Question 1

In a recent article,two economists estimated that the 37.5% increase in price that would result from a 75 cent tax increase on cigarettes would lead to a decrease in smoking among college students of 30%.What can you conclude about the demand for cigarettes among college students?

Accepted Answer

The answer of In a recent article,two economists estimated that...

Question 2

What is the shape of the total revenue curve derived from a linear downward sloping demand curve?

Accepted Answer

The total revenue curve derived from a linear downward sloping demand curve is inverted U-shaped, as initially, an increase in price leads to a higher revenue due to the higher price, but eventually, the decrease in the quantity demanded due to the higher price leads to a decrease in revenue. Thus, the total revenue initially increases, reaches a maximum point, and then decreases as the price continues to increase.

Question 3

Recently,Skooterville has experienced a large growth in population.As a result,the demand curve for telephone service in Skooterville:

Accepted Answer

An increase in population leads to an increase in demand for telephone services, thus the demand curve shifts to the right.

Question 4

The Russian government wants to reduce the consumption of vodka.A one hundred rouble tax on each bottle purchased may reduce the consumption of vodka under which circumstance(s)?

Accepted Answer

The answer of The Russian government wants to reduce the...

Question 5

Figure 4.1
A consumer's original utility maximizing market basket of goods is shown in Figure 4.1 as point A.Following a price change,the consumer's utility maximizing market basket changes is at point B.
-Refer to Figure 4.1.The income effect of the price change in food on the quantity of food purchased is:

Accepted Answer

The answer of  Figure 4.1
A consumer's original utility maximizing...

Question 6

Use the following two statements to answer this question: I.The price elasticity of demand is constant along the entire length of a linear demand curve.
II.The price elasticity of demand is the special name that economists give to the slope of a demand curve.

Accepted Answer

The answer of Use the following two statements to answer...

Question 7

You consume good X (horizontal axis)and good Y (vertical axis),and your indifference curves are vertical lines because you do not gain any satisfaction from consumption of Y.As the price of X declines,the change in consumption of X is entirely composed of the:

Accepted Answer

The income effect is the change in consumption of a good due to a change in the consumer's income. In this case, the price of X declines, which means that the consumer's income increases. This will lead to an increase in the consumption of X. The substitution effect is the change in consumption of a good due to a change in the relative prices of goods. In this case, the price of X declines relative to the price of Y, which means that X is now relatively cheaper than Y. This will lead to an increase in the consumption of X. The Giffen effect is a special case of the substitution effect where the consumption of a good increases as its price increases. This is because the good is an inferior good, and consumers substitute away from other, more expensive goods as the price of the inferior good increases. The independent good effect is the change in consumption of a good due to a change in the price of another good that is not a substitute or complement. In this case, the price of Y does not change, so the independent good effect is not relevant.

Question 8

What is the shape of the total revenue curve derived from a horizontal demand curve?

Accepted Answer

The answer of What is the shape of the total...

Question 9

Which of the following is true about the demand for gasoline?

Accepted Answer

In the long run, consumers have more time to adjust their behavior and find alternatives to gasoline, such as using public transportation or purchasing electric cars. This makes the demand for gasoline more price elastic in the long run.

Question 10

When a good has a unitary price elasticity,consumer expenditures for the good

Accepted Answer

When a good has a unitary price elasticity, it means that the percent change in quantity demanded is equal to the percent change in price. In other words, if the price of the good decreases by 1%, the quantity demanded will increase by 1%. However, this does not necessarily mean that consumer expenditures will change. If the price of the good decreases, the quantity demanded will increase by the same percentage, but the total amount spent by consumers may remain the same if the increase in quantity demanded is offset by the decrease in price. Therefore, consumer expenditures for the good do not change when the price of the good decreases.

Question 11

Price elasticity of demand measures the

Accepted Answer

Price elasticity of demand measures the sensitivity of quantity demanded to changes in price.

Question 12

Figure 4.1
A consumer's original utility maximizing market basket of goods is shown in Figure 4.1 as point A.Following a price change,the consumer's utility maximizing market basket changes is at point B.
-Based on Figure 4.1,food is:

Accepted Answer

If the consumer's utility maximizing market basket changes to a point with a higher quantity of food after a price change, food is a normal good. At point B in the diagram, the quantity of food has increased, indicating that food is a normal good.

Question 13

Based Figure 4.2,clothing is:

Accepted Answer

According to Figure 4.2, as income increases, the quantity of clothing demanded also increases. This is consistent with the behavior of a normal good, which is a good that experiences an increase in demand when income increases.

Question 14

As the price of good X increases from $5 to $8,quantity demanded falls from 100 to 80.Based upon this information we can conclude that the demand for X is

Accepted Answer

The answer of As the price of good X increases...

Question 15

When a good is price inelastic,consumer expenditures on the good

Accepted Answer

When a good is price inelastic, it means that its demand is not very responsive to changes in price. This means that when the price of the good increases, consumers will still buy roughly the same amount of the good, resulting in an increase in consumer expenditures on the good. Conversely, when the price of the good decreases, consumers will still buy roughly the same amount, resulting in a decrease in consumer expenditures on the good. Therefore, choice A is the correct answer.

Question 16

Suppose the price of rice increases and you view rice as an inferior good.The substitution effect results in a __________ change in rice consumption,and the income effect leads to a __________ change in rice consumption.

Accepted Answer

If rice is an inferior good, as its price increases, consumers will switch to other substitutes such as pasta or bread, resulting in a negative substitution effect. At the same time, the increase in the price of rice will lead to a decrease in the purchasing power of consumers, causing a positive income effect. Therefore, the total effect on rice consumption is negative.

Question 17

Figure 4.2
A consumer's original utility maximizing market basket of goods is shown in Figure 4.2 as point A.Following a price change,the consumer's utility maximizing market basket is at point B.
-Refer to Figure 4.2.The substitution effect on the quantity of clothing purchased is:

Accepted Answer

The substitution effect occurs when the consumer substitutes a relatively cheaper good for a relatively expensive good. In this case, the price of clothing has decreased, making it relatively cheaper compared to other goods. As a result, the consumer will substitute some of the other goods for clothing, and move from point A to point B, which is a combination of more clothing and less of the other good. The change from C1 to C2 shows this substitution effect on the quantity of clothing purchased.

Question 18

Figure 4.2
A consumer's original utility maximizing market basket of goods is shown in Figure 4.2 as point A.Following a price change,the consumer's utility maximizing market basket is at point B.
-Refer to Figure 4.2.The income effect on the quantity of clothing purchased is:

Accepted Answer

The answer of  Figure 4.2
A consumer's original utility maximizing...

Question 19

A consumer spends his income on food and rent.The government places a $1 tax on food.To restore the pre-tax consumption level of food the rebate paid to consumers will be smallest when

Accepted Answer

The size of the rebate paid to consumers to restore the pre-tax consumption level of food depends on the own price elasticity of demand for food and the income elasticity of demand for food. The smaller the own price elasticity of demand for food, the smaller the needed rebate. The income elasticity of demand for food also affects the size of the rebate, where a higher income elasticity of demand for food requires a smaller rebate. Therefore, choice C, with an own price elasticity of demand for food of 2 and an income elasticity of demand for food of 10, would result in the smallest necessary rebate.

Question 20

The demand for sirloin steak is probably more elastic than the demand for all meat because

Accepted Answer

Sirloin steak is just one type of meat, whereas "all meat" includes a variety of meats. Therefore, there are more substitutes available for sirloin steak, making its demand more elastic. Additionally, price fluctuations or health concerns may lead consumers to choose alternative meats, causing further elasticity in demand for sirloin steak.

Quiz 4: Individual and Market Demand

In a recent article,two economists estimated that the 37.5% increase in price that would result from a 75 cent tax increase on cigarettes would lead to a decrease in smoking among college students of 30%.What can you conclude about the demand for cigarettes among college students?

What is the shape of the total revenue curve derived from a linear downward sloping demand curve?

Recently,Skooterville has experienced a large growth in population.As a result,the demand curve for telephone service in Skooterville:

The Russian government wants to reduce the consumption of vodka.A one hundred rouble tax on each bottle purchased may reduce the consumption of vodka under which circumstance(s) ?

Use the following two statements to answer this question: I.The price elasticity of demand is constant along the entire length of a linear demand curve. II.The price elasticity of demand is the special name that economists give to the slope of a demand curve.

You consume good X (horizontal axis) and good Y (vertical axis) ,and your indifference curves are vertical lines because you do not gain any satisfaction from consumption of Y.As the price of X declines,the change in consumption of X is entirely composed of the:

What is the shape of the total revenue curve derived from a horizontal demand curve?

Which of the following is true about the demand for gasoline?

When a good has a unitary price elasticity,consumer expenditures for the good

Price elasticity of demand measures the

Figure 4.1 A consumer's original utility maximizing market basket of goods is shown in Figure 4.1 as point A.Following a price change,the consumer's utility maximizing market basket changes is at point B. -Based on Figure 4.1,food is:

Based Figure 4.2,clothing is:

As the price of good X increases from $5 to $8,quantity demanded falls from 100 to 80.Based upon this information we can conclude that the demand for X is

When a good is price inelastic,consumer expenditures on the good

Suppose the price of rice increases and you view rice as an inferior good.The substitution effect results in a change in rice consumption,and the income effect leads to a change in rice consumption.

Figure 4.2 A consumer's original utility maximizing market basket of goods is shown in Figure 4.2 as point A.Following a price change,the consumer's utility maximizing market basket is at point B. -Refer to Figure 4.2.The substitution effect on the quantity of clothing purchased is:

Figure 4.2 A consumer's original utility maximizing market basket of goods is shown in Figure 4.2 as point A.Following a price change,the consumer's utility maximizing market basket is at point B. -Refer to Figure 4.2.The income effect on the quantity of clothing purchased is:

A consumer spends his income on food and rent.The government places a $1 tax on food.To restore the pre-tax consumption level of food the rebate paid to consumers will be smallest when

The demand for sirloin steak is probably more elastic than the demand for all meat because