Topic 3 Economics Review

In economics, the concept of demand is defined as the desire to own something

• that has not yet been manufactured or produced

• and a willingness to pay more than other consumers for it

• that a manufacturer is capable of producing

• combined with the ability to pay for it

According to the law of demand, when the price of pizza goes up,

• consumers will buy less pizza

• consumers will save more money

• pizza restaurants will stop making pizza

• pizza restaurants will make more money

Juanita has noticed that the price of bagels has gone up. Because of this, she has decided to buy a less expensive yogurt every morning for her breakfast. This is an example of the

• income effect.

• law of demand.

• substitution effect.

• market demand schedule.

Marty just finished creating a market demand schedule for his hardware store. Which of the following is he most likely trying to determine?

• How many tools he sold last year to his customers

• Which contractors are the best customers of his products

• How many tools sold to all consumers in the market at various prices

• Which of his competitors is the greatest threat to his business

If Tino responds to a sharp increase in his transportation costs by buying fewer clothes, he is demonstrating

• horizontal demand

• an individual demand schedule

• the income demand schedule

• the substitution effect

Shana continues to buy a necessary medicine even though prices for the medicine rise sharply. Shana's behavior shows how

• the passage of time affects elasticity

• the law of demand eliminates elasticity

• luxury goods are not subject to elasticity

• demand for necessities is inelastic

Suppose demand for a product is highly elastic. What will likely happen to a company's total revenue if it raises the price of that product?

• Total revenue will rise

• Total revenue will fall

• Total revenue will remain the same

• Total revenue will change up and down

Suppose the price of a good rises. In general, how does the percentage of your budget you spend on that good affect the elasticity of your demand for goods overall?

• The higher the percentage of your budget a good represents, the less elastic your overall demand.

• The higher the percentage of your budget a good represents, the more elastic your overall demand.

• The lower the percentage of your budget a good represents, the more inelastic your overall demand.

• The lower the percentage of your budget a good represents, the more elastic your overall demand.

Why does demand generally become more elastic over time?

• People don't change their shopping behavior over time

• Few substitutes become available

• People buy more products over time

• People have time to find substitutes and change behaviors

Do higher prices lead to increased revenues for a company?

• Always

• Sometimes

• Never

• Only when demand is elastic