Shared Flashcard Set

Details

Exam 2 Review Questions
ECO 2305 Exam 2
30
Economics
03/06/2011

Additional Economics Flashcards

 


 

Cards

Term
The law of demand refers to how
Definition
the quantity demanded changes when the price of the good changes.
Term
There are five hundred buyers in the market for cheese. If we know each individual's demand curves, to find the market demand, we must

Definition
add the quantities that each buyer will purchase at every price.
Term
A change in the demand for apples could result from any of the following EXCEPT

Definition
a change in the price of an apple.

It could result from:


a change in the number of buyers, a change in income, a change in the price of a banana, or increased preferences for fresh fruit consumption for health reasons.
Term
To access Internet services, consumers must use a computer. If computer prices fall, what is the effect on the demand for Internet services?
Definition
The demand for internet services increases.
Term
Which of the following brings only an increase in the quantity demanded of a good?

Definition
A fall in the price of the good itself
Term
If the demand for a good increases when people's incomes increase,
Definition
the good is a normal good
Term
People come to expect that the price of a gallon of gasoline will rise next week. As a result,
Definition
today's demand for gasoline increases.
Term
Pizza and tacos are substitutes, and the price of a pizza increases. Which of the following correctly indicates what happens?

Definition
The quantity of pizza demanded decreases and the demand for tacos increases.
Term
Which of the following increases the supply of a product?
Definition
lower prices for the resources used to produce the product
Term
Milk can be used to produce cheese or butter. If the price of a pound of butter rises, what happens to the supply of cheese?

Definition
The supply of cheese decreases.
Term
If the number of sellers decreases, then the supply curve ________ and the supply ________.
Definition
shifts leftward; decreases
Term
The price of salsa rises. How does the increase in the price of salsa affect the supply of salsa?
Definition
There is no change to the supply of salsa but the quantity of salsa supplied increases.
Term
The market supply curve is the
Definition
horizontal sum of the individual supply curves
Term
Market equilibrium occurs when

Definition
the quantity demanded equals the quantity supplied.
Term
Assume a competitive market is in equilibrium. There is an increase in demand, but no change in supply. As a result the level of equilibrium price is ________, and the level of equilibrium quantity is _______.
Definition
increased; increased
Term
How does an increase in supply affect a service's equilibrium price and quantity?
Definition
The price falls and the quantity increases.
Term
If the demand and supply both increase equally, then the equilibrium price ________ and the equilibrium quantity ________.
Definition
does not change; increases
Term
When the demand for a good decreases, its equilibrium price ________ and equilibrium quantity ________.
Definition
falls; decreases
Term
The price elasticity of demand measures which of the following?
Definition
how responsive the quantity demanded is to changes in price
Term
Suppose the price of a DVD rose from $15 to $17 and the quantity demanded decreased from 1,000 per month to 900 per month. Using the midpoint formula, the ________ percent change in price lead to a ________ percent change in the quantity demanded.
Definition
12.5; 10.5
Term
If the percentage change in the quantity demanded is not zero but is less than the percentage change in the price, demand is
Definition
inelastic.
Term
Perfectly inelastic demand means that consumers
Definition
will buy a certain quantity, regardless of price.
Term
If a 2 percent change in price leads to a ________ percent change in the quantity demanded, then demand is ________.
Definition
1; inelastic
Term
A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125. Using the midpoint method, what is the price elasticity of demand?
Definition
1.00
Term
Along a linear (straight-line) downward-sloping demand curve, demand is unit elastic
Definition
the midpoint.
Term
Suppose a firm increases the price it charges and nothing else changes. The firm's total revenue does not change. What can we conclude about the price elasticity of demand?
Definition
demand is unit elastic
Term
If demand is inelastic and the price falls, the total revenue
Definition
falls.
Term
The price elasticity of supply measures the responsiveness of ________ to a change in
Definition
quantity supplied; price
Term
If the supply curve is ________, the elasticity of supply is ________.

Definition
vertical; 0
Term
If the price of a product increases by 10 percent and the quantity supplied increases by 5 percent, then the elasticity of supply is
Definition
less than one and supply is inelastic