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40 Cards in this Set

  • Front
  • Back

according to the law of demand, the demand curve for a good will

slope downward



An increase in the price of pork will lead to

a movement up along the demand curve

if the price of automobiles were to decrease substantially, the demand curve for gasoline would most likely

shift rightward

an increase in consumer incomes will lead to

a rightward shift of the demand curve for plasma Tvs

when two goods are substitutes in demand, a shock that raises the price of one good causes the price of the other good to

increase

suppose the market demand curve for pizza can be expressed as Q^D=100-2P+3Pb, where Q^D is the quantity of pizza demanded, P is the price of pizza and Pb is the price of a burrito. when the price of burritos is $1.7 what is the demand for pizza?

Q^D=105.1-2P

Suppose the market demand curve for pizza can be expressed as Q^D=100-2P+3Pb where Q^D is the quantity of pizza demanded, P is the price of pizza, and Pb is the price of a burrito. What is the relationship between burritos and pizza from the point of view of consumers?

They are substitutes

Technological innovation in the production of computers reduced production costs and has led to
a rightward shift of the supply curve for computers

Suppose the demand curve for a good shifts rightward, causing the equilibrium price to increase. this increase in the price of the good results in

an increase in quantity supplied



The supply curve is influenced by

the prices of the inputs required to produce the product

The market supply curve is found by

horizontally summing all individual supply curves

The price of crude oil dropped to $100 per barrel recently. what would we expect to see happen to the supply of gasoline, which is produced using crude oil?

The supply of gasoline will increase

Once an equilibrium is achieved, it can persist indefinitely because

in the absence of supply/demand shocks no one applies pressure to change the price

Suppose a market were currently at equilibrium. a rightward shift of the demand curve would cause

an increase in both price and quantity

If the demand for high definition televisions increases and the supply of high definition televisions increases, then

it is clear that quantity sold will increase, the change in the price of televisions is ambiguous

from the 1970s through the 1990s the relative price of a college education has increased greatly. during the same time period, college enrollment has also increased. this evidence suggests that during this time period

the demand curve for a college education has shifted rightward

Suppose the market for potatoes can be expressed as follows:


supply=Q^S=-20+10p


demand:Q^D=220-20p


what is the equilibrium price

8

what is the equilibrium quantity?

60

The percentage change in the quantity demanded in response to a percentage change in the price is known as the

price elasticity of demand

the change in price that results from a leftward shift of the supply curve will be larger if

the demand curve is relatively steep than if the demand curve is relatively flat

If a consumer increases her quantity of ice cream consumed by 25% when her income rises by 25% then her income elasticity of demand for ice cream is

1.0

If the demand curve for orange juice is expressed as Q=2000-500p where Q is measured in gallons and p is measured in dollars, then at the price of $2, elasticity equals

-3

if the demand for orange juice is expressed as Q=2000-500p where Q is measured in gallons and p is measured in dollars, then at the price of $3 the demand curve

is elastic

suppose the demand curve for a good is expressed as Q=50-2p. If the good currently sells for $3 then the price elasticity of demand is

-2 * (3/44)

On a linear demand curve, the higher the price

the more elastic is demand


how will a decrease in price affect a firm's revenues when its product is elastic?

Revenues will increase

A vertical demand curve for a particular good implies that consumers are

not sensitive to changes in the price of that good

if the demand curve for a good is horizontal and the price is positive, then a rightward shift of the supply curve results in

no change in price

the cross price elasticity of demand between two goods will be positive if

the two goods are substitues

In the late 1980s the health benefits of oat bran were widely advertised. if the price of oats increased by 50% causing the quanity of oats supplied to increase by 60% then the price elasticity of supply was

1.20

a specific tax on sellers will

shift the supply curve up

suppose the demand curve is perfectly inelastic and the supply curve is upward sloping. the price sellers receive after a specific tax is imposed on sellers

is unchanged

For a given positively sloped supply curve, the price increase to consumers resulting from a specific taximposed on sellers will be
greater the less price elastic demand is.

Consumers will always pay the entire amount of a specific tax whenever

supply is perfectly elastic


demand is perfectly inelastic

suppose the demand curve for a good is downward sloping and the supply curve is upward sloping. at the market equilibrium, if demand is more elastic than supply in absolute value, a $1 specific tax will

raise the price to consumers by less than 50 cents

an indifference curve represents bundles of goods that a consumer

views as equally desirable

Measuring 'y' on the vertical axis and 'x' on the horizontal axis, convex indifference curves implies that the MRS of 'y' for 'x'

is decreasing as 'x' increases

the indifference curves for left shoes and right shoes would most likely be

L-shaped

if two goods are perfect substitutes, then the indiference curves for those two goods would

downward sloping and straight

diminishing marginal rate of substitution can be seen when indifference curves

become flatter as we move down and to the right