ECON Test Review Chapters 4 & 5

Match the following

• marginal utility

• satisfaction or usefulness obtained from acquiring one more unit of a product

• Law of Demand

• rule stating that more will be demanded at lower prices and less at higher prices

• demand curve

•  combination of desire, ability, and willingness to buy a product

• demand

• graph showing the quantity demanded at each and every possible price that might prevail in the market at a given time

Match the following

• demand elasticity

• products related in such a way that an increase in the price of one reduces the demand for the other

• inelastic

• price change causes a relatively smaller change in demand

• substitution effect

• the extent to which a change in price causes a change in the quantity demanded

• complements

• the portion of a change in quantity demanded caused by a change in price that makes other products more or less costly

What are the characteristics of demand?

• the desire, ability, and willingness to buy a product

• the ability and willingness to buy a product

• the willingness and desire to buy a product

• the desire and ability to buy a product

Changes in quantity demanded and changes in price have a(n) _________ relationship.

• indirect

• positive

• neutral

• inverse

A hungry man is willing to pay a high price for food. After he is no longer hungry, he is not willing to pay the same high price. Which of the following best defines this example?

• a complement

• unit elasticity

• the substitution effect

• diminishing marginal utility

What is the income effect?

• a change in quantity demanded caused by a change in consumer income

• a change in demand caused by substitution

• a proportional change in quantity demanded based on income

• an increase in purchase of complements based on an increase in income

Which would an economist consider a likely substitute for coffee?

• water

• tea

• chicken

• donuts

Which would an economist consider a likely complement for coffee?

• water

• tea

• chicken

• donuts

Which product most likely has a demand that is inelastic?

• a vital medicine

• a meal at a restaurant

• green beans

• a vacation

How does the graph illustrate the Law of Demand? Choose TWO answers.

• As prices decrease, the quantity demanded increases; as prices increase, quantity demanded decreases.

• The relationship between price and quantity demanded is represented by the upward slope of the demand curve.

• The relationship between price and quantity demanded is represented by the downward slope of the demand curve.

• As prices increase, the quantity demanded increases; as prices decrease, quantity demanded decreases.