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ECON 101 Chapter Notes - Chapter 3: Ceteris Paribus, Demand Curve, Relative Price

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periwinkledeer44
11 Feb 2013
School
UBC
Department
Economics
Course
ECON 101
Professor
Robert Gateman

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ECON 101 Full Course Notes
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ECON 101 Full Course Notes
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Document Summary

Amount of a good or service that consumers want to purchase at a particular price. Flow of purchases per period of time. Qd is affected by: product"s own price, consumer"s income, prices of other products, tastes, population, expectations about the future. Ceteris paribus holding all other variables constant. A basic economic hypothesis is that the price of a product and the quantity demanded are related negatively, other things being equal. That is, the lower the price, the higher the quantity demanded; the higher the price, the lower the quantity demanded. Negative demand slope qd increases as price falls. Table showing the relationship between qd and price. Graph second method of showing this relationship. Demand curve shows the quantity consumers would like to buy at each price. The demand curve represents the relationship between qd and p, all other things being equal. Demand refers to the entire relationship between the qd and of a product and price.

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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

1. In economics, the demand for a good refers to the amount of the good that people:
a. Will buy at alternative income levels
b. Need to achieve a minimum standard of living.
c. Will buy at various prices
d. Would like to have if the good were free
2. The term ceteris paribus means that:
a. What is for the individual is not necessarily true for the whole
b. All variables except those specified are constant
c. Everything is variable
d. No one knows which variables will change and which will remain constant.
3. When economist talk about supply, they are referring to a relationship between price received for each unit sold and the ____________________.
a. Quantity supplied
b. Demand schedule
c. Demand curve
d. Market price
4. But nearly all supply curves share a basic similarity: they slop______________.
a. Up from left to right
b. Down from left to right
c. Up from right to left
d. Down from right to left
5. The nature of demand indicates that as the price of a good increases:
a. Suppliers wish to sell less of it.
b. Buyers desire to purchase less of it
c. More of it is desired
d. More of it is produced
6. Any given demand or supply curve is based on the certeris paribus assumption that _______.
a. Everything is variable
b. All else is held equal
c. No one knows which variables will change and which will remain constant
d. What is true for the individual is not necessary true for the whole.
7. Economist refer to the relationship that a higher price leads to lower quantity demand as the ______________.
a. Price model
b. Law of demand
c. Market equilibrium
d. Income gap
8. A perfect elastic supply curve is:
a. Vertical
b. Downward sloping to the left
c. Horizontal
d. Upward sloping to the right
9. A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:
a. Elasticity of demand for iced tea is 2 and is elastic
b. Cross-price elasticity of demand for iced tea is -2
c. Cross-price elasticity of demand for soda is -0.5
d. Elasticity of demand for soda 0.5 AND IS INELASTIC
10. ___________ is the change in what is on the horizontal axis (quantity) divided by the change in what is the vertical axis (price).
a. Elasticity
b. Supply
c. Demand
d. Revenue
11. A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of:
a. The supply curve and the rightward shift of the demand curve resulting in a higher equilibrium price
b. Both the supply and demand curves
c. The supply curve
d. The demand curve, as consumers try to economize because the shortage.
12. Got the answer.
13. A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the _____________.
a. Demand curve to the right
b. Supply curve to the left
c. Supply curve to the right
d. Demand curve to the left
14. Interpret the following statements:

1.
Which of the following is not a characteristic of a market?

A. Markets are physical locations where trading occurs
B. Voluntary exchanges between economic agents
C. Flexible prices
D. There are rules and arrangements for trading


2.
How would a decrease in supply affect the equilibrium price in a market?

A. The equilibrium price would remain the same
B. The equilibrium price decreases.
C. The equilibrium price increases.
D. More information is needed. It may increase, decrease, or remain the same.

How would the equilibrium price in a market be affected if there were a large increase in supply and a small increase in demand?

A. The equilibrium price would remain the same
B. The equilibrium price decreases.
C. The equilibrium price increases.
D. More information is needed. It may increase, decrease, or remain the same.

How would the equilibrium price in a market be affected if there were a large decrease in supply and a small decrease in demand?
A. The equilibrium price would remain the same
B. The equilibrium price decreases.
C. The equilibrium price increases.
D. More information is needed. It may increase, decrease, or remain the same.

4.
What does it mean to say that we are running out of "cheap oil"?
A. That there are declining reserves of low-quality oil, but there is still plenty of high-quality oil remaining.
B. That world demand for oil is declining , which will raise the price of oil in the future.
C. That we will soon seplete all the world's oil reserves, which will cause the price of oil to increase significantly.
D. That oil reserves are becoming more expensive to find and extract over time.

What doese this imply for the price of oil in the future?
A. the demand for oil will increase, which will lead to lower prices in the future.
B. the demand for oil will decrease, which will lead to higher prices in the future.
C. The supply of oil will increase, which will lead to lower prices in the future.
D. The supply of oil will decrease, which will lead to higher prices in the future.


5.
What is meant by holding all else equal and how is this concept used when discussing movements along the demand curve?
A. everything else in the economy is held constant, including the price of the good.
B. All variables that can affect the demand for the good are held constant.
C. All variables in the model are set to equal values.
D. All of the above.

We make the assumption of holding all else equal when considering demand curves since we want to focus on the changes in the quantity demanded that result from changes in [ only the price of a good / only the income of consumers / the price of a good and incomes ]