Exam 7: Consumer Choice and Elasticity

Firms estimate the price elasticity of demand for new products by conducting market experiments in which firms try different prices and observe the resulting change in quantity demanded.

Consider the following hypothetical scenarios: Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the pair of jeans you wish to buy is on sale for $160 at another store,located about a 20-minute drive away. Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.The sales attendant at the store tells you that the t-shirt you wish to buy is on sale for $30 at another store,located about a 20-minute drive away. Based on standard economic theory,under which scenario would you make the 20-minute trip to the other store?

The demand curve for a Giffen good is

If your total satisfaction increases when you consume another unit,your marginal utility must be

Marginal utility can be

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

Consumers maximize total utility within their budget constraint by

The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.

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

Consider a demand curve that has a constant elasticity value of 0.What happens to quantity demanded and total revenue when price increases?

The iPod is a product without any significant network externalities.

Suppose a decrease in the supply of wheat results in an increase in revenue.This indicates that

When demand is unit-elastic,a change in price causes total revenue to stay the same because

The demand curve for an inferior good can never be downward-sloping.

Table 7-2 Table 7-2 above shows Keira's utility from soup and sandwiches.The price of soup is $2 per cup and the price of a sandwich is $3.Keira has $18 to spend on these two goods. -Refer to Table 7-2.If Keira maximizes her utility,how many units of each good should she buy?

Figure 7-5 -Refer to Figure 7-5.At the midpoint of the demand curve,in absolute value,

Once a product becomes established,network externalities may create ________ costs that make consumers reluctant to buy a new product with better technology.

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges,then Marlowe

When diminishing marginal utility sets in,total utility must be negative.

Seth is a competitive body builder.He says he has to have his 12-oz package of protein powder to "feed his muscles" every day.On the basis of this information,what can you conclude about his price elasticity of demand for protein powder?