Exam 20: Consumer Choice and Elasticity

Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third cup, $.50. If Elaine drinks three cups of coffee for breakfast, her marginal utility is equal to

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

Ceteris paribus, an increase in the price of a good will cause the

The price elasticity of demand for automobiles measures the responsiveness of

Figure 7-15 -Refer to Figure 7-15. Along which of these segments of the supply curve is supply most elastic?

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?

If the price elasticity of demand is computed for two products, and product A measures .79, and product B measures 1.6, then:

A perfectly inelastic demand curve indicates that

Assume that a college student purchases only coffee and Snickers. The substitution effect associated with a decrease in the price of a Snickers will result in

John's demand schedule for pizza is indicated below. If the current price of pizza is $1.10 per slice, what is John's consumer surplus if he buys five slices of pizza?

The schedule of the amount of a product that consumers would be willing to purchase at alternative prices during a specific time period is the

Figure 7-12 -Refer to Figure 7-12. An increase in price from $20 to $30 would

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?

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 consumers would be willing to purchase the same quantity of a good no matter what its price was, the demand curve would

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 substitution effect, which of the following is most likely to occur?

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?

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

If taking an airplane from Pittsburgh to Miami cost $600 and takes 5 hours, while taking a bus would cost $150 and takes 50 hours, the minimum value of your time that would make it worthwhile to fly would be

Figure 7-11 -Refer to Figure 7-11. As price falls from PA to PB, which demand curve represents the most elastic demand?