Quiz 2 Flashcards
(14 cards)
Which of the following does not cause a change in demand?
Price of the good
An increase in the number of potential buyers will most likely cause which of the following?
An increase in demand
A decrease in income will cause which of the following to happen to the demand for used cars? Assume used cars are inferior goods.
The demand for used cars will increase.
What will happen to current purchases if people expect lower prices in the future? What will happen with expectations of higher incomes?
Demand decreases; demand increases
Sometimes consumers purchase goods because of “conspicuous consumption”; i.e., they want others to know that they can afford to buy the goods. There are many examples of these goods, such as Rolex watches, Coach purses, and flying first class. What would you expect the income elasticity of demand to be for these goods?
These are luxury goods, so income elasticity would be greater than 1.
Suppose you know that the price elasticity of demand for your product is 0.5, and you are thinking about raising your price by 8%. How much can you expect quantity to decrease?
4%
If you were selling a product with an elasticity of 1.6 and you wanted to increase your revenue, what should you do to the price?
Lower price
If income decreases and, at the same time, a new technology is discovered that lowers the cost of producing a normal good, which of the following will happen?
Cannot tell the change in equilibrium quantity. The equilibrium price will decrease.
If (1) the cost of manufacturing computers decreases and (2) at the same time the quality improves, making computers more useful for households, which of the following is most likely to happen?
Equilibrium price may increase or decrease; equilibrium quantity will increase
A decrease in the price of a complementary good will cause its complement’s equilibrium price to ______________ and the equilibrium quantity to ______________.
Increase; increase
New technology lowering the costs of production will cause the equilibrium price to ______________ and the equilibrium quantity to ______________.
Decrease; increase
An increase in the prices of inputs will cause the equilibrium price to ______________ and the equilibrium quantity to ______________.
Increase; decrease
Since 1950, the labor force participation rate of women with young children has increased dramatically. In accordance with this trend, one would predict that there has been _______________.
An increase in the demand for child care services
The law of diminishing marginal returns is the cause of ______________ marginal product and ______________ marginal cost.
decreasing; increasing
