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Econ exam review
Terms in this set (75)
The demand curve illustrates the fact that consumers tend to purchase
More of a good as its price falls
Which of the following is not true of a demand curve
It reflects sellers reservation prices
As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called
The substitution effect of price change
When price rises people can afford less of a good so quantity demand falls
Marginal benefit is measured by the buyers
One reason the demand curve slopes _______ is that as price falls ______
downward; more people find that the price is now less than the reservation price
The quantity that sellers wish to sell tends to ____ as price increases, and so the supply curve is _____ sloping
A sellers reservation price is generally equal to
The sellers marginal cost
When a market is in equilibrium
There is neither excess supply nor demand
Excess demand occurs
When price is below the equilibrium price
If the price is above the equilibrium price, then there will be
The price of bananas will increase in response to
An excess demand for bananas
There is an excess supply of sport utility vehicles, then
Quantity supplied is greater than quantity demanded
Price $9 there will be
Excess supply and downward pressure on price
when the current price of a good is below the equilibrium price
Buyers will have an incentive to offer to pay sellers more than the current price
In a free market if the price of a good is above the equilibrium price then
Sellers, dissatisfied with growing inventories, will lower their prices
Suppose that when oranges are three dollars per pound quantity demanded is 4.7 sons and 3.9 is supplied in this case
excess demand will lead the price of oranges to rise
If all sellers started charging $45 per unit what is most likely to happen
They would lower their prices because of $45 there would be excess supply
The current market price is $50 and you would expect
The market price to rise
A movement along the demand curve from a price quantity combination to another is called
Change in quantity demanded
"As the price of personal computers continues to fall demand increases" this headline is an inaccurate because
A falling price of personal computers increases the quantity demanded, not demand
Points along the demand curve represent
Buyers reservation price
A decrease in price of pizza
Increase in the quantity of pizza demanded
The demand for computers increases as consumer income rises, then computers are
A normal good
Beginning of the semester, college towns experience large increases in population causing
Increase in demand for apartments
If fast food is an inferior good then
The demand for fast food will fall as income rises
As the price of flour (an input into the cookie production process) increases, firms that produce cookies will:
Decrease supply of cookies
Supposed technology used to manufacture laptops has improved. Results would be
Increase in supply of laptops
Relative to column A, column B represents 100 110
The increase in demand
When the supply curve shifts to the left and there is no change in demand
The equilibrium price will rise
Suppose that demand decreases, but there is no change in supply. As a market reaches its new equilibrium
excess supply will lead the price to fall
Suppose that supply decreases, but there is no change in demand. As a market reaches its new equilibrium
Excess demand will lead the price to rise
Suppose you observe a decrease in the equilibrium price and quantity of corn. of the options listed below the is best explained by
A fall in consumer income assuming corn is a normal good
Suppose you observe an increase in the equilibrium price of coffee and a decrease in the equilibrium quantity of coffee period of the options listed below this is most consistent with
An increase in the cost of producing coffee
Assume demand remains unchanged at D1. If supply shifts from S1 to S2 than the equilibrium price will _____ and equilibrium quantity will ______
Government price controls fail because
Legislation cannot alter basic economic incentives
Which is not true of equilibrium price
It is fair in a sense that everyone can afford basic goods and services
Which of the following is not a characteristic of rent controls
Greater availability of apartments
If supply and demand both increase, the new equilibrium price will be ______ and the new equilibrium quantity will be ______.
Suppose the equilibrium price and quantity of ketchup fall. The most likely explanation for these changes is
a decrease in the demand for ketchup.
Suppose that the equilibrium price of pickles falls while the equilibrium quantity rises. The most likely explanation for these changes is
an increase in the supply of pickles.
Assume the demand for coffee increases and the supply of coffee decreases. Which of the following outcomes is certain to occur?
The equilibrium price of coffee will rise.
Assume the demand for sugar decreases and the supply of sugar increases. Which of the following outcomes is certain to occur
The equilibrium price of sugar will fall.
Assume both the demand for bagels and the supply of bagels increase. Which of the following outcomes is certain to occur?
The equilibrium quantity of bagels will rise.
Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see
an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price.
Refer to the accompanying figure. Assume the market is originally at point W. Movement to point Z is a combination
an increase in supply and an increase in demand.
Assume that Joe is willing to produce a hamburger for $1, and Mary is willing to pay $3 for a hamburger. Which of the following is true?
Joe and Mary can make a mutually beneficial exchange
If there are no unexploited opportunities for individuals in a particular market, then one can conclude that
the market is in equilibrium.
The price elasticity of demand is a measure of
the change in quantity demanded of a good that results from a change in its price.
When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically
If the price of cheese falls by 1 percent and the quantity demanded rises by 3 percent, then the price elasticity of demand for cheese is equal to
If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is
If the price of textbooks increases by one percent and the quantity demanded falls by three-fourths percent, then demand for textbooks is
The price elasticity of demand is typically expressed as a positive number because
it's convenient to use absolute values.
If the absolute value of the price elasticity of demand for tickets to a football game is 2, then if the price increases by 1 percent, quantity demanded decreases by
If 20 percent increase in the price of a good leads to a 60 percent decrease in the quantity demanded, then what is the price elasticity of demand?
If demand is ______ with respect to price, a price increase will ______ total revenue.
The owner of a pizza shop observes that when she raises the price of a large pizza, her total revenue decreases, and when she lowers the price of a large pizza, her total revenue increases. This suggests that
the demand for her large pizzas is elastic with respect to price.
If the demand for electricity is inelastic, and the local utility wants to increase its total revenue, it should _______ its price.
If consumers cannot readily switch to a close substitute when the price of a good increases, the demand for that good is likely to be
If the demand for a good is highly elastic, that good is likely to have
many close substitutes.
Which of the following is likely to have the highest price elasticity of demand?
Nike running shoes
For which of the following products is demand likely to be least elastic with respect to price?
Jeans, in general, have fewer close substitutes than a specific brand of jeans. Therefore, the demand for jeans, in general, will be _______ than the demand for a specific brand of jeans.
Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will
increase because the Internet offers more substitutes.
All else equal, the price elasticity of demand for small-budget items such as soap tends to be ______ than the price elasticity of demand for big-ticket items such as flat-screen TV
Demand tends to be ______ in the short run than in the long run.
Suppose that the short-run price elasticity of demand for electricity is 0.03, and the long-run price elasticity of demand is 1.2. One would classify the short-run elasticity as being ___________ and the long-run elasticity as being ____________.
Suppose you learn that in 1900, households spent about 40 percent of their budget on food, and today, they spend about 10 percent of their budget on food. All else equal, this suggests that the price elasticity of demand for food
is probably lower now than it was in 1900.
Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be _______ the flatter curve.
less elastic than
Refer to the accompanying figure. The absolute value of the slope of the demand curve D1 is ______, and the absolute value of the slope of demand curve D2 is ______.
If the demand curve is horizontal, then demand is
f the percentage change in quantity demanded is zero for any percentage change in the price of the good, demand is classified as
If the demand curve for a good is a vertical line at Q = 1, then a decrease in the price of that good will
not change the quantity demanded.
When the price of insulin is $10, consumers demand 100 units; when the price is $15, consumers demand 100 units; and when the price is $20, consumers demand 100 units. Based on this information, the demand for insulin is
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