Exam 5: Consumers and Incentives

April runs a small bakery in northern Minnesota.Her most popular item is her homemade cranberry scone.As a pricing experiment,April raises the price of her raspberry scones by 5 percent and sees daily sales fall by 2 percent.From this experiment,April can estimate the price elasticity of demand for her cranberry scones as approximately ________.

The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as ________.

The following figure shows the indifference curves (IC) and the budget constraint (BC) of a consumer who needs to decide between the number of trousers and shirts he should purchase. -Refer to the figure above.Given the consumer's budget constraint,the consumption bundle that maximizes his satisfaction consists of ________.

Which of the following statements is true about the income elasticity of demand?

Ryan buys 4 pairs of jeans when the price is $25.He buys 3 pairs when the price increases to $50.Ryan's percentage change in quantity demanded is ________,when the price increase by ________ percent,and thus his price elasticity of demand is ________.

Gabriel's demand for chocolate bars is inelastic.If the price of chocolate bars increases,he will ________.

Gary consumes 10,000 kilowatt-hours of electricity when his income is $500.When his income increases to $1,000,his consumption of electricity increases to 18,000 kilowatt-hours.What is Gary's income elasticity of demand for electricity?

The following figure shows the budget constraint of Lesley when she is faced with two goods: burgers and icecream. -Refer to the figure above.If the price of a burger doubled,Lesley's new budget constraint ________.

If the value of the price elasticity of demand for a good is equal to infinity,the good has a ________ demand.

Which of the following will lead to a change in the opportunity cost of buying a pen in terms of a pencil?

Scenario: Suppose pairs of jeans (j) cost $60 per pair, sweaters (s) cost $20 each, and you have $300 of income. Assume you purchase only jeans and sweaters with your income. Your budget constraint is: $60 - j + $20 - s = $300. The graph below shows 4 consumption bundles (combinations of jeans and sweaters). -Your budget set contains ________.

Anne has chosen how many bagels and how many units of cream cheese she would buy this month.She has $20 to spend on these two goods.Suppose that her chosen combination,the marginal benefit per dollar for bagels is $6,and her marginal benefit per dollar for cream cheese is $10.By reallocating one dollar from ________ to ________ she can add ________ to her benefit.

In equilibrium,________.

Which of the following goods is likely to have the highest price elasticity of demand?

If the cross-price elasticity of demand for a good is estimated to be −3.9,estimate the percentage change in the quantity demanded of the good when the price of the related good increases from $30 per unit to $75 per unit.Also,if it is known that the income elasticity of demand for the same good is 2.5,estimate the percentage change in the quantity demanded of the good when consumer income increases from $100 to $300.

Using the table below,solve for the bundle of small Regina Pizzeria pies and Red Sox games that maximizes Joey's utility/well-being/satisfaction.

The following table shows the marginal benefit that Marcus derives by consuming different quantities of hotdog and soda. The price of a hotdog is $3, and the price of a soda is $1. -Refer to the table above.What is the maximum amount of consumer surplus that Marcus can get,if he has $14 budget to spend on these two goods?

The demand for a good is elastic.This means that if there is a 10% change in price of this good,________.

For any two indifference curves,the one on the right indicates ________.

The opportunity cost of a Red Sox ticket is ________ small Pizzeria Regina Pies.