the quantity of the good demanded.
People buy more of good 1 when the price of good 2 rises. These goods are
substitutes.
Good A and good B are substitutes in production. The demand for good A increases so that the price of good A rises. The increase in the price of good A shifts the
supply curve of good B leftward.
If the price is above the equilibrium price, then there is a
surplus, and market forces will operate to lower price.
Sweatshirts and tee-shirts are complements in consumption and the price of a sweatshirt increases. As a result, the demand for
tee-shirts will decrease, that is, the demand curve will shift leftward.
For many goods, the price elasticity of demand increases over time after a price hike because
the ability to find good substitutes for the product whose price rose increases over time.
If the price of an Xbox player falls, then in the market for Xbox games,
the demand curve for Xbox games shifts rightward.
In the above figure, if the demand curve is D2, then
the equilibrium price will be P1 and the equilibrium quantity will be Q2.
A fall in the price of a good causes producers to reduce the quantity of the good they are willing to produce. This fact illustrates
the law of supply.
A rise in the price of a good causes producers to supply more of the good. This statement illustrates
the law of supply.
Suppose the price of burgers increases from $2 to $3 each. The degree to which quantity demanded responds to this price increase depends on the
the price elasticity of demand.
Producers' total revenue will increase if
the price rises and demand is inelastic.
A change in which of the following shifts the demand curve?
the tastes and preferences of consumers
Consumers expect that the price of a gallon of gasoline will rise next week. As a result,
today's demand for gasoline increases.