Chapter 5: The Demand for Goods

Chapter 5: The Demand for Goods

THE DETERMINANTS OF DEMAND

1. Stat s and e!o "ons#derat#ons #n "ons mpt#on are: A$ So"#ops%"h#atr#" e&p'anat#ons of demand. ($ E"onom#" determ#nants of demand. Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: ./

C$ An e&amp'e of #n"ome. D$ A'' of the a)o*e.

0. A mo*ement a'on! a !#*en demand " r*e )et+een t+o pr#"es refers to: A$ The pr#"e e'ast#"#t% of demand. C$ A "han!e #n 1 ant#t% demanded. ($ A "han!e #n demand. D$ The 'a+ of d#m#n#sh#n! mar!#na' t#'#t%. Ans+er: C T%pe: Def#n#t#on -a!e: .2

/. 3hen the demand for a !ood #n"reases: A$ Cons mers are +#''#n! and a)'e to pa% on'% 'o+er pr#"es for an% !#*en 1 ant#t% of the !ood. ($ Cons mers des#re to ha*e more of the !ood. C$ Cons mers are +#''#n! and a)'e to p r"hase !reater 1 ant#t#es of the !ood at an% !#*en pr#"e. D$ There #s mo*ement a'on! the demand " r*e. Ans+er: C T%pe: Def#n#t#on -a!e: .2

THE DEMAND C,R4E

2. ,t#'#t% refers to the: A$ Sat#sfa"t#on o)ta#ned from a !ood or ser*#"e. ($ Add#t#ona' sat#sfa"t#on o)ta#ned from one more n#t of a !ood or ser*#"e. C$ 3#''#n!ness to ) % spe"#f#" 1 ant#t#es of a !ood or ser*#"e at a part#" 'ar pr#"e. D$ De"rease #n sat#sfa"t#on as more of a !ood or ser*#"e #s "ons med. Ans+er: A T%pe: Def#n#t#on -a!e: .5

5. 3h#"h of the fo''o+#n! determ#nants of demand #s most d#re"t'% an #nd#"at#on of a "ons mer5s t#'#t% for a !ood6 A$ In"ome. ($ Tastes. C$ E&pe"tat#ons of f t re pr#"es. D$ Other !oods 7a*a#'a)#'#t% and pr#"es$. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: .5

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Chapter 5: The Demand for Goods

8. The amo nt of sat#sfa"t#on o)ta#ned from "ons mpt#on of an add#t#ona' n#t of a !ood or ser*#"e #s: A$ Ne*er ne!at#*e. ($ Tota' t#'#t%. C$ A f n"t#on of s pp'%. D$ Mar!#na' t#'#t%. Ans+er: D T%pe: Def#n#t#on -a!e: .5

9. Mar!#na' t#'#t% for a !ood #s "omp ted as: A$ Tota' t#'#t% d#*#ded )% 1 ant#t%. ($ : ant#t% d#*#ded )% tota' t#'#t%. C$ The "han!e #n 1 ant#t% d#*#ded )% tota' t#'#t%. D$ The "han!e #n tota' t#'#t% d#*#ded )% the "han!e #n 1 ant#t%. Ans+er: D T%pe: Def#n#t#on -a!e: .5

;. The add#t#ona' p'eas re or sat#sfa"t#on from a !ood de"'#nes as more of #t #s "ons med #n a !#*en per#od. Th#s #s the def#n#t#on of the: A$ <a+ of demand. C$ <a+ of d#m#n#sh#n! tota' t#'#t%. ($ <a+ of d#m#n#sh#n! mar!#na' t#'#t%. D$ Tota' re*en e r 'e. Ans+er: ( T%pe: Def#n#t#on -a!e: .5

.. A""ord#n! to the 'a+ of d#m#n#sh#n! mar!#na' t#'#t%: A$ Cons mers +#'' p r"hase more of a !ood at a 'o+er pr#"e= ceteris paribus. ($ Cons mers ma&#m#>e tota' t#'#t% +hen the mar!#na' t#'#t% per do''ar spent #s e1 a' for a'' !oods "ons med. C$ Ea"h s ""ess#*e n#t of a !ood "ons med %#e'ds 'ess add#t#ona' t#'#t%. D$ Cons mers )eha*e rat#ona''% +hen the pr#"e of a !ood e1 a's the mar!#na' t#'#t% of the !ood. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: .5

1?. The 'a+ of d#m#n#sh#n! mar!#na' t#'#t% s !!ests that: A$ -eop'e are +#''#n! to ) % add#t#ona' 1 ant#t#es of a !ood on'% #f #ts pr#"e fa''s. ($ -eop'e +#'' s )st#t te 'o+er@pr#"ed !oods for more e&pens#*e !oods= ceteris paribus. C$ -r#"e and 1 ant#t% demanded are d#re"t'% re'ated. D$ As mar!#na' t#'#t% de"reases= the +#''#n!ness to pa% #n"reases. Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: .5

11. As more sat#sfa"t#on #s a"h#e*ed from "ons m#n! a !ood +#th d#m#n#sh#n! mar!#na' t#'#t%= then tota' t#'#t%: A$ In"reases at a de"reas#n! rate. ($ De"reases as 'on! as mar!#na' t#'#t% #s ne!at#*e. C$ De"reases as 'on! as mar!#na' t#'#t% #s pos#t#*e. D$ Is ne!at#*e as 'on! as mar!#na' t#'#t% #s de"reas#n!. Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: .5

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Chapter 5: The Demand for Goods

10. At some po#nt d r#n! a mea' ea"h e&tra )#te pro*#des 'ess and 'ess add#t#ona' sat#sfa"t#on. Th#s "an )e e&p'a#ned )%: A$ The 'a+ of demand. C$ The 'a+ of #n"reas#n! opport n#t% "ost. ($ The 'a+ of d#m#n#sh#n! mar!#na' t#'#t%. D$ A sh#ft #n the demand " r*e. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: .5

1/. Aose !oes to an a''@%o @"an@eat ) ffet at a Ch#nese resta rant and "ons mes three p'ates of food. He does not !o )a"B for a fo rth p'ate of food )e"a se: A$ The pr#"e of the fo rth p'ate #s too h#!h. ($ He has rea"hed the po#nt of #n"reas#n! mar!#na' t#'#t%. C$ The mar!#na' t#'#t% of the fo rth p'ate +o 'd )e >ero or e*en ne!at#*e. D$ H#s tota' t#'#t% +o 'd #n"rease +#th the fo rth p'ate of food. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: .5

12. As "ons mpt#on #n"reases= tota' t#'#t% m st: A$ Fa''. ($ In"rease as 'on! as mar!#na' t#'#t% #s pos#t#*e. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: .8

C$ In"rease on'% #f mar!#na' t#'#t% #n"reases. D$ In"rease.

15. If mar!#na' t#'#t% #s ne!at#*e= then: A$ Tota' t#'#t% +#'' #n"rease +#th add#t#ona' "ons mpt#on. ($ Tota' t#'#t% +#'' de"rease +#th add#t#ona' "ons mpt#on. C$ The !ood or ser*#"e )e#n! "ons med #s an #nfer#or !ood. D$ Tota' t#'#t% #s at a m#n#m m. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: .8

18. Tota' t#'#t% #s ma&#m#>ed +hen: A$ -r#"e #s 'ess than mar!#na' t#'#t%. ($ -r#"e #s e1 a' to mar!#na' t#'#t%. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: .8

C$ Mar!#na' t#'#t% #s >ero. D$ Mar!#na' t#'#t% #s ma&#m#>ed.

19. 3h#"h of the fo''o+#n! #s not he'd "onstant +hen "ons#der#n! the demand for p#>>a6 A$ Cons mer #n"omes. C$ The pr#"e of spa!hett# 7a s )st#t te$. ($ The pr#"e of p#>>a. D$ E&pe"tat#ons of h#!her pr#"es for p#>>as. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: .8

1;. If a !ood had a >ero pr#"e 7#.e. the !ood +as free$= a rat#ona' person +o 'd "ons me: A$ An #nf#n#te amo nt of the !ood. ($ The !ood nt#' tota' t#'#t% +as >ero.

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Chapter 5: The Demand for Goods

C$ The !ood nt#' the mar!#na' t#'#t% +as ma&#m#>ed. D$ The !ood nt#' the mar!#na' t#'#t% of the 'ast n#t +as >ero. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: .8

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Chapter 5: The Demand for Goods

1.. The fa"t that a " p of !o'd #s norma''% pr#"ed h#!her than a " p of +ater s !!ests that: A$ The tota' t#'#t% of !o'd #s h#!her than the tota' t#'#t% of +ater. ($ The mar!#na' t#'#t% of a " p of !o'd #s !reater than the mar!#na' t#'#t% of a " p of +ater. C$ Go'd #s a norma' !ood +h#'e +ater #s an #nfer#or !ood. D$ There are more s )st#t tes for +ater than for !o'd. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: .8

0?. A""ord#n! to the 'a+ of demand= ceteris paribus: A$ The 1 ant#t% demanded #n"reases at 'o+er pr#"es. ($ A "ons mer +#'' p r"hase more of a !ood at h#!her pr#"es than at 'o+er pr#"es. C$ -r#"e and 1 ant#t% s pp'#ed are d#re"t'% re'ated. D$ The respons#*eness of "ons mer demand to a "han!e #n the pr#"e of a !ood #s meas red )% the pr#"e e'ast#"#t% of demand. Ans+er: A T%pe: Def#n#t#on -a!e: .9

-RICE E<ASTICITC

01. -r#"e e'ast#"#t% of demand sho+s ho+: A$ To "omp te the s'ope of the demand " r*e. ($ : ant#t% demanded responds to pr#"e "han!es. C$ : ant#t% demanded responds to "han!es #n the pr#"e of other !oods. D$ -r#"e responds to 1 ant#t% "han!es. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: .9

00. The pr#"e e'ast#"#t% of demand #s def#ned as the: A$ -er"enta!e "han!e #n 1 ant#t% demanded t#mes the per"enta!e "han!e #n pr#"e. ($ ,n#t "han!e #n pr#"e d#*#ded )% the n#t "han!e #n 1 ant#t% demanded. C$ -er"enta!e "han!e #n 1 ant#t% demanded d#*#ded )% the per"enta!e "han!e #n pr#"e. D$ ,n#t "han!e #n 1 ant#t% demanded t#mes the n#t "han!e #n pr#"e. Ans+er: C T%pe: Def#n#t#on -a!e: .9

0/. For do+n+ard@s'op#n! '#near demand " r*es= the pr#"e e'ast#"#t% of demand: A$ Is "onstant at ea"h po#nt on the " r*e. C$ Tends to )e e'ast#" at re'at#*e'% 'o+ pr#"es. ($ 4ar#es thro !ho t the demand " r*e. D$ Is e1 a' to the s'ope of the demand " r*e. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: .9

02. The pr#"e e'ast#"#t% of demand for a !ood #s '#Be'% to )e e'ast#" #f the mar!#na' t#'#t% for that !ood: A$ De"reases s'o+'% as add#t#ona' n#ts are "ons med. ($ Rema#ns "onstant as add#t#ona' n#ts are "ons med. C$ In"reases rap#d'% as add#t#ona' n#ts are "ons med. D$ De"reases rap#d'% as add#t#ona' n#ts are "ons med.

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Chapter 5: The Demand for Goods

Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: .9

05. The demand " r*e #s t%p#"a''% do+n+ard s'op#n! )e"a se: A$ Of the 'a+ of d#m#n#sh#n! mar!#na' t#'#t%. ($ Cons mers +#'' not to pa% as m "h for a !ood +#th a 'o+ mar!#na' t#'#t% as the% +#'' for a !ood +#th a h#!h mar!#na' t#'#t%. C$ Cons mers ha*e '#m#ted ) d!ets. D$ A'' of the a)o*e. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: .9

08. Ass me the pr#"e e'ast#"#t% of demand for ,.S. Fr#s)ee Co. fr#s)ees #s D?.5. If the "ompan% #n"reases the pr#"e of ea"h fr#s)ee from E8 to E;= the n m)er of fr#s)ees so'd +#'': A$ De"rease )% 12./ per"ent. C$ In"rease )% 0?.? per"ent. ($ De"rease )% //./ per"ent. D$ In"rease )% 9.? per"ent. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: .;

09. Ass me the pr#"e e'ast#"#t% of demand for AT Ch#p Co. "h#ps #s D0.?. If the "ompan% de"reases the pr#"e of ea"h )a! of "h#ps from E1.;. to E1.2.= the n m)er of )a!s so'd +#'': A$ De"rease )% /. per"ent. C$ In"rease )% 02 per"ent. ($ In"rease )% 29 per"ent. D$ In"rease )% /. per"ent. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: ..

0;. The pr#"e e'ast#"#t% of demand #s "a'" 'ated s#n! per"enta!e "han!es #n order to: A$ A*o#d m#staB#n! e'ast#"#t% +#th s'ope. ($ MaBe e'ast#"#t% a per"enta!e f#! re. C$ A*o#d pro)'ems asso"#ated +#th n#ts of meas rement. D$ F#nd a "onstant e'ast#"#t% a'on! ea"h demand " r*e. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: ..

0.. For prod "t X= the pr#"e e'ast#"#t% of demand has an a)so' te *a' e of 0. Th#s means that 1 ant#t% demanded +#'' #n"rease )%: A$ 1 per"ent for ea"h 0 per"ent de"rease #n pr#"e= ceteris paribus. ($ 1 n#t for ea"h E0 de"rease #n pr#"e= ceteris paribus. C$ 0 per"ent for ea"h 1 per"ent de"rease #n pr#"e= ceteris paribus. D$ 0 n#ts for ea"h E1 de"rease #n pr#"e= ceteris paribus. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: ..

/?. Ass me the pr#"e e'ast#"#t% of demand has an a)so' te *a' e of 2 for a part#" 'ar !ood. Th#s means that 1 ant#t% demanded +#'' de"rease )%: A$ 2 per"ent for ea"h 1 per"ent #n"rease #n pr#"e= ceteris paribus.

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Chapter 5: The Demand for Goods

($ 1 n#t for ea"h E2 #n"rease #n pr#"e= ceteris paribus. C$ 1 per"ent for ea"h 2 per"ent #n"rease #n pr#"e= ceteris paribus. D$ 2 n#ts for ea"h E1 #n"rease #n pr#"e= ceteris paribus. Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: ..

/1. S ppose the 1 ant#t% demanded of ,.S. "ars fa''s from 2.? m#''#on to /.? m#''#on as a res 't of an a*era!e pr#"e #n"rease from E0?=??? to E05=??? per *eh#"'e. The a)so' te *a' e of the pr#"e e'ast#"#t% of demand #s "'osest to: A$ ?.0?. ($ 1.0.. C$ ?.9;. D$ ?.0.. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: ..

/0. S ppose a n#*ers#t% ra#ses #ts t #t#on )% 2 per"ent and as a res 't the enro''ment of st dents de"reases )% 0 per"ent. The a)so' te *a' e of the pr#"e e'ast#"#t% of demand #s: A$ ?.5?. ($ 0.?. C$ ;.?. D$ 8.?. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: ..

//. S ppose Har'e% Da*#dson #n"reases the pr#"e of a part#" 'ar mode' of motor"%"'e )% / per"ent and as a res 't sa'es of the mode' de"reases )% 1 per"ent. The a)so' te *a' e of the pr#"e e'ast#"#t% of demand #s: A$ 2.?. ($ /.?. C$ 0.?. D$ ?.//. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: ..

/2. A demand " r*e #s des"r#)ed as perfe"t'% #ne'ast#" #f: A$ The same 1 ant#t% #s p r"hased re!ard'ess of pr#"e. ($ The same pr#"e #s "har!ed re!ard'ess of 1 ant#t% so'd. C$ On'% 1 ant#t% demanded "an "han!e. D$ It #s hor#>onta'. Ans+er: A T%pe: Def#n#t#on -a!e: 1??

/5. A demand " r*e that #s "omp'ete'% #ne'ast#" #s: A$ Hor#>onta'. ($ 4ert#"a'. C$ ,p+ard s'op#n!. Ans+er: ( T%pe: Def#n#t#on -a!e: 1??

D$ Do+n+ard s'op#n!.

/8. 3hen the per"enta!e "han!e #n 1 ant#t% demanded #s 'ess than the per"enta!e "han!e #n pr#"e= ceteris paribus: A$ Demand #s e'ast#". C$ Demand #s n#tar% e'ast#". ($ Demand #s #ne'ast#". D$ E'ast#"#t% #s #mposs#)'e to "a'" 'ate. Ans+er: ( T%pe: Def#n#t#on -a!e: 1??

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Chapter 5: The Demand for Goods

/9. A demand " r*e #s des"r#)ed as perfe"t'% e'ast#" #f: A$ The same 1 ant#t% #s p r"hased re!ard'ess of pr#"e. ($ The same pr#"e #s "har!ed re!ard'ess of 1 ant#t% so'd. C$ On'% pr#"e "an "han!e. D$ It #s *ert#"a'. Ans+er: ( T%pe: Def#n#t#on -a!e: 1??

/;. A demand " r*e that #s "omp'ete'% e'ast#" #s: A$ Hor#>onta'. ($ 4ert#"a'. C$ ,p+ard s'op#n!. Ans+er: A T%pe: Def#n#t#on -a!e: 1??

D$ Do+n+ard s'op#n!.

/.. 3hen the per"enta!e "han!e #n 1 ant#t% demanded #s !reater than the per"enta!e "han!e #n pr#"e= ceteris paribus: A$ Demand #s n#tar% e'ast#". C$ Demand #s e'ast#". ($ Demand #s #ne'ast#". D$ E'ast#"#t% #s #mposs#)'e to "a'" 'ate. Ans+er: C T%pe: Def#n#t#on -a!e: 1??

2?. 3h#"h of the fo''o+#n! #nf' en"es the pr#"e e'ast#"#t% of demand6 A$ A*a#'a)#'#t% of s )st#t tes. ($ -r#"e re'at#*e to ) d!et. C$ <en!th of t#me. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 1?0

D$ A'' of the a)o*e.

21. 3h#"h of the fo''o+#n! +o 'd )e most '#Be'% to ha*e a pr#"e@e'ast#"#t% "oeff#"#ent !reater than 16 A$ C#!arettes. ($ Coffee. C$ An add#"t#*e dr !. D$ Resta rant mea's. Ans+er: D T%pe: Ana'%t#"a' -a!e: 1?0

20. 3h#"h of the fo''o+#n! +o 'd )e most '#Be'% to ha*e a pr#"e@e'ast#"#t% "oeff#"#ent 'ess than 16 A$ An add#"t#*e dr !. ($ A#r'#ne tra*e'. C$ Resta rant mea's. D$ Ne+ "ars. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

2/. 3h#"h of the fo''o+#n! #s '#Be'% to ha*e the most #ne'ast#" pr#"e e'ast#"#t% of demand6 A$ A tomo)#'es. ($ -#"B p tr "Bs. C$ Hondas. D$ The Hondas one Honda dea'er se''s. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

22. 3h#"h of the fo''o+#n! #s '#Be'% to ha*e the most e'ast#" pr#"e e'ast#"#t% of demand6 A$ Food. ($ Fr #t.

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Chapter 5: The Demand for Goods

C$ -ea"hes. D$ Farmer (ett%5s pea"hes 7+h#"h are e&a"t'% '#Be a'' the other farmer5s pea"hes$. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

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Chapter 5: The Demand for Goods

25. Ceteris paribus= as the n m)er of s )st#t tes for a !ood #n"rease= the: A$ -r#"e e'ast#"#t% of demand sho 'd )e"ome sma''er. ($ -r#"e e'ast#"#t% of demand sho 'd )e"ome 'ar!er. C$ Cross@pr#"e e'ast#"#t% of demand sho 'd )e"ome ne!at#*e. D$ In"ome e'ast#"#t% of demand sho 'd )e"ome ne!at#*e. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

28. Ceteris paribus= as the n m)er of s )st#t tes for a !ood de"rease= the: A$ -r#"e e'ast#"#t% of demand sho 'd )e"ome sma''er. ($ -r#"e e'ast#"#t% of demand sho 'd )e"ome 'ar!er. C$ Cross@pr#"e e'ast#"#t% of demand sho 'd )e"ome ne!at#*e. D$ In"ome e'ast#"#t% of demand sho 'd )e"ome ne!at#*e. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

29. Ceteris paribus= as the n m)er of s )st#t tes for a !ood #n"reases the: A$ -r#"e e'ast#"#t% of demand sho 'd )e"ome sma''er. ($ -r#"e e'ast#"#t% of demand sho 'd )e"ome 'ar!er. C$ Cross@pr#"e e'ast#"#t% of demand sho 'd )e"ome ne!at#*e. D$ In"ome e'ast#"#t% of demand sho 'd )e"ome ne!at#*e. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

2;. 3h#"h of the fo''o+#n! "a ses demand to )e more e'ast#" +#th respe"t to pr#"e6 A$ Shorter per#ods of t#me to adF st to a "han!e #n pr#"e. ($ A steeper demand " r*e for a !#*en pr#"e and 1 ant#t%. C$ Fe+er s )st#t tes. D$ A h#!h rat#o of pr#"e to #n"ome. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 1?0

2.. Ceteris paribus= the h#!her the rat#o of pr#"e to #n"ome for a part#" 'ar !ood= the: A$ More e'ast#" the demand for the !ood. C$ More n#tar% e'ast#" the demand for the !ood. ($ <ess e'ast#" the demand for the !ood. D$ Sma''er the #n"ome e'ast#"#t% for the !ood. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

5?. Ceteris paribus= the 'o+er the rat#o of pr#"e to #n"ome for a part#" 'ar !ood= the: A$ More e'ast#" the demand for the !ood. C$ More n#tar% e'ast#" the demand for the !ood. ($ <ess e'ast#" the demand for the !ood. D$ Sma''er the #n"ome e'ast#"#t% for the !ood. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

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Chapter 5: The Demand for Goods

51. 3h#"h of the fo''o+#n! "a ses demand to )e 'ess e'ast#" +#th respe"t to pr#"e6 A$ A 'on!er per#od of t#me to adF st to a "han!e #n pr#"e. ($ A f'atter demand " r*e for a !#*en pr#"e and 1 ant#t%. C$ More s )st#t tes. D$ A 'o+ rat#o of pr#"e to #n"ome. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 1?0

50. Ceteris paribus= the 'on!er the t#me per#od= the: A$ Sma''er the #n"ome e'ast#"#t% for the !ood. ($ <ess e'ast#" the demand for the !ood.

C$ More n#tar% e'ast#" the demand for the !ood. D$ More e'ast#" the demand for the !ood.

Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

5/. 3h#"h of the fo''o+#n! "a ses demand to )e more e'ast#" +#th respe"t to pr#"e6 A$ <on!er per#ods of t#me to adF st to a "han!e #n pr#"e. ($ A 'o+er rat#o of pr#"e to #n"ome. C$ Fe+er s )st#t tes. D$ A'' of the a)o*e. Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: 1?0

-RICE E<ASTICITC AND TOTA< RE4EN,E

52. The tota' re*en e effe"t of a mo*ement a'on! a demand " r*e "an )est )e pred#"ted s#n! the: A$ <a+ of d#m#n#sh#n! mar!#na' t#'#t%. C$ ,t#'#t%@ma&#m#>#n! r 'e. ($ -r#"e e'ast#"#t% of demand. D$ <a+ of demand. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 1?2

55. The 'o"a' )ase)a'' team o+ner h#res %o to he'p ma&#m#>e the team5s prof#ts. Co are to'd that "osts are "onstant )e"a se eno !h he'p #s a'+a%s h#red #n "ase of a f '' stad# m= so ass me %o r tasB #s to ma&#m#>e re*en es from t#"Bet sa'es. Co r ad*#"e to the o+ner sho 'd )e: A$ Set the t#"Bet pr#"e #n the #ne'ast#" re!#on of the demand " r*e #n order to #n"rease re*en es. ($ Ra#se the pr#"e as h#!h as poss#)'e nt#' the n m)er of t#"Bets so'd )e!#ns to fa''. C$ Set the pr#"e as 'o+ as poss#)'e to maBe s re the stad# m #s a'+a%s f ''. D$ Set the pr#"e of t#"Bets at the n#tar% e'ast#"#t% pr#"e. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?2

58. Ass me a !ood has a do+n+ard@s'op#n!= '#near demand " r*e. As the pr#"e of th#s !ood #n"reases= tota' re*en e: A$ In"reases #ndef#n#te'%. ($ De"reases #ndef#n#te'% )e"a se the 1 ant#t% so'd +#'' de"rease. C$ Rema#ns "onstant. D$ In"reases then de"reases.

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Chapter 5: The Demand for Goods

Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?2

59. Ass me a !ood has a do+n+ard@s'op#n!= '#near demand " r*e. As #ts pr#"e #n"reases= "ons mer e&pend#t res on th#s !ood: A$ In"rease #ndef#n#te'%. ($ De"rease #ndef#n#te'% )e"a se the 1 ant#t% so'd +#'' de"rease. C$ Rema#n "onstant. D$ In"rease then de"rease. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?2

5;. Mo*#n! do+n+ard a'on! a '#near demand " r*e res 'ts #n more: A$ Ine'ast#" demand and a "han!#n! s'ope. C$ E'ast#" demand and a "han!#n! s'ope. ($ Ine'ast#" demand ) t a "onstant s'ope. D$ E'ast#" demand and a "onstant s'ope. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 1?2

5.. If the pr#"e e'ast#"#t% of demand #s 0.?= and a f#rm ra#ses #ts pr#"e )% 1? per"ent= the 1 ant#t% so'd )% the f#rm +#'': A$ In"rease )% 1? per"ent. C$ De"rease )% 0? per"ent. ($ De"rease )% 1? per"ent. D$ In"rease )% 0? per"ent. Ans+er: C T%pe: Ana'%t#"a' -a!e: 1?2

8?. If the pr#"e e'ast#"#t% of demand #s 1.?= and a f#rm ra#ses #ts pr#"e )% 15 per"ent= the 1 ant#t% so'd )% the f#rm +#'': A$ Fa'' )% 15 per"ent. ($ Fa'' )% 8.9 per"ent. C$ R#se )% 15 per"ent. D$ R#se )% 15? per"ent. Ans+er: A T%pe: Ana'%t#"a' -a!e: 1?2

81. If the pr#"e e'ast#"#t% of demand #s 1.?= and a f#rm ra#ses #ts pr#"e )% 1? per"ent= the tota' re*en e +#'': A$ R#se )% 1? per"ent. ($ Fa'' )% 1? per"ent. C$ Not "han!e. D$ R#se )% 1?? per"ent. Ans+er: C T%pe: Ana'%t#"a' -a!e: 1?2

80. S ppose AAA A#r'#nes #s s ffer#n! from 'o+ re*en es and prof#ts. If the "ompan% +ants to #n"rease t#"Bet re*en e and the pr#"e e'ast#"#t% of demand #s ?.95= the "ompan% sho 'd: A$ In"rease the pr#"e of t#"Bets. ($ De"rease the pr#"e of t#"Bets. C$ Geep the pr#"e n"han!ed )e"a se #f the pr#"e #s e#ther #n"reased or de"reased tota' re*en es +#'' fa''. D$ Ad*ert#se. The on'% opt#on the "ompan% has to ra#se tota' re*en es #s to ad*ert#se. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?5

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Chapter 5: The Demand for Goods

8/. Ash'e% has ) d!eted E2? per month for "and% )ars. No matter ho+ the pr#"e of "and% )ars "han!es= she spends e&a"t'% E2? per month. 3hat does th#s )eha*#or #mp'% a)o t Ash'e%5s pr#"e e'ast#"#t% of demand for "and% )ars6 A$ Her pr#"e e'ast#"#t% of demand m st e1 a' >ero. ($ Her pr#"e e'ast#"#t% of demand m st )e n#tar%. C$ Her pr#"e e'ast#"#t% of demand m st )e *er% #ne'ast#" s#n"e the amo nt he spends #s not respons#*e to a pr#"e "han!e. D$ Her pr#"e e'ast#"#t% of demand m st )e *er% e'ast#" s#n"e the 1 ant#t% demanded "an "han!e s#!n#f#"ant'% #f the pr#"e of "and% )ars "han!es s#!n#f#"ant'%. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: 1?5

82. Ass me the pr#"e e'ast#"#t% of demand for Great F#t Shoe Co. shoes #s D1.5. If the "ompan% de"reases the pr#"e of ea"h pa#r of shoes= tota' re*en e +#'': A$ In"rease )e"a se more shoes +#'' )e so'd. ($ De"rease )e"a se the "ompan% +#'' )e re"e#*#n! 'ess re*en e per pa#r of shoes. C$ In"rease )e"a se the per"enta!e #n"rease #n the n m)er so'd #s !reater than the per"enta!e de"rease #n the pr#"e. D$ Imposs#)'e to pred#"t )e"a se +e do not Bno+ the per"enta!e "han!e #n pr#"e. Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: 1?5

85. Ass me the pr#"e e'ast#"#t% of demand for MC -ret>e' Co. pret>e's #s D?.;. If the "ompan% #n"reases the pr#"e of ea"h )a! of pret>e's= tota' re*en e +#'': A$ De"rease )e"a se fe+er )a!s +#'' )e so'd. ($ In"rease )e"a se the "ompan% +#'' )e re"e#*#n! more re*en e per )a!. C$ In"rease )e"a se the per"enta!e #n"rease #n the pr#"e #s !reater than the per"enta!e de"rease #n the n m)er of )a!s so'd. D$ Imposs#)'e to pred#"t )e"a se +e do not Bno+ the per"enta!e "han!e #n pr#"e. Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: 1?5

88. 3hen demand #s pr#"e #ne'ast#"= ceteris paribus: A$ An #n"rease #n pr#"e 'eads to 'o+er tota' re*en e. ($ An #n"rease #n tota' re*en e means 1 ant#t% r#ses. C$ An #n"rease #n tota' re*en e #nd#"ates a red "t#on #n pr#"e. D$ An #n"rease #n pr#"e 'eads to !reater tota' re*en e. Ans+er: D T%pe: Def#n#t#on -a!e: 1?5

89. Ma&#m m tota' re*en e o"" rs +hen: A$ Tota' re*en e #s 1.?. ($ The a)so' te *a' e of the pr#"e e'ast#"#t% of demand #s 1.?. C$ -r#"e m 't#p'#ed )% 1 ant#t% #s 1.?. D$ A'' of the a)o*e. Ans+er: ( T%pe: Ana'%t#"a' -a!e: 1?5

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Chapter 5: The Demand for Goods

8;. A pr#"e " t +#'' #n"rease the tota' re*en e a f#rm re"e#*es= ceteris paribus= on'% #f the demand for #ts prod "t #s: A$ E'ast#". ($ Ine'ast#". C$ ,n#tar% e'ast#". D$ -erfe"t'% #ne'ast#". Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: 1?5

OTHER E<ASTICITIES

8.. 3h#"h of the fo''o+#n! +o 'd )est meas re the effe"ts of a re"ess#on6 A$ In"ome e'ast#"#t% of demand. C$ Cross@pr#"e e'ast#"#t% of demand. ($ -r#"e e'ast#"#t% of demand. D$ ,t#'#t%@ma&#m#>#n! r 'e. Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: 1?5

9?. S ppose the #n"ome e'ast#"#t% of demand for ,.S. a tomo)#'es #s 0.?. If the 'e*e' of #n"ome de"reases )% 1 per"ent= the n m)er of ,.S. a tomo)#'es so'd +#''= ceteris paribus: A$ R#se ?.5 per"ent. ($ R#se 0.? per"ent. C$ Fa'' ?.5 per"ent. D$ Fa'' 0.? per"ent. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?5

91. S ppose #n"ome fa''s 1 per"ent #n a %ear and as a res 't "onstr "t#on of ne+ homes fa''s from 1; m#''#on to 18 m#''#on n#ts ann a''%. The *a' e of the #n"ome e'ast#"#t% of demand for ho s#n! #s "'osest to: A$ 1.1/. ($ ?.;.. C$ 0.?. D$ 11.;. Ans+er: D T%pe: Ana'%t#"a' -a!e: 1?9

90. S ppose the #n"ome e'ast#"#t% of demand for sed a tomo)#'es #s /.?. If the 'e*e' of #n"ome de"reases )% 1 per"ent= the n m)er of sed a tomo)#'es so'd +#''= ceteris paribus: A$ R#se ?.// per"ent. ($ R#se /.? per"ent. C$ Fa'' ?.// per"ent. D$ Fa'' /.? per"ent. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?9

9/. S ppose #n"ome fa''s 5 per"ent #n a %ear and as a res 't= ho s#n! "onstr "t#on fa''s from 1? m#''#on to 5 m#''#on n#ts ann a''%. (ased on th#s #nformat#on ho s#n! starts are: A$ An #nfer#or !ood. ($ A norma' !ood. C$ -r#"e e'ast#". D$ -r#"e #ne'ast#". Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: 1?;

92. Other th#n!s )e#n! e1 a'= #f #n"ome #n"reases and as a res 't= the demand for !ood X #n"reases= then !ood X #s: A$ An #nfer#or !ood. ($ A ' & r% !ood. C$ A s )st#t te !ood. D$ A norma' !ood. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 1?;

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Chapter 5: The Demand for Goods

95. Other th#n!s )e#n! e1 a'= #f #n"ome #n"reases and as a res 't= the demand for !ood X #n"reases and the demand for !ood Y fa''s: A$ Good X #s an #nfer#or !ood and !ood Y #s a norma' !ood. ($ Good X #s a norma' !ood and !ood Y #s an #nfer#or !ood. C$ Goods X and Y are s )st#t te !oods. D$ Goods X and Y are "omp'ementar% !oods. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 1?;

98. Other th#n!s )e#n! e1 a'= #f #n"ome #n"reases and as a res 't= the demand for !ood X de"reases= then !ood X #s: A$ An #nfer#or !ood. ($ A norma' !ood. C$ A s )st#t te !ood. D$ A "omp'ementar% !ood. Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: 1?;

99. 3h#"h of the fo''o+#n! #s most '#Be'% an #nfer#or !ood6 A$ A Mer"edes@(en> a tomo)#'e. C$ A )'a"B@and@+h#te te'e*#s#on set. ($ An or#!#na' +orB of art. D$ A ' & r% *a"at#on. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: 1?;

9;. S ppose "omp ter pr#"es at an off#"e s pp'% store fa'' from E1=??? to E.?? and as a res 't the 1 ant#t% demanded of t%pe+r#ters de"reases from 2? to 0? per month. The "ross@pr#"e e'ast#"#t% #s "'osest to: A$ ?.18. ($ ?.0. C$ 5.?. D$ 8./. Ans+er: D T%pe: Ana'%t#"a' -a!e: 1?;

9.. Ass me app'es and oran!es are s )st#t tes. S ppose app'e !ro+ers 'a n"h a *er% s ""essf ' ad*ert#s#n! "ampa#!n that "on*#n"es "ons mers app'es are a )etter prod "t. As a res 't the "ross@pr#"e e'ast#"#t% of app'es and oran!es +#'' )e"ome: A$ <ess ne!at#*e 7mo*e "'oser to >ero$. C$ <ess pos#t#*e 7mo*e "'oser to >ero$. ($ More ne!at#*e. D$ More pos#t#*e. Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: 1?;

;?. Other th#n!s )e#n! e1 a'= #f the pr#"e of !ood X #n"reases and as a res 't= the demand for !ood Y #n"reases: A$ Goods X and Y are #nfer#or !oods. C$ Goods X and Y are "omp'ementar% !oods. ($ Goods X and Y are norma' !oods. D$ Goods X and Y are s )st#t te !oods. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 1?;

;1. Other th#n!s )e#n! e1 a'= #f the pr#"e of "offee #n"reases s#!n#f#"ant'%= the: A$ Demand for "offee s )st#t tes +#'' de"rease. C$ Demand for "offee s )st#t tes +#'' #n"rease. ($ Demand for "offee +#'' de"rease. D$ : ant#t% demanded of "offee +#'' #n"rease. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: 1?;

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Chapter 5: The Demand for Goods

;0. If !oods X and Y are s )st#t te !oods= an #n"rease #n the pr#"e of X +#''= ceteris paribus: A$ De"rease the demand for X. C$ In"rease the demand for Y. ($ De"rease the demand for Y. D$ Not "han!e the demand for Y. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: 1?;

;/. 3hen the pr#"es of posta!e stamps r#se= the demand for Internet ser*#"e #n"reases= ceteris paribus. -osta!e stamps and Internet ser*#"e are therefore: A$ E'ast#". ($ Ine'ast#". C$ Comp'ements. D$ S )st#t tes. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?;

;2. S ppose the pr#"e of *#deo !ame "artr#d!es fa''s from E2? to E0? and as a res 't the 1 ant#t% demanded of )#"%"'es fa''s from 2?=??? to 0?=??? per %ear. The *a' e of the "ross@pr#"e e'ast#"#t% #s: A$ Hero. ($ 1.?. C$ 1?.?. D$ 0.?. Ans+er: ( T%pe: Ana'%t#"a' -a!e: 1?;

;5. S ppose the pr#"e of Honda motor"%"'es #n"reases )% 1? per"ent and as a res 't= Har'e%@Da*#dson e&per#en"es a 5 per"ent r#se #n the 1 ant#t% of motor"%"'es demanded. The *a' e of the "ross@pr#"e e'ast#"#t% for Har'e%@Da*#dson motor"%"'es #s: A$ ?.5. ($ 0.?. C$ @?.5. D$ 5.?. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?;

;8. If !oods X and Y are "omp'ementar% !oods= an #n"rease #n the pr#"e of X +#''= ceteris paribus: A$ De"rease the demand for X. C$ In"rease the demand for Y. ($ De"rease the demand for Y. D$ Not "han!e the demand for Y. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 1?;

;9. If !oods X and Y are "omp'ementar% !oods= a de"rease #n the pr#"e of X +#''= ceteris paribus: A$ In"rease the demand for X. C$ Not "han!e the demand for Y. ($ De"rease the demand for Y. D$ In"rease the demand for Y. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 1?.

;;. Other th#n!s )e#n! e1 a'= #f the pr#"e of !ood X #n"reases and as a res 't= the demand for !ood Y de"reases= !oods X and Y are: A$ Infer#or !oods. ($ Norma' !oods. C$ Comp'ementar% !oods. D$ S )st#t te !oods. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: 1?.

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Chapter 5: The Demand for Goods

;.. If D4D p'a%ers and D4Ds are "omp'ementar% !oods= an #n"rease #n the pr#"e of D4Ds +#''= ceteris paribus: A$ In"rease the 1 ant#t% demanded of D4Ds. ($ In"rease the 1 ant#t% demanded of D4D p'a%ers. C$ Red "e the demand for D4D p'a%ers. D$ Red "e the demand for D4Ds. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: 1?.

.?. S ppose the "ross@pr#"e e'ast#"#t% of demand for a tomo)#'es +#th respe"t to the pr#"e for !aso'#ne #s @?.1?. If !aso'#ne pr#"es r#se 0? per"ent= then a tomo)#'e sa'es sho 'd= ceteris paribus: A$ Fa'' )% 0 per"ent. ($ Fa'' )% 5? per"ent. C$ R#se )% 0 per"ent. D$ R#se )% 5? per"ent. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 11?

CHOOSING AMONG -ROD,CTS

.1. 3hen t+o or more !oods are )e#n! p r"hased= opt#ma' "ons mpt#on #s a"h#e*ed +hen: A$ Opport n#t% "osts re'at#*e to t#'#t% are >ero for a'' !oods. ($ Mar!#na' t#'#t% e1 a's >ero. C$ The pr#"e e'ast#"#t% of demand #s !reatest. D$ The rat#o of mar!#na' t#'#t% to pr#"e #s the same for a'' !oods. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 110

.0. Ass me that Heather a'+a%s ma&#m#>es her tota' t#'#t% !#*en her ) d!et "onstra#nt. E*er% morn#n! for )reaBfast Heather has t+o e!!s and three sa sa!es. If the mar!#na' t#'#t% of the 'ast e!! #s 0? t#'s and the pr#"e of e!!s #s E1 ea"h= +hat "an +e sa% a)o t the mar!#na' t#'#t% of the 'ast sa sa!e #f the pr#"e of ea"h sa sa!e #s E06 A$ It m st )e e1 a' to 2? t#'s. C$ It m st )e e1 a' to 1? t#'s. ($ It m st )e e1 a' to 0? t#'s. D$ Indeterm#nate. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 110

./. S ppose that Aason has a''o"ated h#s ent#re ) d!et to the p r"hase of app'es and )ananas. The mar!#na' t#'#t% of the 'ast app'e p r"hased #s 1? t#'s and ea"h app'e "osts 1? "ents. The mar!#na' t#'#t% of the 'ast )anana p r"hased #s 1? t#'s and ea"h )anana "osts 5 "ents. (r#an sho 'd: A$ Se'e"t more app'es and fe+er )ananas )e"a se he '#Bes app'es more than )ananas. ($ Se'e"t more )ananas and fe+er app'es )e"a se of the 'o+er pr#"e for )ananas. C$ Se'e"t more )ananas and fe+er app'es )e"a se he !ets more mar!#na' t#'#t% per do''ar from )ananas. D$ Aason has made the "ho#"e that !#*es h#m the most tota' t#'#t%. Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: 110

.2. Ma&#m m t#'#t% #s a"h#e*ed +hen: A$ Tota' re*en e #s the !reatest.

C$ Mar!#na' t#'#t% #s >ero.

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Chapter 5: The Demand for Goods

($ The pr#"e e'ast#"#t% of demand #s 1.?. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: 110

D$ A'' of the a)o*e.

.5. A "ons mer ma&#m#>es tota' t#'#t% from a !#*en amo nt of #n"ome +hen the: A$ Mar!#na' t#'#t% o)ta#ned from the 'ast do''ar spent on ea"h !ood #s the same. ($ Mar!#na' t#'#t% of the 'ast n#t of ea"h !ood #s the same. C$ Tota' t#'#t% o)ta#ned from ea"h prod "t #s the same. D$ Amo nt spent for ea"h prod "t #s the same. Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: 110

THE ECONOMC TOMORRO3

.8. One of the o)Fe"t#*es of ad*ert#s#n!= from an e"onom#" perspe"t#*e= #s to sh#ft the: A$ S pp'% " r*e to the 'eft. C$ Demand " r*e to the 'eft. ($ S pp'% " r*e to the r#!ht. D$ Demand " r*e to the r#!ht. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 112

.9. A s A$ ($ C$ D$

""essf ' ad*ert#s#n! "ampa#!n +#'': In"rease the demand for the ad*ert#sed !ood. In"rease the pr#"e e'ast#"#t% of demand for the ad*ert#sed !ood. Ca se the 1 ant#t% s pp'#ed of the ad*ert#sed !ood to #n"rease. A'' of the a)o*e.

Ans+er: A T%pe: (as#" ,nderstand#n! -a!e: 112

.;. The o)Fe"t#*e of ad*ert#s#n! #s to: A$ In"rease demand and #n"rease the pr#"e e'ast#"#t% of demand. ($ In"rease demand and de"rease the pr#"e e'ast#"#t% of demand. C$ In"rease demand on'%. D$ De"rease demand and maBe the pr#"e e'ast#"#t% of demand n#tar%. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 112

... A s ""essf ' ad*ert#s#n! "ampa#!n +#'' affe"t the: A$ S pp'% of the ad*ert#sed !ood. ($ Demand for the ad*ert#sed !ood. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 112

C$ : ant#t% s pp'#ed of the ad*ert#sed !ood. D$ : ant#t% demanded of the ad*ert#sed !ood.

1??. 3hen C'a d#a !oes to the !as stat#on she ) %s 1? !a''ons of !as no matter +hat the pr#"e per !a''on. 3hat does th#s #mp'% a)o t her pr#"e e'ast#"#t% of demand for !aso'#ne6

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Chapter 5: The Demand for Goods

A$ It #s n#tar%.

($ It #s re'at#*e'% e'ast#".

C$ It #s perfe"t'% #ne'ast#".

D$ It #s perfe"t'% e'ast#".

Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: 112

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Chapter 5: The Demand for Goods

,se the fo''o+#n! to ans+er 1 est#ons 1?1@1?8: Figure 5.1 E0?? 1;? 18? 10?
- r#" e 7p e r n #t$

1?? ;? 2? D em and 18?

0?

2?

;?

1??

10?

: a n t#t% D e m a n d e d 7p e r p e r #o d $

1?1. In F#! re 5.1= tota' re*en e #s ma&#m#>ed at the n#t pr#"e of: A$ E5?. ($ E8?. C$ E;?. D$ E1??. Ans+er: D T%pe: Ana'%t#"a' -a!e: 1?2

1?0. In F#! re 5.1= at +hat pr#"e #s the e'ast#"#t% of demand n#tar%6 A$ E1??. ($ E0??. C$ E2?. D$ E18?. Ans+er: A T%pe: Ana'%t#"a' -a!e: 1?2

1?/. In the E;? to E2? pr#"e ran!e #n F#! re 5.1= demand #s: A$ -erfe"t'% pr#"e e'ast#". ($ -r#"e #ne'ast#". C$ ,n#tar% pr#"e e'ast#". Ans+er: ( T%pe: Ana'%t#"a' -a!e: .;

D$ -r#"e e'ast#".

1?2. If pr#"e +ere ra#sed from E1?? to E10? #n F#! re 5.1= ceteris paribus: A$ Demand +o 'd de"rease. C$ Tota' re*en e +o 'd #n"rease. ($ : ant#t% demanded +o 'd #n"rease. D$ Tota' re*en e +o 'd de"rease. Ans+er: D T%pe: Ana'%t#"a' -a!e: 1?2

1?5. In the E18? to E1;? pr#"e ran!e #n F#! re 5.1= the a)so' te *a' e of the pr#"e e'ast#"#t% of demand #s: A$ ..?. ($ 1.?. C$ 5.9. D$ ?.195.

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Chapter 5: The Demand for Goods

Ans+er: C T%pe: Ana'%t#"a' -a!e: .;

1?8. O*er the pr#"e ran!e from E;? to E2? #n F#! re 5.1= ceteris paribus: A$ Demand #s #ne'ast#". C$ Demand #s #n"reas#n!. ($ Tota' re*en e #s ma&#m#>ed. D$ A'' of the a)o*e are "orre"t. Ans+er: A T%pe: Ana'%t#"a' -a!e: .;

,se the fo''o+#n! to ans+er 1 est#ons 1?9@110: Figure 5.2 E1?? .? ;? 8? 5? 2? 0? ?

- r#" e 7p e r n #t$

D em and

1?

0?

2?

5?

8?

;?

: a n t#t% D e m a n d e d 7p e r p e r#o d $

1?9. In F#! re 5.0= tota' re*en e #s ma&#m#>ed at the n#t pr#"e of: A$ E2?. ($ E;?. C$ E8?. D$ E5?. Ans+er: D T%pe: Ana'%t#"a' -a!e: 1?2

1?;. In the E2? to E0? pr#"e ran!e of F#! re 5.0= demand #s: A$ -erfe"t'% pr#"e e'ast#". C$ ,n#tar% pr#"e e'ast#". ($ -erfe"t'% pr#"e #ne'ast#". D$ Re'at#*e'% pr#"e #ne'ast#". Ans+er: D T%pe: Ana'%t#"a' -a!e: .;

1?.. If pr#"e +ere ra#sed from E;? to E.? #n F#! re 5.0= ceteris paribus: A$ Demand +o 'd de"rease. C$ Tota' re*en e +o 'd rema#n the same. ($ Tota' re*en e +o 'd de"rease. D$ Tota' re*en e +o 'd )e ma&#m#>ed.

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Chapter 5: The Demand for Goods

Ans+er: ( T%pe: Ana'%t#"a' -a!e: 1?2

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Chapter 5: The Demand for Goods

11?. In the E2? to E0? pr#"e ran!e of F#! re 5.0= the a)so' te *a' e of the pr#"e e'ast#"#t% of demand #s "'osest to: A$ 0.?. ($ 1.?. C$ 0./. D$ ?.2. Ans+er: D T%pe: Ana'%t#"a' -a!e: .;

111. If pr#"e +ere red "ed from E;? to E8? #n F#! re 5.0= ceteris paribus: A$ Tota' re*en e +o 'd #n"rease. C$ 3e "an )e "erta#n that prof#ts +o 'd #n"rease. ($ Demand +o 'd #n"rease. D$ A'' of the a)o*e are "orre"t. Ans+er: A T%pe: Ana'%t#"a' -a!e: 1?2

110. In F#! re 5.0= "ons mer e&pend#t res on th#s !ood are ma&#m#>ed at a pr#"e of: A$ E1??. ($ E5?. C$ E0?. D$ E8?. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 1?2

,se the fo''o+#n! to ans+er 1 est#ons 11/@118: Comp'ete Ta)'e 5.1. Then se the #nformat#on #n the ta)'e to ans+er the #nd#"ated 1 est#ons. Table 5.1 tilit! schedule
Q u a n tit! co n su m ed 1 0 / 2 T o ta l u tilit! 1? IIIII 1; IIIII M a r g in a l u tilit! 1? 8 IIIII 1

11/. In Ta)'e 5.1= the mar!#na' t#'#t% of the th#rd n#t #s: A$ 1;. ($ 8. C$ 0. D$ 1. Ans+er: C T%pe: Ana'%t#"a' -a!e: .5

112. In Ta)'e 5.1= the tota' t#'#t% +hen t+o n#ts are "ons med #s: A$ 1?. ($ 18. C$ 1;. D$ 1.. Ans+er: ( T%pe: Ana'%t#"a' -a!e: .5

115. In Ta)'e 5.1= the tota' t#'#t% +hen fo r n#ts are "ons med #s: A$ 1.. ($ 5/. C$ 1;. D$ 1?. Ans+er: A T%pe: Ana'%t#"a' -a!e: .5

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Chapter 5: The Demand for Goods

-a!e 02

Chapter 5: The Demand for Goods

118. In Ta)'e 5.1= d#m#n#sh#n! mar!#na' t#'#t% o"" rs: A$ 3#th the se"ond and fo rth n#ts on'%. ($ 3#th the f#rst and th#rd n#ts. Ans+er: D T%pe: Ana'%t#"a' -a!e: .5

C$ On'% +#th the se"ond n#t. D$ 3#th a'' n#ts after the f#rst.

,se the fo''o+#n! to ans+er 1 est#ons 119@10?: Comp'ete Ta)'e 5.0. Then se the #nformat#on #n the ta)'e to ans+er the #nd#"ated 1 est#ons. Table 5.2 tilit! schedule
Q u a n tit! co n su m ed 1 0 / 2 T o ta l u tilit! 05 IIIII 8? 85 M a r g in a l u tilit! 05 00 IIIII IIIII

119. In Ta)'e 5.0= the mar!#na' t#'#t% of the th#rd n#t #s: A$ 1/. ($ 8?. C$ 5. D$ 00. Ans+er: A T%pe: Ana'%t#"a' -a!e: .5

11;. In Ta)'e 5.0= the mar!#na' t#'#t% of the fo rth n#t #s: A$ 00. ($ 5. C$ 8?. D$ 85. Ans+er: ( T%pe: Ana'%t#"a' -a!e: .5

11.. In Ta)'e 5.0= the mar!#na' t#'#t% of the fo rth n#t #s: A$ 9;. ($ 85. C$ 8?. D$ 5. Ans+er: D T%pe: Ana'%t#"a' -a!e: .5

10?. In Ta)'e 5.0= the tota' t#'#t% +hen t+o n#ts are "ons med #s: A$ 05. ($ 00. C$ 29. D$ 8?. Ans+er: C T%pe: Ana'%t#"a' -a!e: .5

-a!e 05

Chapter 5: The Demand for Goods

,se the fo''o+#n! to ans+er 1 est#ons 101@102: Table 5." Demand schedule for automobiles
# r ic e o f a u to &d o lla r s p e r a u to ' E 0 5 =? ? ? 0 0 =? ? ? $ u m b e r o f n e % a u to s &m illio n s p e r ! e a r ' 1? 10

101. In Ta)'e 5./= +hat #s the tota' re*en e from a tomo)#'e sa'es at a pr#"e of E00=??? per a to6 A$ E/?? )#''#on per %ear. C$ E05? )#''#on per %ear. ($ E082 )#''#on per %ear. D$ E12 )#''#on per %ear. Ans+er: ( T%pe: Ana'%t#"a' -a!e: 1?2

100. 3h#"h of the fo''o+#n! e'ast#"#t#es "an )e "omp ted s#n! the data #n Ta)'e 5./6 A$ The pr#"e e'ast#"#t% of demand. C$ The "ross@pr#"e e'ast#"#t% of demand. ($ The #n"ome e'ast#"#t% of demand. D$ The 1 ant#t% e'ast#"#t% of demand. Ans+er: A T%pe: Ana'%t#"a' -a!e: .;

10/. 3hat #s the *a' e of the pr#"e e'ast#"#t% of demand +h#"h "an )e "a'" 'ated from the #nformat#on #n Ta)'e 5./6 A$ ?.9?. ($ ?./5. C$ ?.89. D$ 1.20. Ans+er: D T%pe: Ana'%t#"a' -a!e: .;

102. In Ta)'e 5./= as pr#"e #n"reases from E00=??? per "ar to E05=??? per "ar: A$ The demand " r*e for "ars sh#fts to the 'eft. C$ The 1 ant#t% of "ars demanded #n"reases. ($ Tota' re*en e fa''s. D$ A'' of the a)o*e. Ans+er: ( T%pe: Ana'%t#"a' -a!e: .;

,se the fo''o+#n! to ans+er 1 est#ons 105@10.: Table 5.( Demand schedule for automobiles
# r ic e o f a u to &d o lla r s p e r a u to ' E 0 ? =? ? ? 1 ; =? ? ? $ u m b e r o f n e % a u to s &m illio n s p e r ! e a r ' 1? /?

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Chapter 5: The Demand for Goods

105. In Ta)'e 5.2= +hat #s the tota' re*en e from a tomo)#'e sa'es at a pr#"e of E0?=??? per a to6 A$ E0?? )#''#on per %ear. C$ E18? )#''#on per %ear. ($ E/8? )#''#on per %ear. D$ E1;? )#''#on per %ear. Ans+er: A T%pe: Ana'%t#"a' -a!e: 1?2

108. In Ta)'e 5.2= +hat #s the tota' re*en e from a tomo)#'e sa'es at a pr#"e of E1;=??? per a to6 A$ E1;? )#''#on per %ear. C$ E52? )#''#on per %ear. ($ E0?? )#''#on per %ear. D$ E8?? )#''#on per %ear. Ans+er: C T%pe: Ana'%t#"a' -a!e: 1?2

109. 3h#"h of the fo''o+#n! e'ast#"#t#es "an )e "omp ted s#n! the demand s"hed 'e #n Ta)'e 5.26 A$ The #n"ome e'ast#"#t% of demand. C$ The pr#"e e'ast#"#t% of demand. ($ The "ross@pr#"e e'ast#"#t% of demand. D$ The 1 ant#t% e'ast#"#t% of demand. Ans+er: C T%pe: Ana'%t#"a' -a!e: 1?2

10;. A""ord#n! to Ta)'e 5.2= the pr#"e e'ast#"#t% of demand #s. A$ ..5= and tota' re*en e +#'' de"rease #f pr#"e de"reases. ($ ..5= and tota' re*en e +#'' #n"rease #f pr#"e de"reases. C$ ?.11= and tota' re*en e +#'' de"rease #f pr#"e #n"reases. D$ ?.11= and tota' re*en e +#'' #n"rease #f pr#"e de"reases. Ans+er: ( T%pe: Ana'%t#"a' -a!e: .;

10.. In Ta)'e 5.2= as pr#"e de"reases from E0?=??? per "ar to E1;=??? per "ar: A$ There #s mo*ement a'on! the demand " r*e. C$ The 1 ant#t% of "ars demanded #n"reases. ($ Tota' re*en e #n"reases. D$ A'' of the a)o*e. Ans+er: D T%pe: Ana'%t#"a' -a!e: .;

,se the fo''o+#n! to ans+er 1 est#ons 1/?@1/2: Comp'ete Ta)'e 5.5. Then se the #nformat#on #n the ta)'e to ans+er the #nd#"ated 1 est#ons. Ass me the pr#"e of "o'a #s E2 per n#t and the pr#"e of pret>e's #s E0 per n#t. Table 5.5 Michael)s utilit! schedule

-a!e 09

Chapter 5: The Demand for Goods

n its o f c o la 1 0 / 2 5

o f c o la 2? IIIII .8 110 102

o f c o la 2? /0 02 IIIII IIIII

n its o f p r e t* e ls 1 0 / 2 5

T of p r e t* e ls /? IIIII 88 9; ;2

M of p r e t* e ls /? 0? 18 IIIII IIIII

1/?. In Ta)'e 5.5= +hat #s the tota' t#'#t% of 0 n#ts of "o'a6 A$ /0. ($ 2?. C$ 90. D$ .8. Ans+er: C T%pe: Ana'%t#"a' -a!e: .5

1/1. In Ta)'e 5.5= +hat #s the mar!#na' t#'#t% of the f#fth n#t of "o'a6 A$ 8. ($ 10. C$ 18. D$ 02. Ans+er: ( T%pe: Ana'%t#"a' -a!e: .5

1/0. Refer to Ta)'e 5.5. S ppose M#"hae' has E; to spend on "o'a and pret>e's. 3hat "om)#nat#on sho 'd he p r"hase #n order to ma&#m#>e h#s t#'#t%6 A$ 0 "o'as and 0 pret>e's. C$ 1 "o'a and 0 pret>e's. ($ No "o'as and 2 pret>e's. D$ 0 "o'as and no pret>e's. Ans+er: C T%pe: Ana'%t#"a' -a!e: 110

1//. Refer to Ta)'e 5.5. If M#"hae' has E; to spend on "o'a and pret>e's= +hat #s h#s ma&#m m t#'#t%6 A$ 90. ($ 9;. C$ .?. D$ 1/;. Ans+er: C T%pe: Ana'%t#"a' -a!e: .5

1/2. Refer to Ta)'e 5.5. If M#"hae' has E12 to spend on "o'a and pret>e's= +hat "om)#nat#on sho 'd he p r"hase #n order to ma&#m#>e h#s t#'#t%6 A$ 0 "o'as and / pret>e's. C$ / "o'as and 1 pret>e'. ($ 1 "o'a and 5 pret>e's. D$ 0 "o'as and 0 pret>e's. Ans+er: A T%pe: Ana'%t#"a' -a!e: 110

,se the fo''o+#n! to ans+er 1 est#ons 1/5@1/;: Figure 5."

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Chapter 5: The Demand for Goods

8 5
M A R G IN A < , T I< IT C 7 t#'s $

2 / 0 1 ? @1 @0 1 0 / 2 5

: , A N T IT C O F A - - < E S

-a!e 0.

Chapter 5: The Demand for Goods

1/5. Refer to F#! re 5./. The tota' t#'#t% of 5 app'es #s: A$ 1 t#'s. ($ 19 t#'s. C$ 1; t#'s. D$ 0? t#'s. Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: .5

1/8. Refer to F#! re 5./. The tota' t#'#t% of 0 app'es #s: A$ 0 t#'s. ($ 5 t#'s. C$ 8 t#'s. D$ 11 t#'s. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: .5

1/9. Refer to F#! re 5./. Tota' t#'#t% #s ma&#m#>ed at: A$ 8 app'es. ($ 9 app'es. C$ 1 app'e. D$ / app'es. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: .5

1/;. Refer to F#! re 5./. 3#th no ) d!et "onstra#nt= a rat#ona' "ons mer +#'' "ons me IIIIIIIII app'es. A$ Hero. ($ One. C$ S#&. D$ An #nf#n#te amo nt. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: .5

,se the fo''o+#n! to ans+er 1 est#ons 1/.@12?: Figure 5.(

8 5 2 / 0 1 ? 1 0 / 2 : , A N T IT C O F T A C O S 5 8

1/.. Refer to F#! re 5.2. Mar!#na' t#'#t%: A$ (e"omes ne!at#*e at some 'e*e' of ta"o "ons mpt#on )e%ond 8 ta"os. ($ Ma% ne*er )e"ome ne!at#*e. C$ (e"omes ne!at#*e after the fo rth ta"o. D$ (e"omes ne!at#*e after the f#rst ta"o )e"a se of d#m#n#sh#n! mar!#na' t#'#t%.

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Chapter 5: The Demand for Goods

Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: .5

12?. Refer to F#! re 5.2. 3#th no ) d!et "onstra#nt= a rat#ona' "ons mer +#'' "ons me IIIIIIIII ta"os. A$ S#&. ($ Fo r. C$ Three. D$ An #nf#n#te amo nt. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: .5

121. If ta"os +ere free= the "ons mer represented #n F#! re 5.0 +o 'd "ons me: A$ An #nf#n#te amo nt. ($ 8 ta"os. C$ 1 ta"o. D$ 2 ta"os. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: .5

,se the fo''o+#n! to ans+er 1 est#ons 120@12/: Figure 5.5

- R IC E

-0 -1

( : , A N T IT C

120. Refer to F#! re 5.5. Ass me the t+o demand " r*es #n F#! re 5.5 are para''e'. 3h#"h " r*e #s re'at#*e'% more pr#"e #ne'ast#" )et+een - and - 6
1 0

A$ ($ C$ D$

AA. ((. Cannot )e determ#ned. (oth " r*es ha*e the same s'ope and= therefore= the same pr#"e e'ast#"#t%.

Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: .;

12/. Refer to F#! re 5.5. Ass me the t+o demand " r*es #n F#! re 5.5 are para''e'. 3h#"h " r*e #s re'at#*e'% more pr#"e e'ast#" )et+een - and - 6
1 0

A$ ($ C$ D$

AA. ((. Cannot )e determ#ned. (oth " r*es ha*e the same s'ope and= therefore= the same pr#"e e'ast#"#t%.

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Chapter 5: The Demand for Goods

Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: .;

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Chapter 5: The Demand for Goods

,se the fo''o+#n! to ans+er 1 est#ons 122@128: Figure 5.+

-1 -0

JA

JC
D em and ? D ( : , A N T IT C

122. Refer to F#! re 5.8. If the area ?- A( #s 'ess than the area ?- CD= +e "an "on"' de that the pr#"e e'ast#"#t%
1 0

of demand )et+een -o#nt A and -o#nt C #s: A$ E'ast#". ($ Ine'ast#". C$ ,n#tar%. D$ Imposs#)'e to determ#ne. It depends on +hether the pr#"e has #n"reased or de"reased. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?2

125. Refer to F#! re 5.8. S ppose that the areas ?- A( and ?- CD are e1 a'. 3e "an "on"' de that the pr#"e
1 0

e'ast#"#t% of demand )et+een -o#nt A and -o#nt C #s: A$ E'ast#". ($ Ine'ast#". C$ ,n#tar%. D$ Imposs#)'e to determ#ne. It depends on +hether the pr#"e has #n"reased or de"reased. Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: 1?2

128. Refer to F#! re 5.8. Compar#n! the pr#"e e'ast#"#t% of demand at po#nts A and C= +e "an sa% that: A$ The e'ast#"#t#es are the same )e"a se the po#nts are on the same demand " r*e. ($ -o#nt A has a !reater pr#"e e'ast#"#t% of demand. C$ -o#nt C has a !reater pr#"e e'ast#"#t% of demand. D$ Indeterm#nate )e"a se spe"#f#" pr#"e data #s not !#*en. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: .;

-a!e //

Chapter 5: The Demand for Goods

The fo''o+#n! m 't#p'e@"ho#"e 1 est#ons re1 #re "r#t#"a' th#nB#n! a)o t In the News and World View art#"'es that appeared #n the te&t.

129. One In the News art#"'e reports KL %o n! +omen spend a 'ot more mone% on "'oth#n!= persona' "are #tems= and the#r pets.K A s ""essf ' ad*ert#s#n! "ampa#!n sho 'd sh#ft the: A$ Demand " r*e to the 'eft. C$ S pp'% " r*e to the 'eft. ($ Demand " r*e to the r#!ht. D$ S pp'% " r*e to the r#!ht. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: ./

12;. One In the News art#"'e d#fferent#ates the spend#n! ha)#ts of +omen and men: KMen spend t+#"e as m "h as +omen do on te'e*#s#on and stereo e1 #pment L %o n! +omen spend a 'ot more mone% on "'oth#n!= persona' "are #tems= and the#r pets.K 3h#"h determ#nant of demand #s most '#Be'% #n*o'*ed6 A$ In"ome. ($ Tastes. C$ E&pe"tat#ons. D$ Other !oods 7a*a#'a)#'#t% and pr#"es$. Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: ./

12.. One of the 'essons to )e 'earned #n the World View art#"'e t#t'ed KC#!arette Sm !!'#n!: A <esson #n -r#"e E'ast#"#t%K #s: A$ Ra#s#n! ta&es on a !ood for +h#"h there are man% s )st#t tes ma% not res 't #n h#!her re*en es or red "ed "ons mpt#on. ($ Ra#s#n! ta&es ma% en"o ra!e s#!n#f#"ant ta&@e*ad#n! )eha*#or. C$ 3hen h#!h potent#a' prof#ts are #n*o'*ed= entreprene rs +#'' somet#mes )e"ome #n*o'*ed #n #''e!a' a"t#*#t#es. D$ A'' of the a)o*e. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

15?. A""ord#n! to the World View art#"'e t#t'ed KC#!arette Sm !!'#n!: A <esson #n -r#"e E'ast#"#t%=K #f a'' states and "o ntr#es ra#sed "#!arette ta&es )% the same amo nt at the same t#me= the pr#"e e'ast#"#t% of demand of "#!arettes +o 'd )e: A$ <ess pr#"e e'ast#". ($ More pr#"e e'ast#". C$ E1 a' to n#tar% pr#"e e'ast#"#t%. D$ The same as the "ross@pr#"e e'ast#"#t% of demand. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

151. One In the News art#"'e states MFor e*er% 1? per"ent de"'#ne #n the pr#"e= %o th smoB#n! r#ses )% a'most 9 per"entLK G#*en th#s #nformat#on= the pr#"e e'ast#"#t% of demand for smoB#n! amon!st %o th m st )e: A$ ?.9? and re'at#*e'% e'ast#". C$ 1.20 and re'at#*e'% e'ast#". ($ ?.9? and re'at#*e'% #ne'ast#". D$ 1.20 and re'at#*e'% #ne'ast#". Ans+er: ( T%pe: Comp'e& ,nderstand#n! -a!e: 1?0

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Chapter 5: The Demand for Goods

150. One In the News art#"'e= t#t'ed KSt n! (% the E"onom%= Amer#"ans <ose The#r Appet#te for D#n#n! O t=K reports that a de"rease #n #n"ome "a ses a de"rease #n the "ons mpt#on of resta rant mea's. (ased on th#s #nformat#on= resta rant mea's are: A$ A "omp'ementar% !ood. ($ A s )st#t te !ood. C$ A norma' !ood. D$ An #nfer#or !ood. Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: 1?;

15/. One In the News art#"'e= t#t'ed KSt n! (% the E"onom%= Amer#"ans <ose The#r Appet#te for D#n#n! O t=K reports that a de"rease #n #n"ome "a ses a de"rease #n the "ons mpt#on of resta rant mea's. (ased on th#s #nformat#on= +h#"h of the fo''o+#n! #s tr e a)o t resta rant mea's6 A$ Demand has sh#fted to the 'eft. ($ Demand has sh#fted to the r#!ht. C$ There has )een a de"rease #n 1 ant#t% demanded. D$ There has )een an #n"rease #n 1 ant#t% demanded. Ans+er: A T%pe: Comp'e& ,nderstand#n! -a!e: 1?;

152. One In the News art#"'e #s t#t'ed KD4D Sa'es are Soar#n! as -r#"es Drop.K If a de"rease #n the pr#"e of D4Ds "a ses an #n"rease #n the sa'es of D4D p'a%ers= then the t+o !oods are: A$ Norma'. ($ Infer#or. C$ S )st#t tes. D$ Comp'ements. Ans+er: D T%pe: Comp'e& ,nderstand#n! -a!e: 1?.

155. One In the News art#"'e #s t#t'ed KD4D Sa'es are Soar#n! as -r#"es Drop.K If a de"rease #n the pr#"e of D4Ds "a ses an #n"rease #n the sa'es of D4D p'a%ers= then: A$ The "ross@pr#"e e'ast#"#t% of demand #s !reater than >ero. ($ The "ross@pr#"e e'ast#"#t% of demand #s e1 a' to >ero. C$ The "ross@pr#"e e'ast#"#t% of demand #s 'ess than >ero. D$ The pr#"e e'ast#"#t% of demand m st )e e'ast#" for D4D p'a%ers. Ans+er: C T%pe: Comp'e& ,nderstand#n! -a!e: 1?.

A--ENDIN

158. An #nd#fferen"e " r*e sho+s: A$ The ma&#m m t#'#t% that "an )e a"h#e*ed for a !#*en "ons mer ) d!et. ($ The ma&#m m t#'#t% that "an )e a"h#e*ed for d#fferent amo nts of a !ood. C$ The "om)#nat#ons of !oods !#*#n! e1 a' t##t% to a "ons mer. D$ The opt#ma' "ons mpt#on "om)#nat#ons )et+een t+o !oods. Ans+er: C T%pe: Def#n#t#on -a!e: 119

159. 3h#"h of the fo''o+#n! #s sed to dep#"t a'ternat#*e "om)#nat#ons of !oods that are e1 a''% sat#sf%#n!6 A$ An #nd#fferen"e map. ($ An #nd#fferen"e " r*e. C$ A demand " r*e. D$ A ) d!et "onstra#nt. Ans+er: ( T%pe: Def#n#t#on -a!e: 119

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Chapter 5: The Demand for Goods

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Chapter 5: The Demand for Goods

15;. An #nd#fferen"e " r*e represents: A$ A'' "om)#nat#ons of t+o !oods that are e1 a''% sat#sf%#n!. ($ A "onstant 'e*e' of t#'#t%. C$ A !reater 'e*e' of tota' t#'#t% the farther #t #s from the or#!#n. D$ A'' of the a)o*e. Ans+er: D T%pe: Def#n#t#on -a!e: 119

15.. A ) A$ ($ C$ D$

d!et '#ne represents: Cons mpt#on poss#)#'#t#es. The "om)#nat#ons of !oods !#*#n! e1 a' t#'#t% to a "ons mer. The "om)#nat#ons of pr#"e and 1 ant#t% a*a#'a)'e to a "ons mer. The amo nt of #n"ome that #s re1 #red to p r"hase a !#*en amo nt of a !ood.

Ans+er: A T%pe: Def#n#t#on -a!e: 11.

18?. 3h#"h of the fo''o+#n! #s sed to dep#"t a'' "om)#nat#ons of !oods that are afforda)'e +#th a !#*en #n"ome and !#*en pr#"es6 A$ An #nd#fferen"e " r*e. ($ An #nd#fferen"e map. C$ A demand " r*e. D$ A ) d!et "onstra#nt. Ans+er: D T%pe: Def#n#t#on -a!e: 11.

181. A ) A$ ($ C$ D$

d!et '#ne represents: The "om)#nat#ons of !oods !#*#n! e1 a' t#'#t% to a "ons mer. The demand " r*e. Com)#nat#ons of t+o !oods +h#"h "an )e p r"hased +#th a !#*en ) d!et. The amo nt of #n"ome that #s re1 #red to p r"hase a !#*en amo nt of a !ood.

Ans+er: C T%pe: Def#n#t#on -a!e: 11.

180. The s'ope of the ) d!et "onstra#nt #s a'+a%s e1 a' to the: A$ Mar!#na' rate of s )st#t t#on. ($ Rat#o of the pr#"e of one !ood to the pr#"e of the other !ood. C$ In"ome of the "ons mer. D$ Re"#pro"a' of the mar!#na' t#'#t% of one !ood. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 11.

18/. The po#nt +here the ) d!et '#ne and an #nd#fferen"e " r*e are tan!ent: A$ Represents an opt#ma' "ons mpt#on po#nt. ($ Ind#"ates the 1 ant#t% and pr#"e that +o 'd appear on a demand " r*e. C$ Ind#"ates that the re'at#*e mar!#na' t#'#t#es of the !oods e1 a' the#r re'at#*e pr#"es. D$ A'' of the a)o*e. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 10?

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Chapter 5: The Demand for Goods

182. The opt#ma' "ons mpt#on "om)#nat#on: A$ Ma&#m#>es tota' t#'#t% s )Fe"t to a ) d!et "onstra#nt. ($ Is the po#nt of tan!en"% )et+een the ) d!et "onstra#nt and an #nd#fferen"e " r*e. C$ O"" rs +hen the mar!#na' rate of s )st#t t#on e1 a's the rat#o of the pr#"es of the t+o !oods. D$ A'' of the a)o*e. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 10?

185. The s'ope of the ) d!et "onstra#nt= +hen a "ons mer has rea"hed opt#ma' "ons mpt#on of t+o !oods= #s e1 a' to the: A$ Mar!#na' rate of s )st#t t#on. C$ Rat#o of the mar!#na' t#'#t#es of the t+o !oods. ($ Rat#o of the pr#"es of the t+o !oods. D$ A'' of the a)o*e. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 101

188. The rate at +h#"h a "ons mer #s +#''#n! to e&"han!e one !ood for another refers to the: A$ Mar!#na' rate of s )st#t t#on. C$ Opt#ma' "ons mpt#on "om)#nat#on. ($ S'ope of the ) d!et "onstra#nt. D$ Rat#o of the pr#"es of the t+o !oods. Ans+er: A T%pe: Def#n#t#on -a!e: 101

189. The s'ope of the #nd#fferen"e " r*e #s e1 a' to the: A$ Rat#o of the pr#"e of one !ood to the pr#"e of the other !ood. ($ In"ome of the "ons mer. C$ Mar!#na' rate of s )st#t t#on. D$ S'ope of the demand " r*e. Ans+er: C T%pe: (as#" ,nderstand#n! -a!e: 101

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Chapter 5: The Demand for Goods

,se the fo''o+#n! to ans+er 1 est#ons 18;@190: ,se the #nd#fferen"e " r*es and the ) d!et '#nes #n F#! re 5.9 to ans+er the #nd#"ated 1 est#ons. Ass me the pr#"e of Y #s E1 per n#t. Figure 5.,

18;. Refer to F#! re 5.9. If the pr#"e per n#t of !ood X #s E/= the "ons mer +o 'd ma&#m#>e t#'#t% at po#nt: A$ A. ($ (. C$ C. D$ D. Ans+er: A T%pe: Ana'%t#"a' -a!e: 101

18.. Refer to F#! re 5.9. If the pr#"e per n#t of !ood X #s E/= the "ons mer +o 'd ma&#m#>e t#'#t% )% "ons m#n!: A$ /? n#ts of Y. ($ 01 n#ts of Y. C$ 1? n#ts of Y. D$ 05 n#ts of Y. Ans+er: ( T%pe: Ana'%t#"a' -a!e: 101

19?. Refer to F#! re 5.9. If the pr#"e per n#t of !ood X #s E1= opt#ma' "ons mpt#on #s fo nd at po#nt: A$ B. ($ D. C$ E. D$ C. Ans+er: D T%pe: Ana'%t#"a' -a!e: 101

191. Refer to F#! re 5.9. If the pr#"e per n#t of !ood X #s E1= the "ons mer +o 'd ma&#m#>e t#'#t% )% "ons m#n!: A$ 05 n#ts of Y. ($ 01 n#ts of Y. C$ 15 n#ts of Y. D$ 1? n#ts of Y.

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Chapter 5: The Demand for Goods

Ans+er: C T%pe: Ana'%t#"a' -a!e: 101

190. In F#! re 5.9= !#*en an #n"ome of E/? and a pr#"e for !ood Y of E1= +h#"h of the fo''o+#n! t+o po#nts represent opt#ma' "ons mpt#on6 A$ A +hen pr#"e of X #s E/ and C +hen pr#"e of X #s E1. ($ B +hen pr#"e of X #s E1 and D +hen pr#"e of X #s E/. C$ A +hen pr#"e of X #s E1 and D +hen pr#"e of X #s E/. D$ B +hen pr#"e of X #s E1 and C +hen pr#"e of X #s E/. Ans+er: A T%pe: Ana'%t#"a' -a!e: 100

,se the fo''o+#n! to ans+er 1 est#ons 19/@199: ,se the #nd#fferen"e " r*es and ) d!et '#nes #n F#! re 5.; to ans+er the #nd#"ated 1 est#ons. Ass me the pr#"e of Y #s E/ per n#t. Figure 5.-

19/. The #n"ome per per#od a*a#'a)'e to the "ons mer dep#"ted #n F#! re 5.; #s: A$ E/?. ($ E8?. C$ E20. D$ E.?. Ans+er: D T%pe: Ana'%t#"a' -a!e: 10?

192. Refer to F#! re 5.;. If the pr#"e per n#t of !ood X #s E.= the "ons mer +o 'd ma&#m#>e t#'#t% at po#nt: A$ A. ($ B. C$ C. D$ D.

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Chapter 5: The Demand for Goods

Ans+er: A T%pe: Ana'%t#"a' -a!e: 100

195. Refer to F#! re 5.;. If the pr#"e per n#t of !ood X #s E/= the "ons mer5s opt#ma' "om)#nat#on of !oods X and Y #s fo nd at po#nt: A$ B. ($ C. C$ D. D$ A'' of the po#nts a)o*e %#e'd e1 a' t#'#t%. Ans+er: ( T%pe: Ana'%t#"a' -a!e: 100

198. Refer to F#! re 5.;. If the pr#"e per n#t of !ood X #s E.= the "om)#nat#on +h#"h %#e'ds the most sat#sfa"t#on #s: A$ 01 n#ts of X and / n#ts of Y. C$ 5 n#ts of X and 05 n#ts of Y. ($ 15 n#ts of X and 15 n#ts of Y. D$ / n#ts of X and 01 n#ts of Y. Ans+er: D T%pe: (as#" ,nderstand#n! -a!e: 100

199. Refer to F#! re 5.;. If the pr#"e per n#t of !ood X #s E/= the "om)#nat#on +h#"h %#e'ds the most sat#sfa"t#on #s: A$ 0? n#ts of X and 1? n#ts of Y. C$ 5 n#ts of X and 05 n#ts of Y. ($ 15 n#ts of X and 15 n#ts of Y. D$ / n#ts of X and 01 n#ts of Y. Ans+er: ( T%pe: (as#" ,nderstand#n! -a!e: 100

True.False Questions

DETERMINANTS OF DEMAND

F 19;. Stat s and e!o "ons#derat#ons #n "ons mpt#on are e"onom#" e&p'anat#ons of demand. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: ./

F 19.. An e&pe"ted #n"rease #n the pr#"e of a !ood "a ses a r#!ht+ard sh#ft #n demand= +h#'e a h#!her " rrent pr#"e of a !ood "a ses a mo*ement a'on! the demand " r*e. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: .2

F 1;?. 3hen the pr#"e of a !ood #s e&pe"ted to fa'' ne&t month= there sho 'd )e a do+n+ard mo*ement a'on! the " rrent demand " r*e. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: .2

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Chapter 5: The Demand for Goods

F 1;1. 3hen the pr#"e of a !ood #s e&pe"ted to fa'' ne&t month= the " rrent demand " r*e sho 'd sh#ft to the 'eft. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: .5

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Chapter 5: The Demand for Goods

THE DEMAND C,R4E

F 1;0. Mar!#na' t#'#t% represents the add#t#ona' sat#sfa"t#on o)ta#ned from one more n#t of a !ood or ser*#"e. Ans+er: Tr e T%pe: Def#n#t#on -a!e: .5

F 1;/. The 'a+ of d#m#n#sh#n! mar!#na' t#'#t% does not app'% to !oods that a person rea''% enFo%s. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: .5

F 1;2. If there #s no ) d!et "onstra#nt= t#'#t% ma&#m#>at#on #s a"h#e*ed +hen mar!#na' t#'#t% #s >ero. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: .8

F 1;5. ,t#'#t% ma&#m#>at#on #s a'+a%s a"h#e*ed +here tota' re*en e #s ma&#m#>ed. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: .8

-RICE E<ASTICITC

F 1;8. The pr#"e e'ast#"#t% of demand #s #nf' en"ed )% a'' of the determ#nants of demand. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: .9

F 1;9. A'' pr#"e e'ast#"#t#es of demand a'on! do+n+ard@s'op#n! demand " r*es ha*e a ne!at#*e *a' e )e"a se of the #n*erse re'at#onsh#p )et+een pr#"e and 1 ant#t% demanded. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: .9

F 1;;. A hor#>onta' demand " r*e has an e'ast#"#t% of >ero. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: 1??

F 1;.. A demand " r*e #s perfe"t'% e'ast#" #f "ons mers red "e the#r 1 ant#t% demanded to >ero +hen pr#"e r#ses )% e*en the s'#!htest amo nt. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: 1??

F 1.?. A demand " r*e #s perfe"t'% #ne'ast#" #f "ons mers red "e the#r 1 ant#t% demanded to >ero +hen

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Chapter 5: The Demand for Goods

pr#"e r#ses )% e*en the s'#!htest amo nt. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: 1??

F 1.1. E'ast#"#t% of demand #s n#tar% at the po#nt on a '#near demand " r*e for +h#"h tota' re*en e #s ma&#m#>ed. Ans+er: Tr e T%pe: Comp'e& ,nderstand#n! -a!e: 1??

-RICE E<ASTICITC AND TOTA< RE4EN,E

F 1.0. If the a)so' te *a' e of the pr#"e e'ast#"#t% of demand #s 0.?= tota' re*en e +#'' #n"rease #f pr#"e #n"reases. Ans+er: Fa'se T%pe: Comp'e& ,nderstand#n! -a!e: 1?5

F 1./. If the a)so' te *a' e of the pr#"e e'ast#"#t% of demand #s ?.5?= tota' re*en e +#'' #n"rease #f pr#"e #n"reases. Ans+er: Tr e T%pe: Comp'e& ,nderstand#n! -a!e: 1?5

F 1.2. A pr#"e "han!e does not "han!e tota' re*en e #f demand #s n#tar% e'ast#". Ans+er: Tr e T%pe: Comp'e& ,nderstand#n! -a!e: 1?5

OTHER E<ASTICITIES

F 1.5. If #n"ome #n"reases= the demand for a norma' !ood +#'' #n"rease. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: 1?5

F 1.8. An #n"rease #n "ons mer #n"ome +#'' sh#ft the demand " r*e of an #nfer#or !ood to the r#!ht. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: 1?;

F 1.9. A ne!at#*e "ross@pr#"e e'ast#"#t% #nd#"ates !oods are s )st#t tes )e"a se a pos#t#*e per"enta!e #n"rease #n one !ood res 'ts #n a ne!at#*e per"enta!e #n"rease #n the other. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: 1?;

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Chapter 5: The Demand for Goods

THE ECONOMC TOMORRO3

F 1.;. Ad*ert#sers " rrent'% spend a)o t E1 m#''#on per %ear to "han!e the demand for prod "ts. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: 11/

F 1... A s ""essf ' ad*ert#s#n! "ampa#!n #nd "es "ons mers to ) % more of the prod "t at an% !#*en pr#"e than )efore. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: 112

F 0??. A s ""essf ' ad*ert#s#n! "ampa#!n +#'' maBe demand for the prod "t 'ess pr#"e e'ast#". Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: 115

A--ENDIN

F 0?1. An #nd#fferen"e " r*e represents "om)#nat#ons of t+o !oods +h#"h pro*#de an #nd#*#d a' the same tota' t#'#t%. Ans+er: Tr e T%pe: (as#" ,nderstand#n! -a!e: 119

F 0?0. The "'oser the #nd#fferen"e " r*e #s to the or#!#n= the more tota' t#'#t% #t %#e'ds. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: 119

F 0?/. A ) d!et '#ne sho+s a'' the "om)#nat#ons that pro*#de the "ons mer +#th e1 a' t#'#t%. Ans+er: Fa'se T%pe: (as#" ,nderstand#n! -a!e: 11;

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Chapter 5: The Demand for Goods

/ns%ers to Table

Table 5.1 /ns%er tilit! schedule Quantit! consumed 1 0 / 2 Total utilit! 1? 18 1; 1. Marginal utilit! 1? 8 0 1

Table 5.2 /ns%er tilit! schedule Quantit! consumed 1 0 / 2 Total utilit! 05 29 8? 85 Marginal utilit! 05 00 1/ 5

Table 5.5 /ns%er Michael)s utilit! schedule nits of pret*els 1 0 / 2 5 T of pret*els /? 5? 88 9; ;2 M of pret*els /? 0? 18 10 8

nits of cola 1 0 / 2 5

T of cola 2? 90 .8 110 102

M of cola 2? /0 02 18 10

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