ECON 1B03 Lecture Notes - Lecture 5: Budget Constraint

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29 Sep 2017

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Changes to the bc: the bc will change for any change in income or prices, if income n increases, bc shifts right. You can buy more of both goods: if income n decreases, bc shifts left. You can"t buy as much of either good as before. Changes in prices: if px decreases, no change in py or n. You can buy more of relatively cheaper x: if px decreases, no change in py or n. You can"t buy as much of relatively more expensive x as before: if px and py both change at the same rate, no change in income n: Bc will have a parallel shift: if px and py change at different rates, no change in income n: Bc will rotate depending on the relative change in prices: mickey can consume combos of hockey and basketball tickets anywhere along his bc or inside it (they are all affordable)

Related Questions

When demand for a good is very elastic, revenue ________ when the price falls.

(2)

An elasticity measure less than one means that demand is __________.

(3)

An elasticity measure greater than one means that demand is __________.

(4)

The Latin expression ceteris paribus means

	having made all other necessary changes.
	holding constant all other variables.
	assuming all households have similar incomes.
	given the level of income in the economy.

(5)

A variable measured in terms of money is called a ____________________.

	real variable
	nominal variable
	macroeconomic variable
	microeconomic variable

(6)

Which of the following is true about the importance of money in economics?

	Money is important in both macroeconomics and microeconomics.
	Money is important in macroeconomics but not microeconomics.
	Money is important in microeconomics but not macroeconomics.
	Money is not important in either microeconomics or macroeconomics.

(7)

What is the difference between normative and positive economics?

	Positive economics is descriptive and predictive; normative economics is prescriptive.
	Positive economics highlights the positive aspects of the economy; normative economics highlights the average features.
	Positive economics studies the actions of individuals; normative economics studies the actions of households.
	Positive economics is an applied social science; normative economics is a theoretical social science.

(8)

The slope of the demand curve is negative because

	the quantity of a good demanded decreases as income declines.
	the quantity of a good demanded increases as income declines.
	the quantity of a good demanded increases as the price declines.
	the quantity of a good demanded decreases as the price declines.

(9)

What is the result of an increase in the price of bread, a normal good?

	The demand curve shifts to the right.
	The demand curve shifts to the left.
	The quantity demanded increases.
	The quantity demanded decreases.

(10)

What is the effect on demand for bread when the price of bagels, a substitute for bread, rises?

	The demand curve for bread shifts to the right.
	The demand curve for bread shifts to the left.
	The quantity of bread demanded increases.
	The quantity of bread demanded decreases.

(11)

Which of the following would cause the supply curve for bread to shift inward?

	An increase in the price of bread
	An increase in the price of bagels
	A decrease in the price of bread
	An increase in the price of flour

(12)

An improvement in technology shifts the supply curve outward because

	at every price, firms find producing the good to be more profitable.
	the price of the good increases.
	at every price, firms find producing the good to be less profitable.
	the price of the good decreases.

(13)

Which of the following factors does not affect how much bread a baker is willing to produce?

	The price of bread
	The demand for bread
	The cost of inputs
	Technology

(14)

How do expectations of prices affect how much of a good producers are willing to sell?

	Expectations of prices affect only demand, not supply.
	Actual prices, not expectations of prices, affect supply.
	If producers expect prices to fall in the future, they supply less at every price.
	If producers expect prices to rise in the future, they supply less at every price.

(15)

When the price of a good is above equilibrium level,

	the quantity demanded exceeds the quantity supplied.
	the quantity supplied exceeds the quantity demanded.
	the supply curve shifts to the left.
	the supply curve shifts to the right.

(16)

At a price of P₀ in the diagram below, which of the following statements is true?

	Supply equals demand.
	There is excess demand.
	There is excess supply.
	There is scarcity.

(17)

If demand for bread increases at every price, the equilibrium price of bread will

	fall.
	rise.
	remain unchanged.
	depend on income.

(18)

If the demand for bread declines, then

	at the original equilibrium price, there is excess demand.
	at the original equilibrium price, there is excess supply.
	the supply curve shifts to the right.
	the supply curve shifts to the left.

(19)

Peanut butter and jelly are complementary goods. When the price of peanut butter rises, the demand for jelly ________ and the price of jelly ________.

	rises; falls
	rises; rises
	falls; rises
	falls; falls

(20)

The measure of elasticity that economists use is

	always a positive number.
	always a negative number.
	positive when demand is elastic and negative when demand is inelastic.
	negative when demand is elastic and positive when demand is inelastic.

(21)

Which of the following formulas is the correct expression for the slope of a line?

(22)

Graphically how would an increase in income affect the demand for hamburgers?

	The slope of the demand curve would increase.
	The slope of the demand curve would decrease.
	The demand curve would shift outward, parallel to the original demand curve.
	The demand curve would shift inward, parallel to the original demand curve.

(23)

Given the equation P = $6.00 ? $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60?

	1.44 units
	3 units
	3.6 units
	6 units

(24)

Which of the following is true about unit elasticity?

	Revenues remain unchanged when the price changes.
	Elasticity of demand increases as one moves down the demand curve.
	Elasticity of demand decreases as one moves down the demand curve.
	The elasticity of demand is greater than one at every point along the demand curve.

(25)

Which of the following could be a determinant of the quantity demanded of a good?

	The price of the good
	The price of related goods
	Income
	Expectations about the future price of the product
	All of the above

violethare488

DEMAND and SUPPLY FUNDAMENTALS: Shifts in Demand or Supply

Variables typically included in a multivariate demand function (other than the price and quantity of the item the demand function represents) are consumer tastes and preferences, the number of buyers, spendable (disposable) income, prices of substitute goods, prices of complementary goods, advertising expenditures, weather, and expectations. Recalling that the price of the item being considered is placed on the vertical axis, and the quantity on the horizontal axis, the other variables are termed demand shifters. Please answer the following questions about the affect changes in other variables might have on the demand for the item. These changes will either cause demand to increase(shift right) or decrease(shift left). Use either word as applicable, for the short answer.

If the price of a good increases because the demand for it increases, What would you expect the demand for its complement to do?

If the demand for coffee beans increases, then what is likely to happen to the demand for land on which to grow coffee?

If advertising expenditures for the good being considered are decreased, then demand for the good being considered will likely:

Lattes are a relatively expensive coffee drink. However, being a normal good, as consumersâ disposable income increases, the demand for Lattes should:

5. As the supply of tablet computers and e-readers increases relative to the demand for them, what change in demand for printed textbooks (having digital e-book versions) would you expect?

Variables typically included in a multivariate supply function (other than the price and quantity of the item the supply function represents) are prices of other goods that use similar input resources for production, expectations, the number of suppliers, techniques of production, taxes and subsidies, and prices of input resources, weather. Please answer the following questions about the affect changes in other variables might have on thesupplyof the item. These changes will either cause supply to increase(shift right) or decrease(shift left). Use either word as applicable, for the short answer.

If there is an increase in the number of producers of the item being considered, then the supply of it is likely to:

A tariff is a form of trade restriction (that behaves much like a tax). Suppose the United States removes a high tariff on imported broccoli that had been in effect for a long time. How should this affect the supply of imported broccoli?

A decrease in a government-provided subsidy of the item being considered is likely to ___________its supply.

If the price of an input resource decreases (and there are no cheaper substitutes for the resource) then producers of the item are likely to _____________ its supply?

Suppose broccoli growers have successfully lobbied Congress for a crop subsidy. Once the subsidy becomes available, the domestic broccoli supply is likely to:

(1) If a demand curve shifts to the left, then:
a) price would go up and quantity would go down
b) price would go down and quantity would go up
c) a lower price and quantity would result
d) a higher price and quantity would result

(2) Demand and supply curves are drawn assuming ceterisparibus.This means that:
a) economists ignore all assumptions
b) economists don't watch for the fallacy of false cause
c) changes will be proportional
d) all other things besides price and quantity are unchanged

(3) If steak and potatoes are complements, when the price ofsteakgoes up, the demand curve for potatoes:
a) shifts to the right
b) shifts to the left
c) stays the same
d) shifts to the right and then moves back

(4) Given that chicken and beef are substitute goods, if thepriceof chicken decreases substantially, there would be:
a) an increase in the demand for beef
b) a decrease in the demand for beef
c) a decrease in the quantity for beef demanded
d) no change in the demand for beef

(5) Every day for the past two years you've had ham and cheese onawhole wheat bagel for lunch at Bungalow Bob's BagelBoutique.However, the price of whole wheat bagels has risen by 10cents sotoday you decide to have ham and cheese on rye bagel. Inthis case,whole wheat and rye bagels are best considered:

a) superior goods
b) normal goods
c) substitute goods
d) complementary goods

(6) For most goods, purchases tend to rise with increases inbuyers'incomes and to fall with decreases in buyers' incomes. Suchgoodsare known as:

a) inferior goods
b) direct goods
c) normal goods
d) luxury goods

(7) Economists know that a particular good can be classified asaninferior good if a(n)______ increase in buyers' incomecausesa(n)_____

a) increase; increase in demand
b) increase; increase in quantity demanded
c) increase; decrease in demand
d) decrease; decrease in demand

(8) An increase in the demand for medical services caused byanincrease in the number of people 65 is most likely attributabletowhich demand shifter?

a) income
b) consumer preferences
c) prices of other goods
d) demographic characteristics

(9) Which of the following would shift the demand curve fornewtextbooks to the right?

a) a decrease in the price of paper
b) a fall in the price of used textbooks
c) an increase in college enrollments
d) a fall in the price of new textbooks

(10) How a supply curve is sloped and located depends on:

a) technology
b) resources prices
c) the number of producers or sellers
d) all of the above

(11) A decrease in supply means:

a) a shift to the left of the entire supply curve
b) moving downward (to the left) along the supply curve withlowerprices
c) less will be demanded at every price
d) more will be supplied at every price

greycrocodile249

ECON 1B03 Lecture Notes - Lecture 5: Budget Constraint

ECON 1B03 Full Course Notes

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