Exam 20: Consumer Choice and Elasticity

Scenario 7-1 Use the information below to answer the following question(s). JoAnn considers cola and plain sparkling water to be good substitutes.Suppose the price of sugar,a key ingredient used to produce cola,falls. -Refer to Scenario 7-1.According to the income effect,which of the following is most likely to occur?

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?

If the income elasticity of demand for a good is negative,this implies that

If Mr.Smith thinks the last dollar spent on shirts yields less satisfaction than the last dollar spent on cola,and Smith is a utility-maximizing consumer,he should

If a 30 percent decline in the price of gasoline leads to a 15 percent rise in expenditures on gasoline,the price elasticity of demand for gasoline in this range must be

Other things constant,the price elasticity of demand for a product will tend to be smaller (more inelastic)if

Which of the following describes a situation in which demand must be elastic?

After eating six chocolate candy bars in ten minutes,Jody says,"You would have to pay me to eat another chocolate candy bar!" This statement best illustrates

Goods that consumers regard as luxuries generally have

If a 10 percent rise in airfares leads to a 5 percent increase in total expenditures on air travel,the price elasticity of demand for air travel in this range must be

If a 50 percent increase in the price of hula hoops led to a 10 percent reduction in the quantity of hula hoops purchased,the price elasticity of demand is

Cary increases the price of her cakes from $8 to $10 per cake,but her cash receipts decrease by 2 percent.The price elasticity of demand (in the $8 to $10 range)is

Coach Ballford: "To increase our revenue from football games,we need to lower ticket prices." University President Smith: "Coach,that would be counterproductive;a reduction in ticket prices would reduce our revenue,not increase it." Which of the following best explains this disagreement?

Figure 7-17 -Consider Figure 7-17.Between the prices of $5 and $6,which supply curve is most elastic and which is least elastic?

Assuming that bus travel is an inferior good,an increase in consumer income,other things being equal,will cause

Along the inelastic portion of a demand curve,

Bob goes out to dinner three times per week,usually either to the local steak house or a Chinese restaurant in town.If the steak house were to raise its prices,Bob would probably (1)be less inclined to eat at the steak house and more inclined to eat at the Chinese restaurant when he did go out and (2)eat out fewer times per week because at the higher prices he cannot afford to eat out as much.

Making drugs,such as cocaine,illegal results in a higher price than would be present if the drugs were legal.All else constant,the higher price results in drug users spending

If the demand for a product increases as the result of an increase in income,it can be concluded that the

Mr.Jones always buys gasoline at the corner station with his credit card.Now a new station (that does not accept credit cards)is built on the other corner and offers the same quality of gasoline for $.05 less per gallon.Is Jones irrational if he continues to buy gasoline at the old station?