Question 1

Suppose that Seth's income increases from $400 to $500 per week, so Seth increases his purchases of movies from 3 to 4. The income elasticity of movies is:

Accepted Answer

A)   1.33.
B)   0.25.
C)   0.75.
D)   1.00.

Question 2

To derive the Engel curve, which shows the relationship between the quantity of a good consumed and a consumer's income, all else equal, solve the consumer's:

Accepted Answer

A)   utility-maximization problem with prices of the goods as variables while keeping income constant.
B)   utility-maximization problem with income as a variable while keeping the prices of the goods constant.
C)   expenditure-minimization problem with prices of the goods as variables while keeping income constant.
D)   expenditure-minimization problem with income as a variable while keeping the prices of the goods constant.

Question 3

Use the following to answer questions 24-25:
Figure 5.14 
-(Figure 5.14)  Because of the income effect associated with the decrease in the price of good X, the quantity of good X purchased:

Accepted Answer

A)   increases from 3 to 4.
B)   increases from 4 to 5.
C)   decreases from 5 to 4.
D)   increases from 3 to 5.

Question 4

To calculate the market demand curve from individual demand curves:

Accepted Answer

A)   vertically sum the individual demand curves.
B)   horizontally sum the individual demand curves.
C)   exponentiate the individual demand curves.
D)   add up the prices of the individual demand curves, holding the quantities constant.

Question 5

Use the following to answer question:
Figure 5.35 
-For a constant income, the cross-price elasticity of demand between good X and Y in figure A is _____. In figure B it is _____

Accepted Answer

2.5; -1.67
Since income does not change ...

Question 6

The income effect of a price change predicts that a _____ in a good's price will _____ consumer purchasing power, leading to a(n)  _____ in consumption of _____ goods.

Accepted Answer

A)   fall; increase; increase; normal
B)   fall; decrease; decrease; normal
C)   rise; increase; increase; inferior
D)   rise; increase; decrease; inferior

Question 7

Suppose that there are two goods, X and Y. The utility function is U = X2Y2. The price of X is P, and the price of Y is $50. Income is $600. Derive the demand for X as a function of P.

Accepted Answer

Write out the constrained optimization p...

Question 8

Which of the following statements about Marshallian demand curves is FALSE?

Accepted Answer

A)   They show the relationship between price and quantity demanded, assuming that the consumer's income stays constant.
B)   They have an income effect as well as a substitution effect.
C)   They have just a substitution effect.
D)   They have the property that purchasing power changes when the good's price changes.

Question 9

Joaquin consumes pizza and beer. His utility function is  where P is the number of pizzas and B is glasses of beer. Joaquin has $30, and he plans to spend all of it on pizza and beer today.
a. The price of one pizza is $10 and the price of beer is $3 per glass. Solve for Joaquin's optimal bundle.
b. Suppose that during happy hour Joaquin can get beer for $2. Find the substitution effect, the income effect, and the total effect of the decrease in the price.
c. Are pizza and beer normal or inferior goods for Joaquin? Explain.

Accepted Answer

a. Joaquin's problem can be expressed as...

Question 10

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is $5, and the price of Y is P. Income is $60. Derive the demand for Y as a function of P.

Accepted Answer

Write out the constrained optimization p...

Question 11

Use the following to answer questions 24-25:
Figure 5.14 
-(Figure 5.14)  Good X is a(n)  _____ good, and good Y is a(n)  _____ good.

Accepted Answer

A)   normal; inferior
B)   normal; normal
C)   inferior; inferior
D)   inferior; normal

Question 12

Suppose that there are two goods, X and Y. The utility function is  The price of Y is $2 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 2,000 units.

Accepted Answer

Write out the constrained optimization p...

Question 13

Use the following to answer question:
Figure 5.4 
-(Figure 5.4)  Which of the following statements is TRUE?

Accepted Answer

A)   Fruitcake is an inferior good regardless of income level.
B)   Fruitcake is a normal good regardless of income level.
C)   Fruitcake is a normal good until income reaches $120, and then it becomes an inferior good.
D)   Fruitcake is an inferior good until income reaches $120, and then it becomes a normal good.

Question 14

For the following scenarios, explain the direction of the substitution effect, income effect, and total effect.

Accepted Answer

In the first scenario, the substitution ...

Question 15

Use the following to answer question:
Figure 5.33 
-(Figure 5.33) The consumer has an income of $15 and the utility function U = 5X + 5Y. Before the price change the consumer will consume _____units of Y and _____units of X. After the change, she will consume _____units of Y and _____units of X.

Accepted Answer

BC₁shows that the price of X is $1 ($15/1...

Question 16

A consumer has the following utility function: U = 4X + 2Y, where X is the number of slices of plain pizza and Y is the number of slices of pepperoni pizza. Given this person's preferences, what is the demand curve for slices of plain pizza?

Accepted Answer

The two types of pizza are perfect subst...

Question 17

Use the following to answer questions 26-28:
Figure 5.15 
-(Figure 5.15)  What type of good is good X?

Accepted Answer

A)   I and III
B)   III
C)   II and III
D)   I

Question 18

The market for good X consists of only two consumers; their demand curves are given by Q = 10 - 0.10P and Q = 5 - 0.10P. What is the market demand curve?

Accepted Answer

A)   QM = 15 - 0.2P if P  ≥\ge≥  $50, and QM = 5 - 0.10P if P 
B)   QM = 15 - 0.2P if P  ≤\le≤  $50, and QM = 10 - 0.10P if P 
C)   QM = 15 - 0.2P if P M = 10 - 0.10P if P > $50
D)   QM = 15 - 0.2P

Question 19

To use calculus to decompose the total effect of a price change into substitution and income effects, it is necessary to solve all of the following EXCEPT the consumer's:

Accepted Answer

A)   utility-maximization problem at the original prices.
B)   utility-maximization problem at the new prices.
C)   expenditure-minimization problem at the new prices and original utility level.
D)   expenditure-minimization problem at the original prices and new utility level.

Question 20

Use the following to answer question:
Figure 5.32 
-(Figure 5.32) Graph the market demand curve for bumper stickers, assuming that Neal and Vince are the only two consumers in the market for bumper stickers. On your graph, show the quantity demanded at $10, $7.50, $5, $2.50, and $0.

Accepted Answer

The answer of Use the following to answer question:
Figure 5.32...

Exam 5: Individual and Market Demand

Use the following to answer questions 24-25: Figure 5.14 -(Figure 5.14) Because of the income effect associated with the decrease in the price of good X, the quantity of good X purchased:

Correct Answer
verified

Correct Answer
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a. Joaquin's problem can be expressed as...
View Answer

Suppose that there are two goods, X and Y. The utility function is The price of Y is $2 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 2,000 units.

Correct Answer
verified
Write out the constrained optimization p...
View Answer

Suppose that Seth's income increases from $400 to $500 per week, so Seth increases his purchases of movies from 3 to 4. The income elasticity of movies is:

Correct Answer
verified

To derive the Engel curve, which shows the relationship between the quantity of a good consumed and a consumer's income, all else equal, solve the consumer's:

Correct Answer
verified

For the following scenarios, explain the direction of the substitution effect, income effect, and total effect.

Correct Answer
verified
In the first scenario, the substitution ...
View Answer

The income effect of a price change predicts that a ___ in a good's price will _ consumer purchasing power, leading to a(n) _ in consumption of ___ goods.

Correct Answer
verified

To calculate the market demand curve from individual demand curves:

Correct Answer
verified

A consumer has the following utility function: U = 4X + 2Y, where X is the number of slices of plain pizza and Y is the number of slices of pepperoni pizza. Given this person's preferences, what is the demand curve for slices of plain pizza?

Correct Answer
verified
The two types of pizza are perfect subst...
View Answer

Use the following to answer question: Figure 5.33 -(Figure 5.33) The consumer has an income of $15 and the utility function U = 5X + 5Y. Before the price change the consumer will consume ___units of Y and _units of X. After the change, she will consume _units of Y and ___units of X.

Correct Answer
verified
BC₁shows that the price of X is $1 ($15/1...
View Answer

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is $5, and the price of Y is P. Income is $60. Derive the demand for Y as a function of P.

Correct Answer
verified
Write out the constrained optimization p...
View Answer

To use calculus to decompose the total effect of a price change into substitution and income effects, it is necessary to solve all of the following EXCEPT the consumer's:

Correct Answer
verified

Use the following to answer questions 24-25: Figure 5.14 -(Figure 5.14) Good X is a(n) _ good, and good Y is a(n) _ good.

Correct Answer
verified

Suppose that there are two goods, X and Y. The utility function is U = X²Y². The price of X is P, and the price of Y is $50. Income is $600. Derive the demand for X as a function of P.

Correct Answer
verified
Write out the constrained optimization p...
View Answer

The market for good X consists of only two consumers; their demand curves are given by Q = 10 - 0.10P and Q = 5 - 0.10P. What is the market demand curve?

Correct Answer
verified

Use the following to answer question: Figure 5.35 -For a constant income, the cross-price elasticity of demand between good X and Y in figure A is _. In figure B it is _

Correct Answer
verified
2.5; -1.67
Since income does not change ...
View Answer

Use the following to answer question: Figure 5.32 -(Figure 5.32) Graph the market demand curve for bumper stickers, assuming that Neal and Vince are the only two consumers in the market for bumper stickers. On your graph, show the quantity demanded at $10, $7.50, $5, $2.50, and $0.

Correct Answer
verified

Which of the following statements about Marshallian demand curves is FALSE?

Correct Answer
verified

Use the following to answer question: Figure 5.4 -(Figure 5.4) Which of the following statements is TRUE?

Correct Answer
verified

Use the following to answer questions 26-28: Figure 5.15 -(Figure 5.15) What type of good is good X?

Correct Answer
verified

Exam 5: Individual and Market Demand

Use the following to answer questions 24-25: Figure 5.14 -(Figure 5.14) Because of the income effect associated with the decrease in the price of good X, the quantity of good X purchased:

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Joaquin's problem can be expressed as...View AnswerShow Answer

Suppose that there are two goods, X and Y. The utility function is The price of Y is $2 per unit and the price of X is P. Derive the Hicksian demand curve for X for utility equal to 2,000 units.

Correct AnswerverifiedWrite out the constrained optimization p...View AnswerShow Answer

Suppose that Seth's income increases from $400 to $500 per week, so Seth increases his purchases of movies from 3 to 4. The income elasticity of movies is:

Correct AnswerverifiedShow Answer

To derive the Engel curve, which shows the relationship between the quantity of a good consumed and a consumer's income, all else equal, solve the consumer's:

Correct AnswerverifiedShow Answer

For the following scenarios, explain the direction of the substitution effect, income effect, and total effect.

Correct AnswerverifiedIn the first scenario, the substitution ...View AnswerShow Answer

The income effect of a price change predicts that a _____ in a good's price will _____ consumer purchasing power, leading to a(n) _____ in consumption of _____ goods.

Correct AnswerverifiedShow Answer

To calculate the market demand curve from individual demand curves:

Correct AnswerverifiedShow Answer

A consumer has the following utility function: U = 4X + 2Y, where X is the number of slices of plain pizza and Y is the number of slices of pepperoni pizza. Given this person's preferences, what is the demand curve for slices of plain pizza?

Correct AnswerverifiedThe two types of pizza are perfect subst...View AnswerShow Answer

Use the following to answer question: Figure 5.33 -(Figure 5.33) The consumer has an income of $15 and the utility function U = 5X + 5Y. Before the price change the consumer will consume _____units of Y and _____units of X. After the change, she will consume _____units of Y and _____units of X.

Correct AnswerverifiedBC1 shows that the price of X is $1 ($15/1...View AnswerShow Answer

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is $5, and the price of Y is P. Income is $60. Derive the demand for Y as a function of P.

Correct AnswerverifiedWrite out the constrained optimization p...View AnswerShow Answer

To use calculus to decompose the total effect of a price change into substitution and income effects, it is necessary to solve all of the following EXCEPT the consumer's:

Correct AnswerverifiedShow Answer

Use the following to answer questions 24-25: Figure 5.14 -(Figure 5.14) Good X is a(n) _____ good, and good Y is a(n) _____ good.

Correct AnswerverifiedShow Answer

Suppose that there are two goods, X and Y. The utility function is U = X2Y2. The price of X is P, and the price of Y is $50. Income is $600. Derive the demand for X as a function of P.

Correct AnswerverifiedWrite out the constrained optimization p...View AnswerShow Answer

The market for good X consists of only two consumers; their demand curves are given by Q = 10 - 0.10P and Q = 5 - 0.10P. What is the market demand curve?

Correct AnswerverifiedShow Answer

Use the following to answer question: Figure 5.35 -For a constant income, the cross-price elasticity of demand between good X and Y in figure A is _____. In figure B it is _____

Correct Answerverified2.5; -1.67Since income does not change ...View AnswerShow Answer

Use the following to answer question: Figure 5.32 -(Figure 5.32) Graph the market demand curve for bumper stickers, assuming that Neal and Vince are the only two consumers in the market for bumper stickers. On your graph, show the quantity demanded at $10, $7.50, $5, $2.50, and $0.

Correct AnswerverifiedShow Answer

Which of the following statements about Marshallian demand curves is FALSE?

Correct AnswerverifiedShow Answer

Use the following to answer question: Figure 5.4 -(Figure 5.4) Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

Use the following to answer questions 26-28: Figure 5.15 -(Figure 5.15) What type of good is good X?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
a. Joaquin's problem can be expressed as...
View Answer

Correct Answer
verified
Write out the constrained optimization p...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In the first scenario, the substitution ...
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The income effect of a price change predicts that a ___ in a good's price will _ consumer purchasing power, leading to a(n) _ in consumption of ___ goods.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The two types of pizza are perfect subst...
View Answer

Use the following to answer question: Figure 5.33 -(Figure 5.33) The consumer has an income of $15 and the utility function U = 5X + 5Y. Before the price change the consumer will consume ___units of Y and _units of X. After the change, she will consume _units of Y and ___units of X.

Correct Answer
verified
BC₁shows that the price of X is $1 ($15/1...
View Answer

Correct Answer
verified
Write out the constrained optimization p...
View Answer

Correct Answer
verified

Use the following to answer questions 24-25: Figure 5.14 -(Figure 5.14) Good X is a(n) _ good, and good Y is a(n) _ good.

Correct Answer
verified

Suppose that there are two goods, X and Y. The utility function is U = X²Y². The price of X is P, and the price of Y is $50. Income is $600. Derive the demand for X as a function of P.

Correct Answer
verified
Write out the constrained optimization p...
View Answer

Correct Answer
verified

Use the following to answer question: Figure 5.35 -For a constant income, the cross-price elasticity of demand between good X and Y in figure A is _. In figure B it is _

Correct Answer
verified
2.5; -1.67
Since income does not change ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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