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Microeconomics Exam 1
Terms in this set (14)
The law of demand says that
an increase in price causes quantity demanded to increase
For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
The good is a luxury.
If the demand for donuts is elastic, then a decrease in the price of donuts will
increase total revenue of donut sellers.
A decrease in input costs to firms in a market will result in a
decrease in equilibrium price and an increase in equilibrium quantity.
If muffins and bagels are substitutes, a higher price for bagels would result in
an increase in the quantity demanded for muffins.
A good will have more elastic demand, the
greater the availability of close substitutes.
Two goods are complements if a decrease in price of one good
increases the demand for the other good.
Soup is an inferior good if the demand
for soup falls when income rises.
Suppose you are in charge of setting prices at a local sandwich shop. Te business needs to increase it's total revenue and your job is on the line. If the demand for sandwiches is inelastic, you
should increase the price of sandwiches.
If the quantity demanded for a certain good responds only slightly to a change in the price of the good, then
the demand for the good is said to be inelastic.
Suppose the number of buyers in a market increase and a technological advancement occurs also. What would we expect to happen in the market.
Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
Ford Motor Company announces that next month it will offer $3,000 rebates on New Mustangs. As a result of this information, today's demand curve for mustangs
Shifts to the left.
Economics is the study of
how society manages its scarce resources.
What you give up to obtain an item.
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