Question 1

Suppose the quantity of x is measured on the horizontal axis.If the price consumption curve is vertical when the price of x changes,then the demand for x is

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  unit elastic. 
D)  There is not enough information to determine the price elasticity of demand for x. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  unit elastic. 
D)  There is not enough information to determine the price elasticity of demand for x.

Question 2

For the following, please answer "True" or "False" and explain why.
-Using the CPI to compensate workers for inflation is appropriate because,in the face of a change in relative prices,people should be allowed to purchase the same bundle as they did before the price changes.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the quantity of x is measured on the horizontal axis.If the income consumption curve is vertical,then the income elasticity of demand for x is

Accepted Answer

A)  0. 
B)  1. 
C)  -1. 
D)  There is not enough information to determine the income elasticity of demand for x. 
A)  0. 
B)  1. 
C)  -1. 
D)  There is not enough information to determine the income elasticity of demand for x.

Question 4

When income increases by 1%,the quantity demanded of a good decreases by 2%.What is the income elasticity of the good? Is the good normal or inferior? Why?

Accepted Answer

The income elasticit

Question 5

Jerry spends his entire income on two goods,Bran and Tea.Every month he spends half of his income on each of these goods.Jerry's income elasticity of demand for Bran is -.75.What is the income elasticity of demand for Tea?

Accepted Answer

A)  2.75 
B)  0.36 
C)  -2.75 
D)  unknown with the information provided 
A)  2.75 
B)  0.36 
C)  -2.75 
D)  unknown with the information provided

Question 6

-The above figure shows Bobby's indifference map for juice and snacks.Assuming income remains unchanged,when the budget line rotates out,the expenditure on snacks

Accepted Answer

A)  increases. 
B)  decreases. 
C)  does not change. 
D)  Not enough information 
A)  increases. 
B)  decreases. 
C)  does not change. 
D)  Not enough information

Question 7

Louie purchases the same quantity of Bones even after the price of bones rises.Draw Louie's price-consumption curve and demand curve (two separate graphs!)based on this information.Discuss directions and magnitudes of the income and substitution effects (or graph them clearly).Are Bones normal or inferior for Louie? Explain.

Accepted Answer

The PCC is vertical because as price cha

Question 8

Edgar only consumes protein shakes with his income,I.The price of shakes is p.
a.What is Edgar's demand equation for shakes?
b.Can protein shakes be an inferior good for Edgar? Explain.
c.What is the price elasticity of Edgar's demand for shakes? Derive using calculus.
d.What is the income elasticity of Edgar's demand for shakes?

Accepted Answer

a.Q = I/p
b.No,as income rises,Edgar wil

Question 9

Borem is a big fan of wine from Trader Moes.Moe's sells a high-quality expensive wine and a cheap low-quality wine.Borem buys both types but tends to buy more bottles of the cheaper wine.Borem later moves to a new city where he must drive a long distance to get his wine at Trader Moe's.Assuming the income effect is small,and that Borem still buys his wine from Moe's,how is he going to change his relative consumption of the expensive and cheap wines?

Accepted Answer

The driving represents a fixed cost adde

Question 10

When the price of a good changes,the total effect of the price change on the quantities purchased can be found by comparing the quantities purchased

Accepted Answer

A)  on the old budget line and the new budget line. 
B)  on the original indifference curve when faced with the original prices and when faced with the new prices. 
C)  on the new budget line and a hypothetical budget line that is a parallel shift back to the original indifference curve. 
D)  on the new indifference curve. 
A)  on the old budget line and the new budget line. 
B)  on the original indifference curve when faced with the original prices and when faced with the new prices. 
C)  on the new budget line and a hypothetical budget line that is a parallel shift back to the original indifference curve. 
D)  on the new indifference curve.

Question 11

A Giffen good has

Accepted Answer

A)  a positive substitution effect. 
B)  a negative income effect. 
C)  a larger income effect than substitution effect. 
D)  All of the above. 
A)  a positive substitution effect. 
B)  a negative income effect. 
C)  a larger income effect than substitution effect. 
D)  All of the above.

Question 12

For the following, please answer "True" or "False" and explain why.
-A good may be inferior at some income levels and normal at others.

Accepted Answer

A) True 
 B)False

Question 13

-The above figure shows Bobby's indifference map for juice and snacks.Also shown are three budget lines resulting from different prices for snacks.Bobby views snacks as a(n)

Accepted Answer

A)  normal good. 
B)  inferior good. 
C)  Giffen good. 
D)  luxury good. 
A)  normal good. 
B)  inferior good. 
C)  Giffen good. 
D)  luxury good.

Question 14

Suppose you have $400,000 saved up and purchase a medium-sized house for $200,000.Consider the following 2 scenarios:
i.The very next day,the prices of all houses,including the one you have just bought,double.
ii.The very next day,the prices of all houses,including the one you bought,fall by half.
Show that both scenarios increase your utility.

Accepted Answer

In both scenarios,you are still able to

Question 15

Jose consumes wallets (q₁)and a composite of other goods (q₂).The price of wallets is p₁ and the price of other goods is p₂=1.Jose's utility from wallets depends also on his income-with a higher income,he values a wallet more because he has more to put inside it! His utility is given by the equation
U(q₁,q₂)= q₁Yq₂
Derive Jose's demand for wallets.

Accepted Answer

The answer of Jose consumes wallets (q₁)and a composite of...

Question 16

For the following, please answer "True" or "False" and explain why.
-If the Engel curve for a good is upward sloping,the demand curve for that good must be downward sloping.

Accepted Answer

A) True 
 B)False

Question 17

-The above figure shows Bobby's indifference map for soda and juice.B1 indicates his original budget line.B2 indicates his budget line resulting from an increase in the price of soda.From the graph,one can conclude that

Accepted Answer

A)  Bobby views soda as an inferior good. 
B)  Bobby's demand for soda is perfectly inelastic. 
C)  Bobby views soda as a normal good. 
D)  the income elasticity of demand for soda is one. 
A)  Bobby views soda as an inferior good. 
B)  Bobby's demand for soda is perfectly inelastic. 
C)  Bobby views soda as a normal good. 
D)  the income elasticity of demand for soda is one.

Question 18

When the price of a good changes,the substitution effect can be found by comparing the equilibrium quantities purchased

Accepted Answer

A)  on the old budget line and the new budget line. 
B)  on the original indifference curve when faced with the original prices and when faced with the new prices. 
C)  on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line. 
D)  on the new indifference curve. 
A)  on the old budget line and the new budget line. 
B)  on the original indifference curve when faced with the original prices and when faced with the new prices. 
C)  on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line. 
D)  on the new indifference curve.

Question 19

-The above figure shows Bobby's indifference map for juice and snacks.Also shown are three budget lines resulting from different prices for snacks.Bobby's demand for snacks is

Accepted Answer

A)  unit elastic. 
B)  elastic. 
C)  inelastic. 
D)  perfectly elastic. 
A)  unit elastic. 
B)  elastic. 
C)  inelastic. 
D)  perfectly elastic.

Question 20

When deriving an Engel curve the prices of both goods

Accepted Answer

A)  are held constant. 
B)  increase by the same percentage as income. 
C)  decrease by the same percentage as income. 
D)  can either decrease, increase or stay the same. 
A)  are held constant. 
B)  increase by the same percentage as income. 
C)  decrease by the same percentage as income. 
D)  can either decrease, increase or stay the same.

Suppose the quantity of x is measured on the horizontal axis.If the price consumption curve is vertical when the price of x changes,then the demand for x is

For the following, please answer "True" or "False" and explain why. -Using the CPI to compensate workers for inflation is appropriate because,in the face of a change in relative prices,people should be allowed to purchase the same bundle as they did before the price changes.

Suppose the quantity of x is measured on the horizontal axis.If the income consumption curve is vertical,then the income elasticity of demand for x is

When income increases by 1%,the quantity demanded of a good decreases by 2%.What is the income elasticity of the good? Is the good normal or inferior? Why?

Jerry spends his entire income on two goods,Bran and Tea.Every month he spends half of his income on each of these goods.Jerry's income elasticity of demand for Bran is -.75.What is the income elasticity of demand for Tea?

-The above figure shows Bobby's indifference map for juice and snacks.Assuming income remains unchanged,when the budget line rotates out,the expenditure on snacks

When the price of a good changes,the total effect of the price change on the quantities purchased can be found by comparing the quantities purchased

A Giffen good has

For the following, please answer "True" or "False" and explain why. -A good may be inferior at some income levels and normal at others.

-The above figure shows Bobby's indifference map for juice and snacks.Also shown are three budget lines resulting from different prices for snacks.Bobby views snacks as a(n)

For the following, please answer "True" or "False" and explain why. -If the Engel curve for a good is upward sloping,the demand curve for that good must be downward sloping.

-The above figure shows Bobby's indifference map for soda and juice.B1 indicates his original budget line.B2 indicates his budget line resulting from an increase in the price of soda.From the graph,one can conclude that

When the price of a good changes,the substitution effect can be found by comparing the equilibrium quantities purchased

-The above figure shows Bobby's indifference map for juice and snacks.Also shown are three budget lines resulting from different prices for snacks.Bobby's demand for snacks is

When deriving an Engel curve the prices of both goods

Introduction

Supply and Demand

A Consumers Constrained Choice

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 4: Demand

Suppose the quantity of x is measured on the horizontal axis.If the price consumption curve is vertical when the price of x changes,then the demand for x is

For the following, please answer "True" or "False" and explain why. -Using the CPI to compensate workers for inflation is appropriate because,in the face of a change in relative prices,people should be allowed to purchase the same bundle as they did before the price changes.

Suppose the quantity of x is measured on the horizontal axis.If the income consumption curve is vertical,then the income elasticity of demand for x is

When income increases by 1%,the quantity demanded of a good decreases by 2%.What is the income elasticity of the good? Is the good normal or inferior? Why?

Jerry spends his entire income on two goods,Bran and Tea.Every month he spends half of his income on each of these goods.Jerry's income elasticity of demand for Bran is -.75.What is the income elasticity of demand for Tea?

-The above figure shows Bobby's indifference map for juice and snacks.Assuming income remains unchanged,when the budget line rotates out,the expenditure on snacks

When the price of a good changes,the total effect of the price change on the quantities purchased can be found by comparing the quantities purchased

A Giffen good has

For the following, please answer "True" or "False" and explain why. -A good may be inferior at some income levels and normal at others.

-The above figure shows Bobby's indifference map for juice and snacks.Also shown are three budget lines resulting from different prices for snacks.Bobby views snacks as a(n)

For the following, please answer "True" or "False" and explain why. -If the Engel curve for a good is upward sloping,the demand curve for that good must be downward sloping.

-The above figure shows Bobby's indifference map for soda and juice.B1 indicates his original budget line.B2 indicates his budget line resulting from an increase in the price of soda.From the graph,one can conclude that

When the price of a good changes,the substitution effect can be found by comparing the equilibrium quantities purchased

-The above figure shows Bobby's indifference map for juice and snacks.Also shown are three budget lines resulting from different prices for snacks.Bobby's demand for snacks is

When deriving an Engel curve the prices of both goods

Introduction

Supply and Demand

A Consumers Constrained Choice

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters