Exam 7: Consumer Choice and Elasticity

Suppose the price elasticity of demand for methamphetamine is -0.35.If decriminalization caused the price of methamphetamine to fall by 75 percent,what will be the percentage increase in the quantity of methamphetamine demanded? If the price elasticity is -3.5,what will be the percentage increase in quantity demanded?

Which of the following explains why a firm would be interested in knowing the price elasticity of demand for a good it sells?

The Wong family consumes 3 pounds of fish and 5 pounds of chicken per month.The price of fish is $8 per pound and chicken is $4 per pound. a.What is the amount of income allocated to fish and chicken consumption? b.What is the price ratio (the price of fish relative to the price of chicken)? c.Explain the meaning of the price ratio you computed. d.If the Wongs maximize utility,what must the ratio of the marginal utility of fish to the marginal utility of chicken be equal to? e.If the price of chicken rises,will the Wong family consume more chicken,less chicken,or the same amount of chicken? Explain your answer using the rule of equal marginal utility per dollar.

The law of diminishing marginal utility states that

If a consumer receives 22 units of marginal utility for consuming the first can of soda,20 units from consuming the second,and 15 from the third,the total utility of consuming the three units is

Which of the following statements is true?

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

Optimal decisions are made

List three reasons why the demand for a product will often increase if the product is endorsed by a celebrity.

Total utility is maximized in the consumption of two goods by

Giffen goods

What is the common feature displayed by the following items? A.eating at a newly opened "fusion" cuisine restaurant B.attending a Red Sox game in Fenway Park C.wearing Lucky Brand designer jeans

If the price of steel increases drastically,the quantity of steel demanded by the building industry will fall significantly over the long run because

Which of the following statements about price elasticity of demand is false?

The slope of a demand curve is not used to measure the price elasticity of demand because

Economists have used the ultimatum game and the dictator game in experiments designed to determine

Holding everything else constant,the demand for a good tends to be more elastic

In making decisions about what to consume,a person's goal is to

Health clubs typically experience an increase in one-year memberships in January,but many new customers cancel their memberships before the end of the year.Which of the following is the best explanation for this behavior?

In general,a "big ticket item" such as a house or new car will