ECO 1304 Chapter Notes - Chapter 3: Ceteris Paribus, Demand Curve, Margarine

123 views3 pages

greygrasshopper518

18 Dec 2016

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

The law of demand is the quantity of a good or service demanded varies inversely (negatively) with its price, ceteris paribus when the price falls, the quantity demanded increases, and conversely, if the price rises, the quantity demanded decreases. One reason for the negative relationship is what economists call diminishing marginal utility the concept that in a given time period, an individual will receive less satisfaction from each successive unit of a good consumed. The second for the law of demand is the substitution and income effects. According to the substitution effect, at higher prices, buyers increasingly substitute other goods for the good that now has a higher relative price. Third is the income effect, higher prices make the buyer feel poorer, causing a lowering of quantity demanded (since they cannot buy the same quantity of goods as they did when prices were lower)

Related Questions

The law of diminishing marginal utility suggests that:

A. People are willing to pay more for a good the less of it they have.

B. People will substitute lower-priced goods for more expensive goods, ceteris paribus.

C. Price and quantity demanded are directly related.

D. As marginal utility decreases, the willingness to pay increases.

emeraldkangaroo494

1. If marginal utility is negative, total utility is

a. Positive

b. Negative

c. Decreasing

d. Constant

e. Increasing

2. If utility-maximizing consumers face identical prices, they will have identical

a. Marginal utilities for each good

b. Ratio of marginal utilities for each good

c. Preferences

d. Ratios of total utilities for each good

e. Total utilities for each good

3. The substitution effect

a. Always increases quantity demanded of a good whose relative price has fallen

b. Is opposite in sign to the income effect for all normal goods

c. Is opposite in sign to the income effect for all normal goods

d. May cause demand curves to be upward sloping

e. Is always dominated by the income effect for normal goods

4. Demand curves for normal goods slope downward because

a. The substitution effect of a price change is greater than the income effect

b. Substitution and income effects work in the same direction

c. The income effect is always greater than the substitution effect

d. The income effect is always less than the substitution effect

e. None of the above

5. The idea that a consumer derives less additional satisfaction from consuming successive units of a good is called

a. Diminishing consumer surplus

b. The paradox of value

c. Diminishing marginal utility

d. Diminishing total value of consumption

e. Diminishing total utility

indigolocust149

When demand for a good is very elastic, revenue ________ when the price falls.

(2)

An elasticity measure less than one means that demand is __________.

(3)

An elasticity measure greater than one means that demand is __________.

(4)

The Latin expression ceteris paribus means

	having made all other necessary changes.
	holding constant all other variables.
	assuming all households have similar incomes.
	given the level of income in the economy.

(5)

A variable measured in terms of money is called a ____________________.

	real variable
	nominal variable
	macroeconomic variable
	microeconomic variable

(6)

Which of the following is true about the importance of money in economics?

	Money is important in both macroeconomics and microeconomics.
	Money is important in macroeconomics but not microeconomics.
	Money is important in microeconomics but not macroeconomics.
	Money is not important in either microeconomics or macroeconomics.

(7)

What is the difference between normative and positive economics?

	Positive economics is descriptive and predictive; normative economics is prescriptive.
	Positive economics highlights the positive aspects of the economy; normative economics highlights the average features.
	Positive economics studies the actions of individuals; normative economics studies the actions of households.
	Positive economics is an applied social science; normative economics is a theoretical social science.

(8)

The slope of the demand curve is negative because

	the quantity of a good demanded decreases as income declines.
	the quantity of a good demanded increases as income declines.
	the quantity of a good demanded increases as the price declines.
	the quantity of a good demanded decreases as the price declines.

(9)

What is the result of an increase in the price of bread, a normal good?

	The demand curve shifts to the right.
	The demand curve shifts to the left.
	The quantity demanded increases.
	The quantity demanded decreases.

(10)

What is the effect on demand for bread when the price of bagels, a substitute for bread, rises?

	The demand curve for bread shifts to the right.
	The demand curve for bread shifts to the left.
	The quantity of bread demanded increases.
	The quantity of bread demanded decreases.

(11)

Which of the following would cause the supply curve for bread to shift inward?

	An increase in the price of bread
	An increase in the price of bagels
	A decrease in the price of bread
	An increase in the price of flour

(12)

An improvement in technology shifts the supply curve outward because

	at every price, firms find producing the good to be more profitable.
	the price of the good increases.
	at every price, firms find producing the good to be less profitable.
	the price of the good decreases.

(13)

Which of the following factors does not affect how much bread a baker is willing to produce?

	The price of bread
	The demand for bread
	The cost of inputs
	Technology

(14)

How do expectations of prices affect how much of a good producers are willing to sell?

	Expectations of prices affect only demand, not supply.
	Actual prices, not expectations of prices, affect supply.
	If producers expect prices to fall in the future, they supply less at every price.
	If producers expect prices to rise in the future, they supply less at every price.

(15)

When the price of a good is above equilibrium level,

	the quantity demanded exceeds the quantity supplied.
	the quantity supplied exceeds the quantity demanded.
	the supply curve shifts to the left.
	the supply curve shifts to the right.

(16)

At a price of P₀ in the diagram below, which of the following statements is true?

	Supply equals demand.
	There is excess demand.
	There is excess supply.
	There is scarcity.

(17)

If demand for bread increases at every price, the equilibrium price of bread will

	fall.
	rise.
	remain unchanged.
	depend on income.

(18)

If the demand for bread declines, then

	at the original equilibrium price, there is excess demand.
	at the original equilibrium price, there is excess supply.
	the supply curve shifts to the right.
	the supply curve shifts to the left.

(19)

Peanut butter and jelly are complementary goods. When the price of peanut butter rises, the demand for jelly ________ and the price of jelly ________.

	rises; falls
	rises; rises
	falls; rises
	falls; falls

(20)

The measure of elasticity that economists use is

	always a positive number.
	always a negative number.
	positive when demand is elastic and negative when demand is inelastic.
	negative when demand is elastic and positive when demand is inelastic.

(21)

Which of the following formulas is the correct expression for the slope of a line?

(22)

Graphically how would an increase in income affect the demand for hamburgers?

	The slope of the demand curve would increase.
	The slope of the demand curve would decrease.
	The demand curve would shift outward, parallel to the original demand curve.
	The demand curve would shift inward, parallel to the original demand curve.

(23)

Given the equation P = $6.00 ? $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60?

	1.44 units
	3 units
	3.6 units
	6 units

(24)

Which of the following is true about unit elasticity?

	Revenues remain unchanged when the price changes.
	Elasticity of demand increases as one moves down the demand curve.
	Elasticity of demand decreases as one moves down the demand curve.
	The elasticity of demand is greater than one at every point along the demand curve.

(25)

Which of the following could be a determinant of the quantity demanded of a good?

	The price of the good
	The price of related goods
	Income
	Expectations about the future price of the product
	All of the above

violethare488

ECO 1304 Chapter Notes - Chapter 3: Ceteris Paribus, Demand Curve, Margarine

Document Summary

Get access

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related Documents

ECO 1304 Lecture Notes - Lecture 11: Ceteris Paribus, Marginal Utility, Demand Curve

ECO 1304 Lecture Notes - Lecture 12: Ceteris Paribus, Demand Curve

ECO 1304 Chapter Notes - Chapter 4: Demand Curve, Economic Equilibrium

Related Questions