Exam 7: Consumer Choice and Elasticity

Figure 7-1 -Refer to Figure 7-1.When the price of hoagies increases from $5.00 to $5.75,quantity demanded decreases from Q₁ to Q₀.This change in quantity demanded is due to

The only Giffen goods that have been identified so far in the real world are luxury goods.

A Giffen good could be either a normal good or an inferior good.

There are two conditions necessary for a consumer to maximize her utility.One is that the marginal utilities per dollar spent on each good and service consumed are equal.What is the other condition?

Which of the following is not a common mistake made by consumers?

Some economists have suggested that network externalities result in consumers being locked into the use of products with inferior technologies.Economists Stan Leibowitz and Stephen Margolis have studied cases that have been cited as examples of this and found

What must be true in terms of the income effect,the substitution effect,and the type of good for the good's demand curve to be upward sloping?

If demand is inelastic,the absolute value of the price elasticity coefficient is greater than one.

Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time.In less than a week she discovered that the shoes were uncomfortable.Grace went back to wearing her old pair and stashed away the new pair.When asked by her boss,Mme.Ramotswe why does she not simply give away the new pair,she said: "But I paid so much for them." Grace's behavior

Opera Estate Girls' School is considering increasing its tuition to raise revenue.If the school believes that raising tuition will increase revenue

Many people leave their servers tips in restaurants,even when they are not likely to visit the restaurant again.This is evidence that

A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.

In their surveys of consumers,Daniel Kahneman,Jack Knetsch and Richard Thaler found that

Total revenue equals

Figure 7-4 -Refer to Figure 7-4.The absolute value of the price elasticity of demand at points a and b is 1.What is the value of Pb?

The amount of income a consumer has to spend on goods and services is known as

The price elasticity of demand for Kellogg's Raisin Bran is larger in absolute value than the price elasticity for all breakfast cereals.

The observation that people tend to value something more highly when they own it than when they don't is called the

Figure 7-3 -Refer to Figure 7-3.A perfectly inelastic demand curve is shown in

If demand is perfectly inelastic,the absolute value of the price elasticity coefficient is