Question 1

With only two goods,x and y,if x and y are gross substitutes,a rise in px must necessarily:

Accepted Answer

A) increase spending in x. 
B) reduce spending in x. 
C) increase spending in y. 
D) reduce spending in y. 
A) increase spending in x. 
B) reduce spending in x. 
C) increase spending in y. 
D) reduce spending in y. C

Question 2

Use the following definitions for an individual who consumes only two goods,x and y:
sS1U1B1xS1U1B0 = share of income spent on x.
sS1U1B1yS1U1B0 = 1-sS1U1B1xS1U1B0.​   = price elasticity of demand for x.​   = price elasticity of demand for y.
​eS1U1B1x,IS1U1B0 = income elasticity of demand for x.
​
eS1U1B1y,IS1U1B0 = income elasticity of demand for y.​   = cross price elasticity of demand for x.​   = cross price elasticity of demand for y.
-If the demand for x is given by   ,which of parameter values hold?

Accepted Answer

A)    
B)    
C)    
D) None of these relations hold since the demand function is not homogeneous of degree zero in   
A)    
B)    
C)    
D) None of these relations hold since the demand function is not homogeneous of degree zero in   B

Question 3

In the Slutsky equation for   ,the income effect is given by:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)    B

Question 4

Quasi-concavity of utility functions insures that with only two goods,these goods must be:

Accepted Answer

A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements. 
A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements.

Question 5

If a rise in the price x causes less y to be demanded:

Accepted Answer

A) x and y are gross complements. 
B) x and y are gross substitutes. 
C) x and y are net complements. 
D) x and y are net substitutes. 
A) x and y are gross complements. 
B) x and y are gross substitutes. 
C) x and y are net complements. 
D) x and y are net substitutes.

Question 6

If goods x and y are complements,then the cross price elasticity of demand between them will be:

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) infinity. 
A) positive. 
B) negative. 
C) zero. 
D) infinity.

Question 7

The attributes model of consumer choice explains the possibility that an individual does not purchase a particular good,z by assuming:

Accepted Answer

A) the person's preferences do not favor z. 
B) linear combinations of other goods dominate z. 
C) that  
Is less than the marginal utility of income. 
D) z is inferior. 
A) the person's preferences do not favor z. 
B) linear combinations of other goods dominate z. 
C) that  
Is less than the marginal utility of income. 
D) z is inferior.

Question 8

Use the following definitions for an individual who consumes only two goods,x and y:
sS1U1B1xS1U1B0 = share of income spent on x.
sS1U1B1yS1U1B0 = 1-sS1U1B1xS1U1B0.​   = price elasticity of demand for x.​   = price elasticity of demand for y.
​eS1U1B1x,IS1U1B0 = income elasticity of demand for x.
​
eS1U1B1y,IS1U1B0 = income elasticity of demand for y.​   = cross price elasticity of demand for x.​   = cross price elasticity of demand for y.
-Homogeneity of the demand function is shown by:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

Use the following definitions for an individual who consumes only two goods,x and y:
sS1U1B1xS1U1B0 = share of income spent on x.
sS1U1B1yS1U1B0 = 1-sS1U1B1xS1U1B0.​   = price elasticity of demand for x.​   = price elasticity of demand for y.
​eS1U1B1x,IS1U1B0 = income elasticity of demand for x.
​
eS1U1B1y,IS1U1B0 = income elasticity of demand for y.​   = cross price elasticity of demand for x.​   = cross price elasticity of demand for y.
-The elasticity of the compensated demand curve  
Can be computed as:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 10

Use the following definitions for an individual who consumes only two goods,x and y:
sS1U1B1xS1U1B0 = share of income spent on x.
sS1U1B1yS1U1B0 = 1-sS1U1B1xS1U1B0.​   = price elasticity of demand for x.​   = price elasticity of demand for y.
​eS1U1B1x,IS1U1B0 = income elasticity of demand for x.
​
eS1U1B1y,IS1U1B0 = income elasticity of demand for y.​   = cross price elasticity of demand for x.​   = cross price elasticity of demand for y.
-A generalization of Engel's Law is given by:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 11

For the Cobb-Douglas utility function with two goods,the sum of the own price elasticities of demand must be:

Accepted Answer

A) 0. 
B) -1. 
C) -2. 
D) any number between 0 and -4. 
A) 0. 
B) -1. 
C) -2. 
D) any number between 0 and -4.

Question 12

"Hicks' Third Law of Demand" states that "most" goods must be:

Accepted Answer

A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements. 
A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements.

Question 13

Two goods are Hicks (net)substitutes if a rise in the price of one causes a(n):

Accepted Answer

A) decline in the quantity demanded of the other holding nominal income constant. 
B) increase in the quantity demanded of the other holding nominal income constant. 
C) decline in the quantity demanded of the other holding utility constant. 
D) increase in the quantity demanded of the other holding utility constant. 
A) decline in the quantity demanded of the other holding nominal income constant. 
B) increase in the quantity demanded of the other holding nominal income constant. 
C) decline in the quantity demanded of the other holding utility constant. 
D) increase in the quantity demanded of the other holding utility constant.

Question 14

With the Cobb-Douglas utility function  
,x and y are:

Accepted Answer

A) net and gross substitutes. 
B) net substitutes and gross complements. 
C) net substitutes and neither gross substitutes or complements. 
D) net and gross complements. 
A) net and gross substitutes. 
B) net substitutes and gross complements. 
C) net substitutes and neither gross substitutes or complements. 
D) net and gross complements.

Question 15

For the "Composite Commodity Theorem" to hold,all goods in the composite must:

Accepted Answer

A) have constant prices. 
B) have constant relative prices. 
C) be used in fixed proportions. 
D) be net complements. 
A) have constant prices. 
B) have constant relative prices. 
C) be used in fixed proportions. 
D) be net complements.

Question 16

The primary additional insight provided by expanding the theory of demand from two to three goods is that a pair of goods may now be:

Accepted Answer

A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements. 
A) gross substitutes. 
B) gross complements. 
C) net substitutes. 
D) net complements.

Question 17

Symmetry of net substitution effects is one of the principal conclusions of the theory of utility maximization.Which two mathematical theorems are used to prove this symmetry?

Accepted Answer

A) Taylor's Theorem and Fundamental Theorem of Calculus 
B) Cauchy's Theorem and DeMoivre's Theorem 
C) Lagrangian Theorem and Fundamental Theorem of Calculus 
D) Envelope Theorem and Young's Theorem 
A) Taylor's Theorem and Fundamental Theorem of Calculus 
B) Cauchy's Theorem and DeMoivre's Theorem 
C) Lagrangian Theorem and Fundamental Theorem of Calculus 
D) Envelope Theorem and Young's Theorem

Question 18

If utility is separable in a three-good utility function x3

Then for changes in  
Must:

Accepted Answer

A) both be gross substitutes for x1. 
B) both be gross complements for x1. 
C) be such that if one is a gross substitute for x1,the other is a gross complement for x1. 
D) both be gross substitutes or both be gross complements for x1. 
A) both be gross substitutes for x1. 
B) both be gross complements for x1. 
C) be such that if one is a gross substitute for x1,the other is a gross complement for x1. 
D) both be gross substitutes or both be gross complements for x1.

With only two goods,x and y,if x and y are gross substitutes,a rise in p_x must necessarily:

In the Slutsky equation for ,the income effect is given by:

Quasi-concavity of utility functions insures that with only two goods,these goods must be:

If a rise in the price x causes less y to be demanded:

If goods x and y are complements,then the cross price elasticity of demand between them will be:

The attributes model of consumer choice explains the possibility that an individual does not purchase a particular good,z by assuming:

For the Cobb-Douglas utility function with two goods,the sum of the own price elasticities of demand must be:

"Hicks' Third Law of Demand" states that "most" goods must be:

Two goods are Hicks (net)substitutes if a rise in the price of one causes a(n):

With the Cobb-Douglas utility function ,x and y are:

For the "Composite Commodity Theorem" to hold,all goods in the composite must:

The primary additional insight provided by expanding the theory of demand from two to three goods is that a pair of goods may now be:

Symmetry of net substitution effects is one of the principal conclusions of the theory of utility maximization.Which two mathematical theorems are used to prove this symmetry?

If utility is separable in a three-good utility function x₃ Then for changes in Must:

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

Exam 4: Demand Relationships Among Goods

With only two goods,x and y,if x and y are gross substitutes,a rise in px must necessarily:

In the Slutsky equation for ,the income effect is given by:

Quasi-concavity of utility functions insures that with only two goods,these goods must be:

If a rise in the price x causes less y to be demanded:

If goods x and y are complements,then the cross price elasticity of demand between them will be:

The attributes model of consumer choice explains the possibility that an individual does not purchase a particular good,z by assuming:

For the Cobb-Douglas utility function with two goods,the sum of the own price elasticities of demand must be:

"Hicks' Third Law of Demand" states that "most" goods must be:

Two goods are Hicks (net)substitutes if a rise in the price of one causes a(n):

With the Cobb-Douglas utility function ,x and y are:

For the "Composite Commodity Theorem" to hold,all goods in the composite must:

The primary additional insight provided by expanding the theory of demand from two to three goods is that a pair of goods may now be:

Symmetry of net substitution effects is one of the principal conclusions of the theory of utility maximization.Which two mathematical theorems are used to prove this symmetry?

If utility is separable in a three-good utility function x3 Then for changes in Must:

Preferences and Utility

Utility Maximization and Choice

Income and Substitution Effects

Uncertainty

Game Theory

Production Functions

Cost Functions

Profit Maximization

The Partial Equilibrium Competitive Model

General Equilibrium and Welfare

Monopoly

Imperfect Competition

Labor Markets

Capital and Time

Asymmetric Information

Externalities and Public Goods

Filters

With only two goods,x and y,if x and y are gross substitutes,a rise in p_x must necessarily:

If utility is separable in a three-good utility function x₃ Then for changes in Must: