ECON 190 Exam 2 | Questions with 100% Correct Answers

ECON 190 Exam 2 | Questions with 100% Correct Answers A market is defined as any arrangement that brings buyers and sellers together. The "law of demand" refers to the fact that, other things remaining the same, when the price of a good rises, there is a movement up along the demand curve to a smaller quantity demanded. What results in a movement upward along the demand curve for movies? an increase in the price of movie tickets The American Dairy Association starts a highly successful advertising campaign that makes most people want to drink more milk. As a result, the demand for milk increases. If income increases and the demand for bus rides decreases, bus rides are an inferior good. If the automobile workers' union successfully negotiates a wage increase for its members, how does the wage hike affect the supply of automobiles? The supply decreases An increase in the number of fast-food restaurants increases the supply of fast-food meals Hot dogs and hot dog buns are complements. If the price of a hot dog falls, then the demand for hot dog buns will increase. The above figure shows the market for pizza. The market is in equilibrium when people's incomes decrease. If pizza is a normal good, then which point represents the most likely new price and quantity E The above figure shows the market for pizza. The market is in equilibrium when the cheese used to produce pizza falls in price. What point represents the most likely new price and quantity? D The above figure shows the market for pizza. The market is in equilibrium when the wages paid pizza workers increases. What point represents the most likely new price and quantity? B The above figure shows the market for pizza. The market is in equilibrium when new pizza firms enter the market. What point represents the most likely new price and quantity? D Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded _______. downward; decreases The market demand curve is the horizontal sum of individual demand curves. The phrase "a change in demand" most directly implies shift of the demand curve. If the demand for used cars decreases after the price of a new car falls, used cars and new cars are substitute goods. Which of the following increases the demand for a good? the expectation that future income will be higher "Other things remaining the same, if the price of a good rises, the quantity supplied of that good increases." This sentence describes a movement along a supply curve. If both the supply and demand curves shift simultaneously, we can always predict what will happen to either the price or the quantity, but not both. The price elasticity of demand is a measure of buyers' responsiveness to changes in the price of a product. The price elasticity of demand measures the ________ that results from a ________. percentage change in the quantity demanded; percentage change in price Suppose the price of a box of cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price? 40 percent 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 demande. 12.5; 10.5 Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price? 8.99 percent When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is elastic If the price of a six-pack of Pepsi falls from $4 to $3 and the quantity purchased increases 80 percent, then demand is elastic. Perfectly inelastic demand means that consumers will buy a certain quantity, regardless of price. Suppose the demand for rescue services in our national parks is perfectly inelastic. This fact would mean that a 31 percent increase in rescue fees leads to no change in the quantity demanded. The demand for a good is more elastic if the good is narrowly defined.