Exam 7: Consumer Choice and Elasticity

For consumers who opt to pay a $10 monthly fee to have unlimited texting on their cell phones,but choose not to pay a $5 monthly fee to have unlimited call minutes ,the unlimited texting option has a ________ than the unlimited minutes option.

Total utility

For each pair of items below determine which product would have the higher price elasticity of demand (in absolute value). a.Insulin for a diabetic or aspirin for someone suffering a headache. b.A new Whirlpool 27 cu.ft.side-by-side refrigerator or electricity to power your all-electric home. c.A can of Red Bull or soft drinks in general.

By hiring Justin Bieber to advertise its electronics Buy Back program,Best Buy is hoping to change its image and reach a new,younger target market.By using celebrities such as Bieber to endorse products,companies are hoping that its customers will respond positively and business will increase.All of the following are reasons why celebrity endorsements may increase sales for advertised products except

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

Figure 7-2 -Refer to Figure 7-2.The demand curve on which elasticity changes at every point is given in

If a firm lowered the price of the product it sells and found that total revenue did not change,then the demand for its product is

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded,then the demand for golf balls is

Psychologists Daniel Kahneman and Amos Tversky conducted the following experiments by asking a sample of people the following questions: Scenario A: "Imagine that you have decided to see a play and paid the admission price of $10 per ticket.As you enter the theater you discover that you have lost the ticket.The seat was not marked and the ticket cannot be recovered.Would you pay $10 for another ticket?" Scenario B: "Imagine that you have decided to see a play where admission is $10 per ticket.As you enter the theater you discover that you have lost a $10 bill.Would you still pay $10 for a ticket for the play?" As long as additional tickets are available,there's no meaningful difference between losing $10 in cash before buying a ticket,and losing the $10 ticket after buying it.In both cases,you are out $10.Yet,far more subjects (88 percent)in Scenario B say they would pay $10 for another ticket and see the play while in Scenario A,only 46 percent of the subjects say they would be willing to spend another $10 to see the play. Which of the following is the best explanation for the results of the experiment?

Suppose Joe is maximizing total utility within his budget constraint.If the price of the last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the price of the last shirt purchased is $20,then,using the rule of equal marginal utility per dollar spent,the extra satisfaction received from the last shirt must be

Table 7-3 -Refer to Table 7-3.Over what range of prices is the demand elastic?

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is -3,then quantity demanded

What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?

Each price-quantity combination on a consumer's demand curve shows the utility-maximizing quantity at the given price.

The demand for gasoline in the short run is

A network externality occurs when

A fair number of people buy expensive gym memberships to commit themselves to exercising.Yet,data from health clubs show that many do not follow through with their intentions and end up losing money on their membership contracts.Which of the following could explain this behavior?

A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.

Firms pay famous individuals to endorse their products because

The demand for all carbonated beverages is likely to be ________ the demand for Dr.Pepper.