Deck 4: Consumer Demand

Question 1

If an individual demands a particular good,it means that he or she:

A) is willing and able to purchase the good at some price.
B) Has a strong desire for the good.
C) Must need the good.
D) Prefers the good over all other choices.

Answer 1

A

Question 2

Sociopsychiatric explanations of consumer behavior include:

A) Desire for ego and status.
B) Level of income.
C) Level of wealth.
D) Prices of other goods.

Answer 2

A

Question 3

Which of the following ranks the top three components of U.S.consumption correctly from largest to smallest?

A) Housing,medical care,entertainment.
B) Housing,transportation,food.
C) Transportation,housing,clothing.
D) Transportation,health care,insurance and pensions.

Answer 3

B

Question 4

Which of the following causes the market demand curve for a good to shift?

A) The cost of factors of production.
B) The number of buyers in the market.
C) The innovation in production process.
D) A producer's income.

Question 5

The law of demand states that:

A) The greater the number of buyers in a marker,the lower the price.
B) Price and quantity demanded are directly related.
C) The lower the cost the lower the price.
D) Price and quantity demanded are inversely relateD.

Question 6

Which of the following refers to the satisfaction a consumer receives from the consumption of a good?

A) Price elasticity.
B) Law of demand.
C) Equilibrium price.
D) Utility.

Question 7

Which of the following is not a determinant of demand?

A) Income.
B) Tastes.
C) The cost of factors of production.
D) Expectations of the future price.

Question 8

Which of the following does NOT influence consumer demand?

A) The consumer's ability to pay.
B) The consumer's fears,psychological complexes,and anxieties.
C) Ego and status.
D) Producer behavior.

Question 9

Which of the following is true about consumer spending over time?

A) Spending habits do not change.
B) Spending habits show no consistent pattern.
C) Spending habits are likely to change when new products enter the market.
D) Spending habits change monthly.

Question 10

Market demand is the:

A) Sum of all individual demands for a product in a given time period.
B) Sum of all individual supply preferences.
C) Same thing as an individual's demand.
D) Satisfaction from consuming an additional unit of a gooD.

Question 11

Which of the following is true about demand?

A) Demand reflects the desire for a good but not necessarily the ability to buy it.
B) In order to demand a good,a person must be willing and able to buy the good.
C) When drawing a demand curve,influences such as price do not change.
D) Demand reflects the ability to buy a good but not necessarily the desire to do so.

Question 12

Which of the following is a determinant of demand for a good?

A) Consumer income.
B) The number of available workers.
C) Prices of factor inputs.
D) Technology.

Question 13

Which of the following is true about American spending habits?

A) Women spend more than men on alcohol and smoking.
B) Young men spend more than young women on clothing and personal-care items.
C) Teenagers spend their money on electronics,cars and clothes.
D) Young women are likely to go into debt because of their spending but not young men.

Question 14

Which of the following is not a determinant of demand for a good?

A) Tastes or preferences.
B) Income.
C) Prices of other goods.
D) Technological advances.

Question 15

In economic theory,utility refers to the:

A) Additional satisfaction obtained from one more unit of a good or service.
B) Satisfaction obtained from a good or service.
C) Willingness to buy specific quantities of a good or service at a particular price.
D) Decrease in satisfaction as more of a good or service is consumeD.

Question 16

The second largest portion of the average U.S.consumer's dollar is spent on:

A) Transportation.
B) Housing.
C) Insurance and pensions.
D) FooD.

Question 17

The largest portion of the average U.S.consumer's dollar is spent on:

A) Food.
B) Entertainment.
C) Health care.
D) Housing.

Question 18

Demand is defined as the:

A) Desire for goods and services.
B) Ability and willingness to sell goods at various prices.
C) Ability and willingness to buy specific quantities of a good or service at various prices in a given time period,ceteris paribus.
D) Sensitivity of buyers to a change in price.

Question 19

The market demand curve is calculated by:

A) Summing the price from individual demand curves.
B) Averaging the price demanded from individual demand curves.
C) Summing the quantities demanded from individual demand curves.
D) Averaging the quantities demanded from individual demand curves.

Question 20

The pleasure or satisfaction obtained from goods and services is known as:

A) Price elasticity of demand.
B) Total revenue.
C) Utility.
D) Ceteris paribus.

Question 21

Javier goes to an all-you-can-eat buffet at a Chinese restaurant and consumes three plates of food.Which of the following explains why the third plate of food does not provide as much satisfaction as the second plate?

A) The law of expanding externalities.
B) The rule of total utility.
C) The law of supply.
D) The law of diminishing marginal utility.

Question 22

The assumption of ceteris paribus is important because it:

A) Allows us to focus on the effects of a change in one variable at a time.
B) Explains the concept of diminishing marginal utility.
C) Determines the point where total utility is maximized.
D) Explains the reason for government failure.

Question 23

Marginal utility is an important economic concept because it:

A) Indicates the budget limitations of the consumer.
B) Is the total utility a consumer receives from a good.
C) Can be used to predict the amount of a good a rational consumer will purchase.
D) Predicts the amount of a good a business will produce.

Question 24

The law of demand and the law of diminishing marginal utility are related since both:

A) Predict that consumers will continue to buy unlimited amounts of goods.
B) Address the budget constraints that consumers face.
C) Assume that the first units consumed have more utility than subsequent units.
D) Assert that consumer preferences are not as significant as price and income.

Question 25

When the additional satisfaction from a good declines as more of it is consumed,this illustrates the law of:

A) Diminishing marginal utility.
B) Exceptional marginal utility.
C) Declining demand.
D) Increasing opportunity costs.

Question 26

If marginal utility is negative,then:

A) Total utility is at a minimum.
B) Total utility will increase with additional consumption.
C) Total utility will decrease with additional consumption.
D) The good in question is an inferior gooD.

Question 27

The amount of utility obtained from the entire consumption of a good is known as:

A) Marginal utility.
B) Diminishing utility.
C) Total utility.
D) Price elasticity.

Question 28

With a greater amount of consumption,total utility:

A) Always decreases.
B) Increases as long as marginal utility is positive.
C) Increases only if marginal utility increases.
D) Always increases.

Question 29

In economic theory,total utility refers to:

A) The additional utility from consuming the last unit of a good.
B) The amount of utility obtained from the entire consumption of a good.
C) The change in utility from the last unit sold.
D) How useful a good is to the consumer.

Question 30

If marginal utility is positive,then total utility must be:

A) Decreasing.
B) Increasing.
C) Zero.
D) Less than zero.

Question 31

Maximum total utility is achieved where:

A) Total revenue equals zero.
B) The price elasticity of demand is 1.0.
C) Marginal utility equals zero.
D) Marginal revenue equals zero.

Question 32

If the marginal utility for slices of pizza is decreasing but positive,then:

A) The total utility for slices of pizza is increasing.
B) The total utility for slices of pizza is decreasing.
C) The total utility for slices of pizza is negative.
D) Additional slices of pizza yield zero satisfaction.

Question 33

At some point during a meal each extra bite provides less and less additional satisfaction.This can be explained by:

A) The law of demand.
B) The law of diminishing marginal utility.
C) The law of increasing opportunity cost.
D) A shift in the demand curve.

Question 34

The difference between total utility and marginal utility is that:

A) Total utility is the satisfaction from consuming one additional unit of a good while marginal utility is the complete satisfaction from consuming a good.
B) Total utility is the complete satisfaction from consuming a good while marginal utility is the satisfaction from consuming one additional unit of a good.
C) Both represent the satisfaction obtained from most all goods and services.
D) Total utility is the satisfaction from consuming a good while marginal utility is the satisfaction from consuming services.

Question 35

According to the law of diminishing marginal utility:

A) Total utility from consuming a good always rises.
B) Total utility from consuming one more unit of a good eventually falls.
C) Marginal utility of a good declines as more of it is consumed in a given time period.
D) Marginal product of labor declines as more of a variable input is useD.

Question 36

The law of diminishing marginal utility helps to explain the:

A) Upward sloping supply curve.
B) Equilibrium price.
C) Downward sloping demand curve.
D) Equilibrium quantity of a good in the marketplace.

Question 37

If the marginal utility of one more piece of candy is positive,then the:

A) Total utility is at a maximum.
B) Total utility will decrease with additional consumption.
C) Candy is an inferior good.
D) Total utility will increase with additional consumption.

Question 38

Total utility is maximized where:

A) Price is less than marginal utility.
B) Price is equal to marginal utility.
C) Marginal utility is maximized.
D) Marginal utility is zero.

Question 39

Which of the following is the best reason why we typically pay a relatively low price for water?

A) Additional units of water are normally not worth much to us.
B) Because water is abundant,the total utility we receive from water is relatively low.
C) Because water is abundant,the marginal utility we receive from water is relatively high.
D) Although additional units of water are normally worth a lot to us,the supply of water is so great we refuse to pay a high price for these additional units.

Question 40

Marginal utility refers to the:

A) Additional utility from consuming the last unit of a good.
B) Change in utility from the last unit consumed.
C) Utility derived from consuming all of the good.
D) Opportunity cost of the gooD.

Question 41

Assume a price elasticity of demand of 0.50.If the tobacco lobby is successful in reducing a tax on the price of cigarettes by 10 percent,the quantity demanded will:

A) Decrease by 5 percent.
B) Decrease by 2 percent.
C) Increase by 5 percent.
D) Increase by 2 percent.

Question 42

If the price elasticity of demand is 1.5,and the prices gone up by 20 percent,the quantity sold will,ceteris paribus:

A) Rise by 13.3 percent.
B) Fall by 13.3 percent.
C) Rise by 30.0 percent.
D) Fall by 30.

Question 43

Ceteris paribus,a demand curve shows the:

A) Quantity of a good that producers are willing to bring to market.
B) Prices a consumer and producer can both agree upon.
C) Quantity of a good consumers are willing and able to purchase at alternative prices.
D) Change in quantity demanded divided by the change in price.

Question 44

The law of demand states that quantity demanded increases in a given time period if:

A) The price of the good falls.
B) Incomes increase.
C) Preferences change.
D) Expectations improve.

Question 45

Which of the following statements is NOT correct?

A) If demand is unitary elastic an increase in the price of a good will not change total revenue.
B) If demand is elastic a higher price will actually decrease total revenue.
C) Total revenue will fall if consumer's response to a price cut is large.
D) If the relative change in price is greater than the relative change in the quantity demanded associated with it,demand is inelastic.

Question 46

The downward slope of the demand curve is related to the:

A) Law of diminishing total returns.
B) Law of diminishing marginal utility.
C) Upward sloping supply curve.
D) Opportunity cost of producing the gooD.

Question 47

According to the law of demand:

A) If consumer's income increases,the demand curve will shift to the right.
B) As the price of a good rises,the quantity demanded will increase in a given time period,ceteris paribus.
C) As the price of a good falls,the quantity supplied will increase in a given time period,ceteris paribus.
D) As the price of a good falls,the quantity demanded will increase in a given time period,ceteris paribus.

Question 48

Suppose a university raises its tuition by 8 percent and as a result the enrollment of students drops by 4 percent.The price elasticity of demand is closest to:

A) 8.0.
B) 4.0.
C) 2.0.
D) 0.

Question 49

If the price elasticity of demand is 2.5,then a 40 percent decrease in the price of the good will lead to a _______ percent increase in the quantity demanded.

A) 150.00
B) 100.00
C) 66.7
D) 22.

Question 50

The law of demand explains why people:

A) Crave certain goods.
B) Are willing to buy more of a good as price falls.
C) Are willing to pay more as marginal utility diminishes.
D) Are able to buy more of a good as supply increases.

Question 51

Ceteris paribus means:

A) Nothing is allowed to change.
B) The determinants of demand may change,but all else must be held constant.
C) Only one determinant is being changed while all others remain unchanged.
D) Consumers try to keep all things constant so that prices will be lower.

Question 52

If the price elasticity of demand is 1.8 then a 30 percent decrease in the price of the good will lead to a _______ percent increase in the quantity demanded.

A) 0.60
B) 0.55
C) 54.00
D) 16.

Question 53

If the price elasticity of demand for a product is 2.3,this means that quantity demanded will increase by _______ for each _______ decrease in price,ceteris paribus.

A) 1 percent;2.3 percent
B) 1 unit;$2.30
C) 2.3 percent;1 percent
D) 2.

Question 54

Suppose the price elasticity of demand for tacos is 0.80.If the price of tacos increases by 10 percent,then the quantity demanded of tacos should,ceteris paribus:

A) Decrease by 8 percent.
B) Increase by 8 percent.
C) Decrease by 1.25 percent.
D) Increase by 1.

Question 55

The demand curve is downward sloping because:

A) Producers are willing to supply more of the good only at higher prices.
B) Consumers are willing to buy less of the good only at lower prices.
C) Producers are willing to supply more of the good only at lower prices.
D) Consumers are willing to buy more of the good only at lower prices.

Question 56

The response of quantity demanded to price changes is shown by:

A) Price elasticity of demand.
B) The determinants of demand.
C) Opportunity cost.
D) Income elasticity of demanD.

Question 57

If a firm finds that it can sell 20,000 units at a price of $5 per unit and 25,000 units at a price of $4 per unit then demand in this price range is:

A) Elastic.
B) Inelastic.
C) Unitary elastic.
D) Cannot be determined with the information given.

Question 58

Price elasticity of demand indicates the consumer's response to changes in:

A) Quantity.
B) Demand.
C) Price.
D) Supply.

Question 59

The price elasticity of demand is defined as the:

A) Percentage change in quantity demanded times the percentage change in price.
B) Unit change in price divided by the unit change in quantity demanded.
C) Percentage change in quantity demanded divided by the percentage change in price.
D) Unit change in quantity demanded times the unit change in price.

Question 60

Price elasticity of demand shows how:

A) To compute the slope of the demand curve.
B) Quantity demanded responds to price changes.
C) Quantity demanded responds to changes in the price of other goods.
D) Price responds to demand changes.

Question 61

When the percentage change in quantity demanded is numerically less than the percentage change in price,ceteris paribus,demand is:

A) Elastic.
B) Inelastic.
C) Unitary elastic.
D) Perfectly elastic.

Question 62

Which of the following is most likely to be elastic with respect to demand?

A) Cigarettes.
B) Shoes.
C) Gasoline in the short run.
D) Airline travel in the long run.

Question 63

Suppose the local government decides to reduce traffic congestion on a bridge by imposing a toll.The toll will be most effective if the price elasticity of demand for the bridge is:

A) Inelastic.
B) Elastic.
C) Unitary.
D) Either unitary or inelastic.

Question 64

The demand for _______ is relatively inelastic.

A) New cars
B) TVs
C) Gasoline in the short run
D) Airline travel

Question 65

For which of the following is the price elasticity of demand most likely to be unitary elastic?

A) Cigarettes.
B) Private education.
C) New cars.
D) Gasoline in the short run.

Question 66

The demand for _______ is relatively elastic.

A) Water
B) Electricity
C) Vacation travel
D) Coffee

Question 67

Suppose a cosmetics company increases the price of eyeliner by 10 percent and as a result the quantity demanded of eyeliner decreases by 2.5 percent.The price elasticity of demand for eyeliner is:

A) 4.0.
B) 2.5.
C) 0.4.
D) 0.

Question 68

If the percentage change in quantity demanded is exactly equal to the percentage change in price,then demand is:

A) Normal elastic.
B) Relatively inelastic.
C) Relatively elastic.
D) Unitary elastic.

Question 69

Ceteris paribus,when the price elasticity of demand is unitary elastic,a decrease in:

A) Price results in no change to total revenue.
B) Total revenue indicates an increase in price.
C) Total revenue indicates a decrease in price.
D) Price results in an increase in total revenue.

Question 70

If demand is elastic,then:

A) Quantity demanded is not very responsive to changes in price.
B) Quantity demanded is very responsive to changes in price.
C) Consumer spending does not respond to changes in income.
D) Total revenue falls in response to a price decrease.

Question 71

If the price elasticity of demand is 1.0 and a firm raises its price by 15 percent,the total revenue will:

A) Rise by 15 percent.
B) Fall by 15 percent.
C) Rise by 6.67 percent.
D) Not change.

Question 72

A price cut will increase the total revenue a firm receives,ceteris paribus,only if the demand for its product is:

A) Elastic.
B) Inelastic.
C) Unitary elastic.
D) Perfectly inelastic .

Question 73

Which of the following is most likely to be inelastic with respect to demand?

A) Illegal drugs.
B) Airline travel in the long run.
C) New cars.
D) HDTV sets.

Question 74

Ceteris paribus,a price increase will cause total revenue to stay the same for a producer only if the price elasticity demand for its product is:

A) Inelastic.
B) Elastic.
C) Unitary elastic.
D) Extremely high.

Question 75

If the price elasticity of demand for Baja Fresh tacos is 2.5,then Baja Fresh can:

A) Reduce the price of tacos by 25 percent and total revenue will remain the same.
B) Raise the price of tacos and total revenue will increase.
C) Reduce the price of tacos by less than 25 percent and total sales will remain the same.
D) Reduce the price of tacos and total revenue will increase.

Question 76

Total revenue is:

A) The price of a product times the quantity sold in a given time period.
B) The profit a company earns from the sales of goods.
C) Equal to revenues minus the costs of production.
D) The additional revenue earned from the sale of one more unit.

Question 77

If quantity demanded rises only slightly following a moderate price cut,then demand is:

A) Elastic.
B) Inelastic.
C) Unitary elastic.
D) Abnormal.

Question 78

If demand is unitary elastic,then a price cut:

A) Reduces total revenue.
B) Increases total revenue.
C) Does not change total revenue.
D) Sometimes increases and sometimes decreases total revenue.

Question 79

If demand is inelastic,then:

A) Consumer spending does not respond to changes in income.
B) Total revenue rises in response to a price decrease.
C) Quantity demanded is very responsive to changes in price.
D) Quantity demanded is not very responsive to changes in price.

Question 80

Suppose Suzuki increases the price of a particular motorcycle model by 12 percent and as a result the quantity demanded for that model decreases by 4 percent.The price elasticity of demand for that model is:

A) 0.33.
B) 3.0.
C) 4.0.
D) 12.