ECON 20 Lecture Notes - Lecture 4: Marginal Utility, Consumer Sovereignty, Demand Curve

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rosebuffalo981

18 Aug 2020

School

Irvine Valley College

Department

Economics

Course

ECON 20

Professor

mitton

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Document Summary

Price is discovered in the interactions of buyers and sellers. Amount consumers are willing and able to purchase at a given price. Consumer sovereignty is: buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers. Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. Price acts as an obstacle to buyers. Law of diminishing marginal utility (represented by the marginal benefit utility, especially in problems related to pollution abatement, diminishing. A change in demand occurs when the demand curve shifts horizontally, and is determined by 5 different factors: Complements (if the price of one complement goes up, the demand for the other goes down) A change in one or more of these five factors will cause for a change in demand. Amount producers are willing and able to sell at a given price.

Related Questions

Question 26 pts

Which of the following is not a reason why specialization and trade are beneficial to society?

	Specialization fosters learning by doing, thus lowering the unit-costs of products
	Firms and workers become less dependent on others for producing goods and services

	The total output of economic goods may be increased even without any increase in resources
	Scarce resources are utilized more efficiently by exploiting differences among them

Question 27 pts

Laissez-faire capitalism limits the government's economic functions to the following, except:

	Protecting private property rights
	Establishing a legal environment to enforce contracts among individuals

	Setting prices of individual goods and services
	Preventing individuals and firms from coercing others

Question 28 pts

A production system where various workers concentrate on different specialized tasks to contribute towards a whole product is referred to as:

	Roundabout production
	A coincidence of wants

	Freedom of enterprise
	Division of labor

Question 29 pts

The market system is said to be characterized by "consumer sovereignty." This is because:

	A sovereign government determines which consumer goods will be produced
	Firms must match their production decisions to the consumers' choices

	The prices of consumer goods are regulated by a sovereign government
	Consumer goods are considered to be more important than capital goods

Question 30 pts

Consumers express self-interest when they:

	Seek the lowest price for a product
	Reduce business losses

	Exclude others in their thinking
	Collect economic profits

Question 311 pts

Refer to the above graph with three demand curves. An "increase in quantity demanded" would be illustrated by a change from:

	Point 5 to point 1
	Point 4 to point 1

	Point 2 to point 5
	Point 4 to point 6

Question 32 pts

The table below shows the weekly demand for hamburger in a market where there are just three buyers.

Refer to the above table. At a price of $6, the weekly market quantity demanded for hamburger is:

	17
	23

	24
	18

Question 33pts

If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n):

	Movement up along the current supply curve of corn
	Movement down along the current supply curve of corn

	Leftward shift in the current supply of corn
	Rightward shift in the current supply of corn

Question 34 pts

Which of the following will not cause the supply curve to shift?

	A technological change in the production of the good
	A change in the prices of other goods that producers could be producing

	A change in the costs of resources needed to produce the good
	A change in the price of the good

Question 35 pts

All of the following would affect the position of the supply curve for cranberries, except the:

	Price of agricultural land for cranberries
	Cost of fertilizers for cranberry production

	Popularity of cranberry drinks
	Development of a new pest control for cranberries

Question 36 pts

When high-school and college graduates apply for jobs in the labor markets,

	Job applicants and employers are both "buyers".
	Job applicants are the "sellers" while employers are the "buyers".

	Job applicants and employers are both "sellers".
	Job applicants are the "buyers" while employers are the "sellers".

Question 37 pts

Refer to the figure above, which shows three supply curves for corn. Which of the following would cause the supply of corn to shift from S₁ to S₂?

	A decrease in consumer incomes, assuming corn is a normal good
	The development of a more effective insecticide against corn rootworm

	An increase in the price of fertilizer
	A change in consumer tastes away from cornbread

Question 38 pts

Which is of the following statements is correct?

	If demand increases, then price will decrease
	If demand decreases, then price will decrease

	If price decreases, then demand will decrease
	If price increases, then demand will decrease

Question 39 pts

Which would be a likely cause of an increase in the demand for pizza?

	A decrease in the price of hamburger sandwiches
	A health report showing eating pizza reduces stress

	A reduced desire for take-out and fast-food dining
	A decrease in the prices of cheese, pepperoni, and mushrooms

Question 40 pts

A market for a product reaches equilibrium when:

	Price falls further after there is a shortage
	The price rises further after there is a surplus

	Buyers intend to buy a quantity equal to the quantity that sellers intend to sell
	The actual quantity bought by buyers equals actual quantity sold by sellers

Question 41 pts

A higher price reduces the quantity demanded for a product because:

	Individuals can afford less of the product and will switch to substitutes
	The financial assets of individuals increase

	Individuals will buy more of the product and less of its substitutes
	The purchasing power of individuals increases

Question 42 pts

The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?

	Price of electric cars
	How much sellers are charging customers for electric cars

	Price of gasoline cars
	Quantity of electric cars demanded by buyers

Question 43 pts

Use the following graph of the demand for coffee:

Refer to the above diagram of three demand curves for coffee. An increase in the price of coffee, other factors constant, would cause a:

	Movement from point a to point b
	Movement from point b to point a

	Shift from D₁ to D₂
	Shift from D₁ to D₃

Question 44 pts

Which of the following factors will decrease the current demand for a product?

	A decrease in the current price of a complementary product
	A decrease in the current price of a substitute product

	An increase in the current price of a substitute product
	An expected increase in the future price of the product

Question 45pts

In competitive markets, a surplus or shortage will:

	Cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage
	Cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage

	Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage
	Never exist because the markets are always at equilibrium

Question 46 pts

Which of the following would cause a leftward shift in the supply curve for car washes?

	A decrease in taxes on car washes
	An increase in the price of car washing equipment

	A decrease in the price of water
	An increase in the number of cars in the city

Question 47pts

The market system automatically corrects a surplus condition in a competitive market by:

	Raising the price of the commodity in question while decreasing the quantity demanded
	Raising the price of the commodity in question while increasing the quantity demanded

	Reducing the price of the commodity in question while increasing the quantity demanded
	Reducing the price of the commodity in question while decreasing the quantity demanded

Question 48 pts

A leftward shift of the supply curve for oil in the United States is most likely to result from:

	A decrease in the world price of oil
	An increase in the costs of exploration and drilling for oil

	An increase in the subsidy for oil exploration and drilling
	A decrease in the fees that oil companies must pay for drilling licenses

Question 49 pts

A fall in the price of milk, used in the production of ice cream, will:

	Decrease the supply of ice cream
	Have no effect on the supply of ice cream

	Increase the supply of ice cream
	Cause a movement along the supply curve of ice cream

Question 50 pts

Refer to the above graph, which shows the market for beef where demand shifted from D₁ and D₂. The change in equilibrium from E₁ to E₂ is most likely to result from:

	An increase in the cost of cattle feed
	A decrease in consumer incomes

	A decrease in the tax on beef products
	An increase in the price of pork

The following table shows the market demand schedule and supply schedule for notebooks.

Price ($/unit)	Quantity Demanded (units)	Quantity Supplied (units)
1	20	4
2	16	6
3	14	10
4	12	12
5	10	14
6	7	17
7	4	20
8	2	22
9	1	25

Refer to the table above. Assume that the market for notebooks is in equilibrium.

1. Which of the following is likely to happen if there is an increase in the school enrollment rate, everything else remaining unchanged?

A. Both the equilibrium price and quantity of notebooks decrease.

B. The equilibrium price and quantity remain unchanged.

C. Both the equilibrium price and quantity of notebooks increase.

D. The equilibrium price increases, but the equilibrium quantity of notebooks decreases.

2. A shortage occurs in a market when:

A.price is lower than the equilibrium price.

B. price is higher than the equilibrium price.

C. supply exceeds demand.

D. the marginal utility of consumption is negligible.

3. A change in the quantity demanded of a good is:

A. the outcome of a change in income.

B. the outcome of a change in tastes and preferences.

C. represented by a shift to a new demand curve.

D. represented by a movement along the demand curve.

4. The following table shows the demand schedules of three consumers of wine. Assume that these three buyers constitute the entire market.

PRICE ($/Bottle)	Sandra's Demand (Bottles)	David's Demand (Bottles)	Mary's Demand (Bottles)
â$8	2		10
â$6	14	15	18
â$4		23	24
â$2	24	27	28

Refer to the table above. If the market price of wine is $8/bottle, and the market demand for wine is 19 bottles, David's consumption of wine is:

A. 12 bottles.

B. 9 bottles.

C. 4 bottles.

D. 7 bottles.

5. Which of the following factors will NOT cause a shift in the demand for a good?

A. A change in the number of consumers

B. A change in the market price of the good

C. A change in tastes and preferences

D. A change in consumer incomes

6. Are all markets perfectly competitive?

A. No, there are other market types where firms have considerable power to control the price.

B. Yes, any economic system with a market structure is by definition perfectly competitive.

C. No, there are also command and control markets that are run by a central government.

D. No, in other types of markets, sellers offer identical goods and simply accept the market price.

7. Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will:

A. increase his profit.

B. lose only a few buyers.

C. increase his sales.

D. lose almost all of his buyers.

8. The willingness to pay for a commodity:

A. increases as the consumption of the commodity increases.

B. is always less than the market price of the commodity.

C. decreases as the consumption of the commodity increases.

D. is always greater than the market price of the commodity.

9. Which of the following is likely to lead to a right shift in the supply curve of cotton?

A. An increase in labor productivity due to training programs

B. A rise in labor costs due to wage demands by labor unions

C. An increase in the price of cotton

D. A decrease in the price of cotton

10. The buyers of a good will want to purchase it as long as their willingness to pay for the good is:

A. equal to zero.

B. greater than or equal to the price.

C. greater than zero.

D. less than the price.

redmammoth450

1. If the cross price elasticity of demand between two commodities is positive, then these commodities are

Select one:

a. are complements.

b. are inferior.

c. are superior.

d. are substitutes.

Answer...?

2. Along a given indifference curve, a consumer reduces the quantity of one good in favor of more units of the other. In this situation

Select one:

a. the marginal utility of the first rises and the marginal utility of the second good falls.

b. Total utility rises.

c. Both the marginal rate of substitution falls and the marginal utility of the first rises and the marginal utility of the second good falls are correct.

d. the marginal rate of substitution falls.

Answer...?

3. Along a given indifference curve, a consumer reduces the quantity of one good in favor of more units of the other. In this situation

Select one:

a. the marginal utility of the first rises and the marginal utility of the second good falls.

b. Total utility rises.

c. Both the marginal rate of substitution falls and the marginal utility of the first rises and the marginal utility of the second good falls are correct.

d. the marginal rate of substitution falls.

Answer...?

4. Moral hazard is a barrier to financing global growth because

Select one:

a. of the differences between financing using loans, portfolio investment and foreign direct investment.

b. there is the possibility that the funds are used for riskier behavior than the lender agreed to.

c. firms sometimes have trouble determining whether they need funds or not.

d. if investors have trouble identifying high-risk firms they may be unwilling to give money to creditworthy firms.

5. Moral hazard is a barrier to financing global growth because

Answer...?

6. Which of the following statements is FALSE?

Select one:

a. Price elasticity of supply can never equal 1.

b. Time is an important consideration in determining supply elasticity.

c. A horizontal supply curve is possible.

d. A perfectly inelastic supply curve is a vertical line.

Answer...?

7. Corporations are able to raise large amounts of financial capital because

Select one:

a. of limited liability and the treatment of a corporation as an individual entity.

b. of the tax breaks corporations are given relative to partnerships or proprietorships.

c. of the elimination of the problem of separation of ownership and control.

d. of their greater ability to monitor the performance of decision makers.

Answer...?

8. The largest quota subscriber of the International Monetary Fund (IMF) is

Select one:

a. China.

b. Japan.

c. Germany.

d. the United States.

Answer...?

9. To derive the demand curve from the indifference map,

Select one:

a. vary the prices of both goods while holding income constant.

b. vary the price of one good while holding the price of the other good and income constant.

c. vary income while holding the prices constant.

d. vary the price of one good and income while holding the price of the other good constant.

Answer...?

10. As an individual consumes more of a particular commodity, the total level of utility derived from that consumption will

Select one:

a. increase at a constant rate.

b. increase at a decreasing rate.

c. remain constant.

d. increase at an increasing rate.

Answer...?

11. Which of the following is a TRUE statement about stock markets?

Select one:

a. It is always better to buy growth stocks than the older and more stable blue-chip stocks.

b. Economists can make above-average profits in the stock market because of their specialized knowledge of economics.

c. It is illegal for a friend of a corporate executive to make large profits in the stock market by using his inside information.

d. The stock market on average over time is random and totally unrelated to the performance of the economy.

Answer...?

12. Income elasticity of demand is defined as

Select one:

a. the percentage change in demand divided by the percentage change in income.

b. the percentage change in income divided by the percentage change in quantity demanded.

c. the change in quantity demanded divided by the change in market price.

d. the change in quantity demanded divided by the change in income.

Answer...?

13. The consumption possibilities curve is the

Select one:

a. budget constraint.

b. indifference curve.

c. supply curve.

d. demand curve.

Answer...?

14. According to the random walk theory,

Select one:

a. the probability that a stock's price will increase tomorrow is greater if it increased today.

b. the probability that a stock's price will increase tomorrow is greater if it decreased today.

c. the best forecast of tomorrow's price is today's price.

d. the best forecast of tomorrow's price is found by determining the trend for the last five trading days.

Answer...?

15. "Unit elasticity of demand can be found everywhere along a straight-line demand curve with a slope of -1." Do you agree or disagree? Explain.

Answer:

16. For which of the following would the absolute price elasticity of demand be greatest?

Select one:

a. Pepsi Cola

b. Tickets to the Super Bowl

c. Salt

d. Gasoline

Answer...?

16. The price of a hamburger is $1 and the price of a movie is $4 and the consumer has $10. A consumer has purchased 2 hamburgers and 2 movies, receiving 25 units of utility for the second hamburger and 100 units of utility for the second movie. The set of goods

Select one:

a. is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies.

b. is not an optimum because the consumer has not spent all of his money.

c. is an optimum since the entire income is spent and total utility is minimized.

d. is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.

Answer...?

17. Marginal utility

Select one:

a. is stable, but then as a person consumes more of a good or service, has a propensity to increase.

b. equals the total satisfaction from consumption of goods and services.

c. can be thought of as being the equivalent to total utility.

d. at first rises and then declines as a person consumes more of a good or service.

Answer...?

18. The nominal rate of interest is 4% and the anticipated rate of inflation is 5%. What is the real rate of interest?

Select one:

a. 1%

b. 4%

c. -1%

d. 9%

Answer...?

19. Using the above table, what is the total utility of consuming 3 bottles of soda?

Select one:

a. 115

b. 135

c. 120

d. 240

Answer...?

20. Dead capital is

Select one:

a. machinery that fails to operate properly.

b. a capital resource that depreciates rapidly.

Answer...?

21. What is the annual rate of growth of per capita real GDP if real GDP grows at a constant rate of 5 percent per year and the annual rate of population growth is 3 percent?

Select one:

a. 1.7 percent

b. 8 percent

c. 5 percent

d. 2 percent

c. machinery that requires constant maintenance.

d. any capital resource that lacks clear title of ownership.

Answer...?

ECON 20 Lecture Notes - Lecture 4: Marginal Utility, Consumer Sovereignty, Demand Curve

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