Academic Vocabulary Quiz # 3

If demand is price inelastic, then

• buyers do not respond much to a change in price

• buyers respond substantially to a change in price, but the response is very slow

• buyers do not respond much to advertising, fads, or general changes in tastes

• the demand curve is very flat

The income effect is best described as:

• The change in quantity demanded resulting from a change in income holding prices fixed

• The change in utility resulting from an increase in purchasing power

• The difference between the income held by the top 20 percent compared to the bottom 20 percent

• The slope of the budget constraint

When the Government prints too much money, prices _______

• Rise

• Fall

• Remains constant

• Becomes zero

Consuming more of one good because of a change in price of another good is known as the

• Income effect

• Elasticity effect

• Substitution effect

• Demand effect

Describe your demand for a product if you buy the same amount of it or just a small amount less after a large price increase.

• Elastic

• Inelastic

• Unit Elastic

• Hyper elastic

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

If the demand for widgets is inelastic, then when the price of widgets increases, revenues will:

• decrease

• remain the same

• increase

• increase, unless there are substitutes available for widgets

Which of the following is a predictable, secondary effect of a sharp increase in gasoline prices?

• Producers will increase the production of gas guzzling vehicles

• Producers will increase the production of fuel efficent cars

• the termination of research on the cost effectiveness of alternative fuels to power automobiles

• the federal government will place a quota on the number of fuel efficient cars for sale

The demand for a good increases when the price of a substitute ________ and also increases when the price of a complement ________.

• falls; falls

• rises; falls

• rises; rises

• falls; rises

A normal good is a good for which

• there are very few complements

• demand decreases when income increases

• demand increases when income increases

• there are few substitutes