Term
| The cross-price elasticity of demand between substitutes |
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Definition
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| A shift in the consumer's demand for a good X cannot result from a change in the |
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Definition
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Definition
| should be ignored when making decisions |
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| Suppose hamburgers are on the horizontal axis and root beer on the vertical axis. You have a budget allowance of $10, and the price of hamburgers is $4 and root beer is $2. The slope of your budget constraint is |
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Definition
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Term
| Which of the following would result in a higher equilibrium price and an ambiguous change in equilibrium quantity? |
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Definition
| a decrease in supply and an increase in demand |
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Term
| A case where a consumer buys less of a good when its price falls |
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Definition
| is an example of a Giffen good and will produce an upward-sloping market demand curve |
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Term
| Ceteris paribus, if the price of a good rises, consumer surplus |
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Definition
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Term
| Suppose the demand for lattes can be estimated using the equation QD=9 – P, if the price is $3 per latte, how much is the consumer surplus? |
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Definition
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Term
| Negatively-sloped, straight-line indifference curves imply |
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Definition
| that the goods are perfect substitutes. |
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Term
| In the production possibilities frontier in Figure 1-1, which points are efficient? |
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Definition
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Term
| Which one of the following would cause the demand for coffee to increase? |
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Definition
| an increase in the price of tea, a substitute for coffee |
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Term
| The bandwagon effect causes market demand to be relatively ______ elastic. |
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Definition
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Term
| Suppose a consumer must pay $P per visit to the local museum for each of the first 10 visits but $2P per visit from the 11th visit on. With a composite consumption good on the y-axis and “Visits to the Museum” on the x-axis, the budget line |
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Definition
| becomes steeper after 10 visits. |
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Term
| In a two-year setting, suppose Gloria has $5,000 in income in year 1 and $10,000 in income in year 2. Gloria can borrow or lend at a rate of 20 percent. If the Gloria's income stream changes so she earns $10,000 in Year 1 and $5,000 in Year 2, the budget line will: |
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Definition
| shift out away from the origin |
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Term
| Along a concave production possibilities frontier, the per-unit opportunity cost of increasing output typically increases because |
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Definition
| some resources are better-suited to producing one good than to the other |
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Term
| The income elasticity of demand for an inferior good |
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Definition
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Term
| Which of the following statements about demand elasticity is correct? |
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Definition
| If demand is price-inelastic, an increase in price will increase total expenditures |
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Term
| Suppose a vaccine for the common cold is discovered. Although the government begins producing the vaccine in as large a volume as possible, there is not enough vaccine available to meet demand. Consequently, the government must also set up an allocation scheme to control the vaccine's distribution. Which of the following is true about the price of the vaccine? |
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Definition
| It was below equilibrium. |
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Term
| An individual may reach a higher indifference curve in all of the following circumstances except |
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Definition
| an increase in the relative price of one good the consumer purchases, other prices remaining unchanged. |
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Term
| When the price-consumption curve is |
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Definition
| upward-sloping, total expenditures on the good are decreasing as the price falls |
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Term
| With a normal good, the income and substitution effects |
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Definition
| always work together and both tend to make the demand curve downward sloping. |
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Term
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Definition
| the consumer's well-being varies. |
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Term
| If price changes from $4.75 to $5.25 and quantity demanded changes from 1025 to 975 units, then the price elasticity of demand is approximately |
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Definition
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Term
| For a risk loving individual, with return on the x-axis and total utility on the y-axis, the total utility curve |
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Definition
| increases at an increasing rate. |
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Term
| The opportunity cost of a good is always constant if the Production Possibility Frontier is |
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Definition
| a downward-sloping straight line. |
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Term
| An excess supply for a product indicates the price is |
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Definition
| below the equilibrium price. |
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Term
| Along a linear demand curve, the price elasticity is constant |
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Definition
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Term
| An income-consumption curve identifies how a consumer's consumption pattern changes as income changes while prices are constant._____ |
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Definition
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Term
| Along an indifference curve, if the MRS of food for clothing is 1F/2C, this means the consumer would be willing to give up 1 unit of food for 2 units of clothing, and would be better off with the exchange._____________ |
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Definition
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Term
| When the marginal rates of substitution differ, the consumer with the steeper indifference curves is happier |
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Definition
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Term
| Positive economics differs from normative economics in that positive economics can be proved correct or incorrect |
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Definition
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Term
| “The tax system should be more progressive so the after-tax distribution of income can be more equal” is an example of a positive economic statement. |
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Definition
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Term
| Price ceilings are often associated with excess supplies. |
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Definition
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Term
| When there is an excess demand for a good, there is upward pressure on price because buyers are willing to pay more. |
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Definition
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Term
| The income effect of a price change is always larger than the substitution effect in the inferior good case |
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Definition
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Term
| If the price-consumption curve is horizontal, then demand elasticity is greater than 1. |
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Definition
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Term
| An individual may reach a higher indifference curve if there is a decrease in the relative price of one good the consumer purchases, other prices remaining unchanged |
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Definition
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Term
| The consumer's optimal consumption bundle is where the slope of the indifference curve equals the slope of the budget line |
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Definition
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Term
| When the price-consumption curve is upward-sloping, total expenditures on the good are increasing as the price falls |
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Definition
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Term
| The snob effect causes market demand to be relatively more elastic |
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Definition
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