Quiz 5: Individual and Market Demand

In 2010, the average household spent $1,178 on telephone services and $333 on nonalcoholic drinks. From this information, we can conclude that: A) the substitution effect of a price change will be larger for telephone services than for nonalcoholic drinks. B) an increase in the price of telephone services will cause a larger income effect than a similar increase in the price of nonalcoholic drinks. C) an increase in the price of nonalcoholic drinks will cause a larger income effect than a similar increase in the price of telephone services. D) the substitution effect of a price change will be larger for nonalcoholic drinks than for telephone services.

(Figure: Billiards and Water Park Tickets I) Based on the consumer's indifference curves and budget constraints, which of the following demand curves reflects the consumer's demand for water park tickets? Assume the consumer has income of $100. A) Demand curve A B) Demand curve B C) Demand curve C D) Demand curve D

There are 10 consumers in the market, each with the demand curve Q = 100 - 0.5P. In a graph of the market demand curve, its slope (ΔP/ΔQ) would equal: A) -0.50. B) -0.20. C) -1.50. D) -2.25.

Which of the following statements about Marshallian demand curves is FALSE? A) They show the relationship between price and quantity demanded, assuming that the consumer's income stays constant. B) They have an income effect as well as a substitution effect. C) They have just a substitution effect. D) They have the property that purchasing power changes when the good's price changes.

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is P, and the price of Y is $5. Income is $60. The demand for X as a function of P is X = ____. A) (30 - P) / P B) (20 - P) / P C) (2 - P) / P D) 2P

(Figure: Market for DS Video Games I) Assume that Sofia and Elena comprise the entire market of buyers. Elena's inverse demand function is ____. A) P = 40 - 5Q B) Q = 40 - 5P C) P = 25 - 5Q D) Q = 25 - 5P

(Figure: Hourly Wage and Hours of Labor I) Which of the following statements is (are) TRUE? I. At a wage above $18, the income effect dominates the substitution effect. II) At a wage below $18, the substitution effect dominates the income effect. III) At a wage above $18, the substitution effect dominates the income effect. IV) At a wage below $18, the income effect dominates the substitution effect. A) I and II B) II and III C) III and IV D) I

(Figure: Good Y and Good X III) The price of good Y _____, increasing the consumption of both good Y and good X, which are _____. A) increased; complements B) decreased; substitutes C) increased; substitutes D) decreased; complements

(Figure: Quantity of Good Y and X IV) The price of good Y decreased from $20 to $10. The cross-price elasticity of demand for good X with respect to good Y is ____. A) positive B) negative C) zero D) infinite

(Figure: Beef Jerky and Scallops I) According to the figure, the substitution effect associated with the increase in the price of scallops is a movement from ____ to _____ scallops. A) 6; 5 B) 6; 2 C) 5; 2 D) 5; 6

For the Cobb-Douglas utility function: A) the income and substitution effects are necessarily the same size. B) the demand for each good is independent of changes in the price of the other good. C) there is only an income effect, no substitution effect. D) there is only a substitution effect, no income effect.

(Figure: Good Y and Good X VII) At BC₁, the consumer has $40 of income to spend on goods X and Y. What changed the budget constraint from BC₁ to BC₂? A) An increase in the price of Good X B) A decrease in the price of Good X C) A decrease in the price of Good Y D) In increase in income

(Figure: Dog Treats and Milk I) When the price of milk drops, the substitution effect _____ the quantity of milk consumed from _____. A) increases; 2 to 6 gallons B) increases; 4 to 6 gallons C) decreases; 6 to 2 gallons D) increases; 2 to 4 gallons

(Figure: Quantity of Goods Y and X II) Because of the income effect associated with the decrease in the price of good X, the quantity of good X purchased: A) increases from 3 to 4. B) increases from 4 to 5. C) decreases from 5 to 4. D) increases from 3 to 5.

(Figure: Good Y and Good X V) In panel (a), the price of good X is $1.50 per unit and the price of good Y is $3 per unit. In panel (b), the consumer's income increased from $400 to $480. Panel (a) Panel (b) Using panel (b), good X is a (an) _____ good. A) necessity B) luxury C) inferior D) Giffen

(Figure: Quantity of Goods Y and X I) The substitution effect will be largest for indifference curve: A) U₁. B) U₂. C) U₃. D) U₄.

Suppose that there are two goods, X and Y. The utility function is The price of Y is $2 per unit and the price of X is P. The Hicksian demand curve for X for utility equal to 2,000 units is X = ____. A) 200P^-(1/3) B) 20P^-(1/3) C) 200P^(1/3) D) 20P

To derive the Engel curve, which shows the relationship between the quantity of a good consumed and a consumer's income, all else being equal, solve the consumer's: A) utility-maximization problem with prices of the goods as variables while keeping income constant. B) utility-maximization problem with income as a variable while keeping the prices of the goods constant. C) expenditure-minimization problem with prices of the goods as variables while keeping income constant. D) expenditure-minimization problem with income as a variable while keeping the prices of the goods constant.

(Figure: Hamburger Meat and Canned Tuna I) Hamburger meat is a(n) _____ good and canned tuna is a(n) _____ good. A) normal; normal B) inferior; normal C) inferior; inferior D) normal; inferior

For the special case of a Giffen good, the partial derivative of quantity demanded with respect to price is _____, and the partial derivative of quantity demanded with respect to income is _____. A) positive; positive B) positive; negative C) negative; positive D) negative; negative

Suppose the price of the normal good X increases. In this case, the substitution effect states that the consumer purchases _____ of good X, and the total effect is _____ in consumption of good X. A) more; an increase B) more; a decrease C) less; an increase D) less; a decrease

(Figure: Units of Good Y and Good X I) Given the change in the budget constraint, which of the following statements is TRUE? A) The demand curve for good Y shifted inward. B) The demand curve for good X shifted outward. C) Good X is an inferior good. D) Good X and good Y are complements.

(Figure: Good Y and Good X III) Given the change in the budget constraint, the demand curve for _____ shifted _____. A) good X; inward B) good Y; outward C) good X; outward D) both good X and good Y; outward

(Figure: Consumers and Quantity of Good X I) Suppose there are only two consumers in the market for good X. The total quantity demanded in the market at a price of $3 is _____, and the total quantity demanded in the market at a price of $12 is _____. A) 20; 2 B) 20; 5 C) 6; 3 D) 18; 0

Joaquin consumes pizza and beer. His utility function is where P is the number of pizzas and B is the number of glasses of beer. Joaquin has $30, and he plans to spend all of it on pizza and beer today. The price of one pizza is $10, and the price of beer is $3 per glass. Joaquin is allowed to purchase fractions of a pizza by buying individual slices at the same average price (thus, one quarter of a pizza would cost $2.50). Suppose the price of beer decreases to $2. The total effect is to increase pizza consumption by ____ pizzas and increase beer consumption by ____ beers. A) 1.38; 0.28 B) 1.12; 0.28 C) 0.54; 1.04 D) 0; 2.5

(Figure: Coffee and Ice Cream I) Kemala spends her income on ice cream and coffee, and coffee sells for $1 a cup. If ice cream sells for $1.50 per gallon, Kemala will purchase: A) 2 gallons. B) 8 gallons. C) 1 gallon. D) 6 gallons.

(Figure: Good Y and Good X V) In panel (a), the price of good X is $1.50 per unit and the price of good Y is $3 per unit. In panel (b), the consumer's income increased from $400 to $480. Panel (a) Panel (b) Using panel (a), the income elasticity of demand for good X is _____. A) 12 B) 6 C) 1/12 D) 1/6

(Figure: Batting Gloves and Baseball Hats I) The substitution effect of the price increase causes consumption of baseball hats to: A) decrease by 1. B) decrease by 3. C) decrease by 4. D) increase by 1.

Suppose there are 100 consumers in the computer speaker market, each with an identical demand curve given by Q_i = 10 - 0.1P, where P is the price per pair of speakers and Q_i measures the quantity demanded of computer speakers by each person. The market supply for computer speakers is given by Q^S = 20P - 200. The equilibrium price in the computer speaker market is $____. A) 40 B) 100 C) 300 D) 600

(Figure: Prune Juice and Apple Juice I) Refer to Figure 5.8, depicting the consumer's indifference curves and budget constraints. Suppose the consumer has $20 of income to spend on apple juice and prune juice. Which of the following statement(s) is (are) TRUE? I. At $2 per quart, the consumer buys 3 quarts of apple juice. II) At $4 per quart, the consumer buys 3 quarts of apple juice. III) At $1.33 per quart, the consumer buys 6 quarts of apple juice. IV) At $0.75 per quart, the consumer buys 6 quarts of apple juice. A) I and II B) II and III C) II and IV D) I

The market for macaroni and cheese has only two consumers, Darshak and Winta. Market demand for macaroni and cheese will tend to be more elastic if: A) Darshak and Winta consider macaroni and cheese to be a necessity good rather than a luxury good. B) Darshak and Winta consider macaroni and cheese to be an inferior good rather than a normal good. C) Darshak and Winta consider macaroni and cheese to be a normal good rather than an inferior good. D) Darshak and Winta consider macaroni and cheese to be an economic "bad."

(Figure: Good Y and Good X V) In panel (a), the price of good X is $1.50 per unit and the price of good Y is $3 per unit. In panel (b), the consumer's income increased from $400 to $480. Panel (a) Panel (b) Using panel (a), good X is a (an) _____ good. A) necessity B) luxury C) inferior D) Giffen

(Figure: Good Y and Good X VI) Which set of points (Good X, Good Y) is consistent with the income expansion path? A) (0,0), (2,2), (5,3), (7,5), and (8,8) B) (0,0), (0,4), (0,8), (0,12), and (0,16) C) (0,0), (4,0), (8,0), (12,0), and (16,0) D) (0,0), (4,4), (8,8), (12,12), and (16,16)

(Figure: Good Y and Good X V) In panel (a), the price of good X is $1.50 per unit and the price of good Y is $3 per unit. In panel (b), the consumer's income increased from $400 to $480. Panel (a) Panel (b) Using panel (b), the income elasticity of demand for good X is _____. A) 1.43 B) -1.43 C) 0.7 D) -0.7

What is the substitution effect of a price change? A) Consumers will buy more of the good whose relative price has risen and less of the good whose relative price has fallen. B) When prices fall, consumers will have more purchasing power and buy more of the good whose price has fallen. C) When prices fall, consumers will have more purchasing power and buy more of all goods. D) Consumers will consume less of the good whose relative price has risen and more of the good whose relative price has fallen.

(Figure: Good Y and Good X IV) The cross-price elasticity of demand for good X with respect to good Y is _____ in panel (a) and _____ in panel (b). Panel (a) Panel (b) A) zero; negative B) negative; positive C) positive; negative D) negative infinity; positive

For Sara, ramen noodles are a normal good, however Sean considers ramen noodles to be inferior. If Sara and Sean have the same amount of income: A) Sean's income effect will be stronger than Sara's income effect. B) Sean's substitution effect will be stronger than Sara's substitution effect. C) Sean's demand for ramen noodles will be more price elastic than Sara's. D) Sean's demand for ramen noodles will be less price elastic than Sara's.

The market for good X consists of only two consumers; their demand curves are given by Q = 10 - 0.10P and Q = 5 - 0.10P. What is the market demand curve? A) Q_M = 15 - 0.2P if P ≥ $50, and Q_M = 5 - 0.10P if P < $50 B) Q_M = 15 - 0.2P if P ≥ $50, and Q_M = 10 - 0.10P if P < $50 C) Q_M = 15 - 0.2P if P < $50, and Q_M = 10 - 0.10P if P > $50 D) Q_M = 15 - 0.2P

(Figure: Fishing Charters and Parachute Jumps I) Francis spends his income on fishing charters and jumping out of airplanes. Which of the following statements is TRUE? A) Fishing charters are an inferior good. B) An increase in income could cause the optimal consumption bundle to move from point A to point B. C) Parachute jumps are an inferior good. D) An increase in the price of parachute jumps could cause the optimal consumption bundle to move from point A to point B.

Joaquin consumes pizza and beer. His utility function is where P is the number of pizzas and B is the number of glasses of beer. Joaquin has $30, and he plans to spend all of it on pizza and beer today. The price of one pizza is $10 and the price of beer is $3 per glass. Joaquin is allowed to purchase fractions of a pizza by buying individual slices at the same average price (thus, one quarter of a pizza would cost $2.50). Joaquin's optimal bundle is ____ pizzas and ____ beers. A) 0.5; 10 B) 1.5; 5 C) 2.5; 4 D) 3; 3

Suppose that Seth's income increases from $400 to $500 per week, so Seth increases his purchases of movies from three to four. The income elasticity of movies is: A) 1.33. B) 0.25. C) 0.75. D) 1.00.

Suppose that there are two goods, X and Y. The utility function is U = X²Y². The price of X is P, and the price of Y is $50. Income is $600. The demand for X as a function of P is X = ____. A) 300/P B) 200/P C) 20/P D) 2P

(Figure: Quantity of Goods Y and X III) What type of good is good X? I. a normal good II) an inferior good III) a Giffen good A) I and III B) III C) II and III D) I

(Figure: Orange Juice and Milk I) According to the above figure and assuming the substitution effect increased milk consumption by one, the income effect of moving from BC₁ to BC₂ is a movement from ____ milk to ____ milk. A) 3; 6 B) 3; 2 C) 2; 6 D) 2; 4

(Figure: Good Y and Good X II) Good X and good Y are: A) perfect complements. B) Giffen goods. C) complement goods. D) substitute goods.

(Figure: Dog Treats and Milk II) When the price of milk drops, the income effect _____ the quantity of milk consumed from _____. A) increases; 2 to 6 gallons B) increases; 4 to 6 gallons C) decreases; 6 to 2 gallons D) increases; 2 to 4 gallons

The size and direction of the income effect depend on all of the following EXCEPT: A) the amount of the good (X) the consumer buys. B) the change in the quantity of X when purchasing power is transformed (X(P_X, P_Y,I)/I). C) the change in the consumption of X as the price of X changes, holding utility constant. D) whether the good is normal or inferior.

The income effect of a price change predicts that a _____ in a good's price will _____ consumer purchasing power, leading to a(n) _____ in consumption of _____ goods. A) fall; increase; increase; normal B) fall; decrease; decrease; normal C) rise; increase; increase; inferior D) rise; decrease; decrease; normal

(Figure: Books and Paintings I) Which of the following statements is TRUE? A) Books are an inferior good at income levels greater than those associated with bundle B. B) Books are an inferior good at income levels greater than those associated with bundle C. C) Both books and paintings are normal goods up to the income level corresponding to bundle D. D) Paintings are an inferior good at income levels higher than those associated with these bundles.

Which of the following statements about a Giffen good is FALSE? A) It is very rare. B) Its demand curve slopes upward. C) The consumer buys a lot of an inferior good, and consumption of the good is very responsive to changes in income. D) The substitution effect dominates the income effect.

(Figure: Market for DS Video Games I) Assume that Sofia and Elena comprise the entire market of buyers. Sofia's inverse demand function is ____. A) P = 40 - 5Q B) Q = 40 - 5P C) P = 25 - 5Q D) Q = 25 - 5P

(Figure: Orange Juice and Milk I) According to the above figure, the substitution effect of moving from BC₁ to BC₂ is a movement from ____ milk to ____ milk. A) 2; 3 B) 2; 1 C) 2; 6 D) 6; 3

(Figure: Good Y and Good X VI) Assume that the price of Good X is $100 per unit and the price of Good Y is $100 per unit. When income increases from $1,200 to $1600, Good X is a (an) _____ good. A) necessity B) luxury C) inferior D) Giffen

There are only three consumers in the market, and their demand equations are as follows: (1) Q = 5 - 0.5P, (2) Q = 10 - P, and (3) Q = 2 - 0.2P. What is the equation for the market demand curve? A) P = 30 - 8Q B) Q = 3.75 - 0.125P C) Q = 17 - 1.7P D) Q = 30 - 2P

Suppose that good X and good Y are substitutes and good X and good Z are complements. When the price of a good Y _____ or the price of good Z _____, the demand for good X shifts outward. A) increases; decreases B) increases; increases C) decreases; decreases D) decreases; increases

A consumer's bundle includes good X and good Y. If good X is an inferior good, the size of the income effect is smaller than the substitution effect, goods X and Y are substitutes, and the price of good X rises, the consumer will buy ____ of good X and ____ of good Y. A) more; more B) more; less C) less; more D) less; less

To use calculus to decompose the total effect of a price change into substitution and income effects, it is necessary to solve all of the following EXCEPT the consumer's: A) utility-maximization problem at the original prices. B) utility-maximization problem at the new prices. C) expenditure-minimization problem at the new prices and original utility level. D) expenditure-minimization problem at the original prices and new utility level.

Suppose that a consumer has utility U(X,Y) = 2XY + X and income of $499 to spend on goods X and Y. The initial prices of X and Y are $1 and $2 per unit, respectively. Suppose the price of good X increases to $2 per unit. The total effect on the consumption of goods X and Y is ____ for good X and ____ for good Y. A) 125; 0 B) -125; 0 C) 0; 125 D) 0; -125

(Figure: Beef Jerky and Scallops I) According to the figure, beef jerky is a (an) ____ good. A) normal B) inferior C) Giffen D) superior

(Figure: Tattoos and Football Tickets I) When the price of football tickets increases, the income effect decreases the number of tickets bought from: A) 4 to 3. B) 6 to 3. C) 6 to 4. D) 20 to 8.

(Figure: Books and Paintings I) The curve that goes through the points A, B, C, and D is called the: A) income elasticity curve. B) optimal consumption path. C) Engel curve. D) income expansion path.

Suppose that Bella's utility function from bananas (B) and chocolate (C) is . Her budget is $15, and the price of chocolate is $3. If Bella's budget increases to $20, then bananas are ____ for Bella. A) a normal good B) an inferior good C) a Giffen good D) a superior good

(Figure: Price and Quantity of Vocal Lessons I) Suppose Lizzie and Miranda are the only two customers in the market for voice lessons. Lizzie's demand is Q_M = 40 - 4P, and Miranda's demand is Q_V = 75 - 5P. Which panel represents the market demand for vocal lessons? A) panel (a) B) panel (b) C) panel (c) D) panel (d)

Suppose the price of good X, a Giffen good, increases. Which of the following statements are TRUE? I) The substitution effect of the price increase causes consumers to buy less of good X. II) The substitution effect of the price increase causes consumers to buy more of good X. III) The income effect of the price increase causes consumers to buy more of good X. IV) The income effect of the price increase causes consumers to buy less of good X. A) I and IV B) II and IV C) I and III D) II and III

A consumer's bundle includes the inferior good X and the normal good Y. According to the income effect, a(n) _____ in the price of good X or a(n) _____ in the price of good Y will cause the consumer to buy more of good X. A) increase; decrease B) increase; increase C) decrease; increase D) decrease; decrease

Suppose the price of an inferior good X, that follows the law of demand, decreases. In this case, the substitution effect states that the consumer purchases _____ of good X, and the total effect is _____ in consumption of good X. A) more; an increase B) more; a decrease C) less; an increase D) less; a decrease

We can use the calculus of the consumer choice model for each of the following EXCEPT: A) to see how the demand curve shifts when there is a discrete change in income or the price of the other good. B) to see how the demand curve shifts when tastes for a good change. C) to see how the supply curve shifts when tastes for a good change. D) to see the effects of a change in price of the good itself.

Abby's utility function is given by U = X²Y². For this utility function, MU_x = 2XY² and MU_y = 2X²Y. If good X costs $10 and good Y costs $5, then Abby will consume ____ times as many units of good Y as she does units of good X. A) 2 B) 3 C) 4 D) 1/2

(Figure: Quantity of Good Y and X IV) The price of good Y decreased from $20 to $10. Goods X and Y are considered ____. A) complements B) substitutes C) unrelated goods D) inferior goods

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is $5, and the price of Y is P. Income is $60. The demand for Y as a function of P is X = ____. A) 350/P B) 35/P C) 20/P D) 2P

Suppose the price of the normal good X decreases. In this case, the substitution effect states that the consumer purchases _____ of good X, and the total effect is _____ in consumption of good X. A) more; an increase B) more; a decrease C) less; an increase D) less; a decrease

Suppose that a consumer has utility U(X,Y) = 2XY + X and income of $499 to spend on goods X and Y. The prices of X and Y are $1 and $2 per unit respectively. The optimal basket of goods is ____X and ____Y. A) 250; 124.5 B) 200; 150 C) 150; 200 D) 124.5; 250

Julie spends all of her income on gasoline and pizza. Gasoline costs $4 per gallon and pizza costs $2 per slice. When Julie's income is $50 per week, she purchases 5 gallons of gasoline and 15 slices of pizza. When her income rises to $80 per week, she buys 15 gallons of gasoline and 10 slices of pizza. Which of the following statements is true? A) Both gasoline and pizza are normal goods. B) Gasoline is a luxury good. C) Pizza is a luxury good. D) Both gasoline and pizza are inferior goods.

Suppose the demand for good X shifts in. Which of the following statements is (are) possibly TRUE? I) The price of good X increased. II) The price of a substitute good decreased. III) The price of a complement good increased. A) I, II, and III B) II and III C) I D) II

(Figure: Tattoos and Football Tickets I) When the price of football tickets increases, the substitution effect decreases the number of tickets bought from: A) 4 to 3. B) 6 to 3. C) 6 to 4. D) 20 to 8.

(Figure: Good Y and Good X II) Which of the following statements are TRUE? I. The demand curve for good Y shifted outward. II) The demand curve for good Y shifted inward. III) The demand curve for good X shifted inward. IV) The price of good Y decreased, causing an increase in the quantity demanded of good Y. A) II and III B) I, III, and IV C) III and IV D) I and IV

Suppose that Bella's utility function from bananas (B) and chocolate (C) is . Her budget is $15, and the price of chocolate is $3. Bella's demand for bananas is ____. A) 15/2p B) 10/p C) 2/p D) 2p

Suppose the price of a Giffen good, X, decreases. In this case, the substitution effect states that the consumer purchases _____ of good X, and the total effect is _____ in consumption of good X. A) more; an increase B) more; a decrease C) less; an increase D) less; a decrease

(Figure: Quantity of Goods Y and X II) Good X is a(n) _____ good, and good Y is a(n) _____ good. A) normal; inferior B) normal; normal C) inferior; inferior D) inferior; normal

The substitution effect of a price increase: A) causes the consumer to purchase less of the good that is now relatively more expensive. B) causes the consumer to purchase more of the good whose price has risen. C) can cause the consumer to purchase either more or less of the good. D) has no effect on the amount purchased of either good.

When Logan earned $1,000 per week, he purchased 5 karate lessons and 40 gallons of gasoline. When his earnings increased to $1,100 per week, he purchased 6 karate lessons and 43 gallons of gasoline. The income elasticity of karate lessons and gasoline are _____ and _____, respectively. A) 0.50; 1.33 B) 0.10; 1.6 C) 2.00; 0.75 D) 0.85; 0.15

(Figure: Good Y and Good X VI) According to the figure, which is true about the two goods? A) Goods X and Y are normal. B) Good X is normal and Good Y is inferior. C) Good X is inferior and Good Y is normal. D) Goods X and Y are inferior.

(Figure: Beef Jerky and Scallops I) According to the figure, scallops are a (an) ____ good. A) normal B) inferior C) Giffen D) superior

The Slutsky equation can be expressed as: A) . B) . C) . D) .

(Figure: Quantity of Good Y and X VI) The price of good Y increased from $1.00 to $5.00. As a result of the increase in the price of good Y, the demand for good X ____. A) shifted outward B) shifted inward C) moved along from left to right D) moved along from right to left

(Figure: Batting Gloves and Baseball Hats I) The income effect of the price increase causes consumption of baseball hats to: A) decrease by 1. B) decrease by 3. C) decrease by 4. D) increase by 1.

(Figure: Income and Fruitcake I) Which of the following statements is TRUE? A) Fruitcake is an inferior good regardless of income level. B) Fruitcake is a normal good regardless of income level. C) Fruitcake is a normal good until income reaches $120, and then it becomes an inferior good. D) Fruitcake is an inferior good until income reaches $120, and then it becomes a normal good.

(Figure: Quantity of Good Y and X VI) The price of good Y increased from $1.00 to $5.00. Goods X and Y are ____. A) complements B) substitutes C) unrelated goods D) Giffen goods

Which of the following statements is TRUE? I) Movies in a theater and movies at home could be substitute goods if the falling price of home entertainment equipment causes people to watch more movies at home and fewer in the theater. II) Movies in a theater and movies at home could be complement goods if watching a lot of movies at home causes people to become more interested in movies, increasing their demand for movies in a theater. III) If the cross-price elasticity of demand between movies in a theater and movies at home is 0.33, the two goods are complements. A) I only B) II only C) I, II, and III D) I and II

Suppose that there are two goods, X and Y. The utility function is U = X^0.5Y. The price of X is P, and the price of Y is $4. Income is $120. The demand for X as a function of P is x =____. A) 40/P B) 20/P C) 2/P D) 0.5P

Joaquin consumes pizza and beer. His utility function is where P is the number of pizzas and B is the number of glasses of beer. Joaquin has $30, and he plans to spend all of it on pizza and beer today. The price of one pizza is $10, and the price of beer is $3 per glass. Joaquin is allowed to purchase fractions of a pizza by buying individual slices at the same average price (thus, one quarter of a pizza would cost $2.50). Suppose the price of beer decreases to $2. The substitution effect is to decrease pizza consumption by ____ pizzas and increase beer consumption by ____ beers. A) 1.12; 0.28 B) 1; 1 C) 0.54; 1.04 D) 0.28; 1.12

Suppose there are 100 consumers in the computer speaker market, each with an identical demand curve given by Q_i = 10 - 0.1P, where P is the price per pair of speakers and Q_i measures the quantity demanded of computer speakers by each person. The market supply for computer speakers is given by Q^S = 20P - 200. The equilibrium quantity in the computer speaker market is ____. A) 40 B) 100 C) 300 D) 600

(Figure: Quantity of Goods Y and X III) Because of the substitution effect associated with the decrease in the price of good X, the quantity of good X purchased: A) increases from 3 to 5. B) decreases from 3 to 2. C) increases from 2 to 3. D) increases from 2 to 5.

(Figure: Coffee and Energy Drinks I) Suppose the consumer has $10 to spend on energy drinks and coffee. Which of the following figures represents the consumer's demand curve for energy drinks? A) panel (a) B) panel (b) C) panel (c) D) panel (d)

To calculate the market demand curve from individual demand curves: A) vertically sum the individual demand curves. B) horizontally sum the individual demand curves. C) exponentiate the individual demand curves. D) add up the prices of the individual demand curves, holding the quantities constant.

There are 100 consumers in the market for good X, each with a demand curve given by Q = 2/P. What is the market demand curve for good X? A) Q_M = 0.5P B) Q_M = 200 - 200P C) Q_M = 1/50P D) Q_M = 200/P

Amisha's Engel curve for potato chips is I = 300C, where I is weekly income and C measures the number of bags of potato chips. Amisha considers potato chips a(n): A) inferior good. B) normal good. C) inferior good at income levels above $60,000. D) inferior good at income levels above $30,000.

Suppose the price of an inferior good X, that follows the law of demand, increases. In this case, the substitution effect states that the consumer purchases _____ of good X, and the total effect is _____ in consumption of good X. A) more; an increase B) more; a decrease C) less; an increase D) less; a decrease

Joaquin consumes pizza and beer. His utility function is where P is the number of pizzas and B is the number of glasses of beer. Joaquin has $30, and he plans to spend all of it on pizza and beer today. The price of one pizza is $10, and the price of beer is $3 per glass. Joaquin is allowed to purchase fractions of a pizza by buying individual slices at the same average price (thus, one quarter of a pizza would cost $2.50). Suppose the price of beer decreases to $2. The income effect is to increase pizza consumption by ____ pizzas and increase beer consumption by ____ beers. A) 1.38; 0.28 B) 1.12; 0.28 C) 0.54; 1.04 D) 0.28; 1.38

A consumer's bundle includes good X and good Y. If good X is a normal good, goods X and Y are substitutes, and the price of good X rises, the consumer will buy ____ of good X and ____ of good Y. A) more; more B) more; less C) less; more D) less; less

Suppose the market for a good is composed of 1,000 identical consumers. The market's demand curve is given by Q_M = 150,000 - 25P. What is the equation for an individual consumer's demand curve? A) Q = 150,000,000 - 25,000P B) Q = 6,000,000 - 40P C) Q = 6 - 4P D) Q = 150 - 0.025

Which of the following statements about Hicksian demand curves is FALSE? A) They are also known as compensated demand curves. B) They can be derived by solving the consumer's expenditure minimization problem to find the bundle of goods after the price change that would give her the same level of utility as before the price change. C) They indicate that the quantity demanded of X is inversely related to the price of X, all else being equal. D) They have an income effect as well as a substitution effect.

Suppose that there are two goods, X and Y. The utility function is The price of Y is $1 per unit and the price of X is P. The Hicksian demand curve for X for utility equal to 50,000 units is X = ____. A) 100P^-0.5 B) 10P^-0.5 C) 100P^0.5 D) 10P

Suppose the price of a Giffen good, X, increases. In this case, the substitution effect states that the consumer purchases _____ of good X, and the total effect is _____ in consumption of good X. A) more; an increase B) more; a decrease C) less; an increase D) less; a decrease

A consumer's bundle includes good X and good Y. If good X is a Giffen good and the price of good X decreases, the consumer will buy ____ of good X and ____ of good Y. A) more; more B) more; less C) less; more D) less; less

A consumer's bundle includes two normal goods, X and Y. According to the income effect, a(n) _____ in the price of good X or a(n) _____ in the price of good Y will cause the consumer to buy less of good X. A) increase; decrease B) increase; increase C) decrease; increase D) decrease; decrease

Siti is one of many consumers in the yellow onion market. Which of the following statements is (are) TRUE? I) Siti's demand curve must have the same slope as that of the market demand curve. II) Siti's demand curve must be to the right of the market demand curve. III) Siti's demand curve is either as flat as or flatter than the market demand curve. A) II and III B) I C) II D) III

(Figure: Beef Jerky and Scallops I) According to the figure, the income effect associated with the increase in the price of scallops is a movement from ____ to _____ scallops. A) 6; 5 B) 6; 2 C) 5; 2 D) 5; 6

(Figure: Quantity of Goods Y and X III) Because of the income effect associated with the decrease in the price of good X, the quantity of good X purchased: A) increases from 3 to 5. B) decreases from 5 to 4. C) decreases from 3 to 2. D) decreases from 5 to 2.

Which of the following statements are TRUE? I) The substitution effect of a wage decrease means that people will work more hours. II) The income effect of a wage decrease means that people will take more leisure. III) If wages fall and people work fewer hours, the substitution effect dominates the income effect. IV) If wages increase and people work fewer hours, the income effect dominates the substitution effect. A) I, II, and IV B) I and IV C) II and III D) III and IV

(Figure: Quantity of Good Y and X VI) The price of good Y increased from $1.00 to $5.00. The cross-price elasticity of demand for good X with respect to good Y is ____. A) positive B) negative C) zero D) infinite

(Figure: Good Y and Good X VI) Assume that the price of Good X is $100 per unit and the price of Good Y is $100 per unit. When income increases from $1,200 to $1600, Good Y is a (an) _____ good. A) necessity B) luxury C) inferior D) Giffen

(Figure: Price and Quantity of Skirts I) This graph shows the demand curve for skirts. Suppose the consumer has $500 to spend on skirts and handbags, and the price of handbags remains unchanged at $100. Using budget constraints and indifference curves, placing skirts on the horizontal axis and handbags on the vertical axis, illustrate two of the consumer's optimal consumption bundles of skirts and handbags.

A consumer has the utility function U = 4X + 2Y, where X is the number of slices of plain pizza and Y is the number of slices of pepperoni pizza. Given this person's preferences, what is the demand curve for slices of plain pizza?

(Figure: Good Y and Good X X) Clark, Lois, Arthur, and Oliver are the only consumers in the market for kayaks; their inverse demand curves, respectively, are as follows: P = 5,000 - 1,000Q_C P = 4,000 - 1,000Q_G P = 3,000 - 500Q_B P = 3,000 - 1,500Q_P What is the market demand curve for kayaks based on these four individuals?

Suppose a consumer spends her income on lobster and frozen pizza. Assume that the consumer has an income of $60, the price of lobster is $6, and the price of frozen pizza is $6. a. Using indifference curves and budget constraints, show the income and substitution effects associated with a decrease in the price of frozen pizza. Assume frozen pizza is an inferior good and lobster is a normal good. b. Using indifference curves and budget constraints, show the income and substitution effects associated with a decrease in the price of frozen pizza. Assume frozen pizza is a Giffen good and lobster is a normal good.

Suppose there are 100 consumers in the computer speaker market, each with an identical demand curve given by Q_i = 10 - 0.1P, where P is the price per pair of speakers and Q_i measures the quantity demanded of computer speakers by each person. The market supply for computer speakers is given by Q^S = 20P - 200. What are the equilibrium price and quantity in the computer speaker market?

Eidi has $100 to spend on video blackjack at $1 per game and French fries at $1 per basket. ​ Graph Eidi's budget constraint, putting video games on the vertical axis and French fries on the horizontal axis. Using an indifference curve, show Eidi's optimal consumption bundle at 20 blackjack games and 80 baskets of fries.

(Figure: VI) The price of good Y increased from $1.00 to $5.00. a. Explain whether goods X and Y are complements or substitutes. b. Calculate the cross-price elasticity of demand for good X with respect to good Y. c. What happened to the demand curve for good X?

Suppose that there are two goods, X and Y. The utility function is The price of Y is $2 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 2,000 units.

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is P, and the price of Y is $5. Income is $60. Derive the demand for X as a function of P.

(Figure: Market for Bumper Stickers I) Graph the market demand curve for bumper stickers, assuming that Isabella and Martina are the only two consumers in the market for bumper stickers. On your graph, show the quantity demanded at $10, $7.50, $5, $2.50, and $0.

Suppose that Bella's utility function from bananas (B) and chocolate (C) is . Her utility is 4, and the price of chocolate is $3. Derive Bella's Hicksian demand for bananas.

Joaquin consumes pizza and beer. His utility function is where P is the number of pizzas and B is glasses of beer. Joaquin has $30, and he plans to spend all of it on pizza and beer today. a. The price of one pizza is $10 and the price of beer is $3 per glass. Solve for Joaquin's optimal bundle. b. Suppose that during happy hour Joaquin can get beer for $2. Find the substitution effect, the income effect, and the total effect of the decrease in the price. c. Are pizza and beer normal or inferior goods for Joaquin? Explain.

(Figure: Black Jack Video Games and Fries III) What is the demand equation?

A consumer's bundle includes good X and good Y. Determine whether the following statements are true, false, or uncertain. a. If good X is a normal good and its price rises, the consumer will buy more of it. b. If good X is an inferior good and its price rises, the consumer will buy less of it. c. If good X is a Giffen good and its price falls, the consumer will buy less of it.

(Figure: Good Y and Good X V) In panel (a), the price of good X is $1.50 per unit and the price of good Y is $3 per unit. In panel (b), the consumer's income increased from $400 to $480. Panel (a) Panel (b) ​ a. Using panel (a), calculate the income elasticity of demand for good X. What type of good is X? b. Using panel (b), calculate the income elasticity of demand for good X. What type of good is X?

Suppose that there are two goods, X and Y. The utility function is U = X^0.5Y. The price of X is P, and the price of Y is $4. Income is $120. Derive the demand for X as a function of P.

(Figure: Beef Jerky and Scallops I) Answer the following questions. a. What are the income effect and substitution effect of the price change? b. Are scallops a normal good or an inferior good? c. Is beef jerky a normal good or an inferior good?

Abby's utility function is given by U = X²Y². For this utility function, MU_x = 2XY² and MU_y = 2X²Y. If good X costs $10 and good Y costs $5, what share of Abby's utility-maximizing bundle is made up of good X?

The utility function for a consumer is U =min{0.25X, Y}. What is the equation for the consumer's income expansion path?

Yasmine has $40 weekly to spend on restaurant meals (priced at $10 per meal) and bowling (priced at $2 per game). a. Graph Yasmine's budget constraint, placing restaurant meals on the vertical axis and bowling games on the horizontal axis. Illustrate Yasmine's optimal consumption bundle, composed of 1 restaurant meal and 15 games of bowling. b. Suppose that the price of bowling increases to $4 per game. Illustrate Yasmine's new budget constraint along with her new optimal consumption bundle, composed of 2 restaurant meals and 5 games of bowling. c. Draw Yasmine's demand curve for bowling, indicating her quantities demanded at $2 and $4.

(Figure: Good Y and Good X VI) Answer the following questions. a. What is the income expansion path? b. What quantities of good X does the income expansion path go through? c. Draw the Engel curve for good X. Assume that the price of good X is $100 per unit and the price of good Y is $100 per unit. d. What is the income elasticity of demand for good X if income increases from $1,200 to $1,600?

Suppose that Bella's utility function from bananas (B) and chocolate (C) is . Her budget is $15, and the price of chocolate is $3. a. Derive Bella's demand for bananas. b. Suppose that Bella's budget increases to $20. Derive her new demand curve for bananas. Are bananas a normal or inferior good for Bella? Explain.

Ana, Marcia, and Juliana are the only consumers in the market for leather jackets; their inverse demand curves, respectively, are as follows: P = 200 - 10Q_A P = 200 - 50Q_M P = 200 - 20Q_J What is the equation for the market demand curve for leather jackets?

(Figure: Good Y and Good X IX) For a constant income, the cross-price elasticity of demand between good X and Y in figure A is _____. In figure B, it is _____.

Suppose that there are two goods, X and Y. The utility function is U = X²Y². The price of X is P, and the price of Y is $50. Income is $600. Derive the demand for X as a function of P.

Suppose a consumer spends $100 of income on two goods-buying 4 units of good X (priced at $10) and 3 units of good Y (priced at $20). Both are substitute goods. Using indifference curves and budget constraints, illustrate the effect of a $10 decrease in the price of good Y on the consumer's optimal consumption bundle.

(Figure: Market for DS Video Games I) Assume that Sofia and Elena comprise the entire market of buyers. a. Complete the following table. b. What are Sofia and Elena's inverse demand equations?

(Figure: Blackjack Video Games and Fries III) The figure shows two budget lines for a consumer whose preferences are represented by the utility function U = 2G + F, where G represents the number of video games and F represents the number of baskets of fries. What is the demand equation for this consumer?

Suppose that there are two goods, X and Y. The utility function is The price of Y is $1 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 50,000 units.

For the following scenarios, explain the direction of the substitution effect, income effect, and total effect. I. The price of good X, a normal good, increases. II. The price of good X, an inferior good, decreases. III. The price of good X, a Giffen good, increases.

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is $5, and the price of Y is P. Income is $60. Derive the demand for Y as a function of P.

Kenza's utility function for black (B) and white (W) socks is U = 10B + 10W, where MU_B = 10 and MU_W = 10. Suppose that Kenza has $40 to spend on socks. With the price of white socks held constant at $10, graph Kenza's demand curve for black socks at $2, $4, $5, $8, $10, and $20.

Suppose that a consumer has utility U(X,Y) = 2XY + X and income of $499 to spend on goods X and Y. a. The prices of X and Y are $1 and $2 per unit, respectively. Use a Lagrangian to solve for the optimal basket of goods. b. Suppose that the price of X increases to $2 per unit. Use a Lagrangian to solve for the new optimal basket of goods. Find the total effect of the price change on the consumption of each good. c. Use a Lagrangian to find the substitution effect of the increase in the price of good X on the consumption of each good. What income would the consumer need to attain the original level of utility if the price of X increased to $2 per unit? d. Find the income effect of the increase in the price of good X on the consumption of each good. Are the goods normal or inferior? Explain. e. Show that the total effect of the increase in the price of X is equal to the sum of the substitution effect and the income effect.

Amina has $200 to spend on fishing equipment and fast-food burgers. Fishing equipment is priced at $10 per unit and fast-food burgers are priced at $4 per burger. a. Graph Amina's budget constraint, placing fishing equipment on the vertical axis and fast-food burgers on the horizontal axis. Using an indifference curve, show Amina's optimal consumption bundle at 10 units of fishing equipment and 25 burgers. b. Suppose that Amina's income increases by $50. Adding a new budget constraint and indifference curve to your original graph, show Amina's new optimal consumption bundle, assuming fishing equipment is a normal good and fast-food hamburgers are an inferior good.