Law of Demand

Jose is a reasonable consumer who spends his entire income on food and vacations. The table above describes his marginal utility and the prices of food and vacations.

If the price of a vacation decreases to $300, which of the following best describes the income effect of this price change?

• He now effectively has more income, which he can spend on more vacations, more food, or both.

• He will purchase more of both goods because his total income has increased.

• The marginal utility per dollar spent on vacations is lower, so he will increase how many vacations he purchases.

• The price of a vacation relative to food has decreases, so he will buy more vacations.

• He will purchase less food because the marginal utility per dollar spent on food has decreased.

Which of the two following movements in this graph would represent an increase in quantity demanded but not a change in demand?

• From point S to point U

• From point U to point T

• From point R to point U

• From point S to point T

• From point S to point R

A government is concerned about whether young children in a community are receiving enough healthcare.

Which of the following is the LEAST likely to increase the amount of healthcare that people provide their children?

• Provide coupons for free healthcare.

• Lowering regulations on who can provide healthcare, such as allowing nurses to provide healthcare rather than just doctors.

• Increase the price of healthcare.

• Reduce the distance traveled to get healthcare.

• Subsidize healthcare.

Owen saw that the price of apples had gone down, and so he decided to buy more apples.

Based on this information only, what does Owen's reaction reflect?

• Owen's demand for apples has increased.

• Owen's quantity demanded for apples has increased.

• Owen has experienced an increase in income.

• Owen observed that there has been an increase in the price of other fruit, a substitute for apples.

• Owen expects future price changes.

All of the following will result in a shift in a demand curve except:

• A change in the income of buyers.

• A change in the supply of a good.

• A change in expected future prices.

• A change in the price of related goods.

• A change in buyers' preferences.

As a result of an increase in consumer incomes, the demand for Meeps has decreased.

Based on this information, what can we definitely say about what type of good a Meep is?

• It has many substitutes.

• It is a complement good.

• It is an inferior good.

• It is a substitute good.

• It is a normal good.

• Buyers of good X expect the price of good X to decrease in the future.

• An increase in the price of good Y which is a complement to good X.

• An increase in the number of buyers of a good.

• People do not like good X as much as they did before.

• An increase in income if good X is an inferior good.