Exam 7: Consumer Choice and Elasticity

Members of Alpha fraternity have developed a strong liking for Coca-Cola. Beta fraternity members buy the same amount of Coke but believe Pepsi is just about as good. From this, we can infer that

In the mythical nation of Oz, gasoline used to sell for $1 a gallon, and the natives purchased 100,000 gallons a week. Four years ago, the price rose to $3 a gallon, and the natives reduced their quantity demanded to 90,000 gallons a week. Calculate the price elasticity for this change. Today, gas again sells for $1 a gallon in Oz, but the natives are only buying 70,000 gallons a week. What gives?

Why do economists use the concept of elasticity in addition to measurement of the slope of the demand curve?

Figure 7-3 Figure 7-3 depicts a demand curve with a price elasticity that is

Which of the following statements is true?

A good is classified as inferior if

A 10 percent increase in the price of sugar reduces sugar consumption by about 5 percent. The increase causes households to

Sally recently got a 15 percent raise. She now purchases 7.5 percent more steak dinners. Sally's income elasticity for steak dinners is

Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will

Suppose the state of New York imposes a one dollar per pack tax on cigarettes, which increases their price by 30 percent, and as a result, the quantity sold declines by 20 percent. The price elasticity of demand for cigarettes is equal to

If the price of apples increases, total expenditures on apples will decline if

John is a well-known consultant who makes $150 an hour and has all the work he can handle. He has a big job in Washington D.C., ten hours away. He can drive at a cost of $80 round trip or take a one-hour flight for $300. Which is he likely to do? Are there circumstances that may lead him to choose otherwise?

Elaine, a small grocer, is planning to cut certain prices to increase her sales revenues. What will be the likely result of a price decrease for matches, a good for which the demand is inelastic, and a price decrease for fresh green tomatoes, an item for which consumer demand is elastic?

Which of the following is true regarding the price elasticity of demand?

Table 7-1 Refer to Table 7-1. When the price of the good is $1.00, the quantity demanded in this market would be

Studies indicate that the demand for fresh tomatoes is much more elastic than the demand for salt. These findings reflect that

If Mr. McLean thinks the last dollar spent on bowling yields more satisfaction than the last dollar spent on hamburgers, and McLean is a utility-maximizing consumer, he should

Terri currently consumes 10 hamburgers and 2 shirts per month. At her current rates of consumption, her marginal utility of hamburgers is 10 and her marginal utility of shirts is 50. If the price of hamburgers is $2 each, while the price of a shirt is $25, Terri

Along the inelastic portion of a demand curve,

Figure 7-16 Which demand curve in Figure 7-16 is perfectly elastic?