Economy- Chapter 4

How is future price related to current demand?

If the price is expected to rise, current demand will drop.
If the price is expected to fall, current demand will rise.
If the price is expected to rise, current demand will rise.
Future price is not related to current demand.

If the price is expected to rise, current demand will rise.

Select the term: The change in consumption resulting from a change in real income

demand curve
income effect
elastic
inferior good

income effect

Ceteris paribus, or "all other things held constant," is an assumption that has what effect on a demand schedule?

It takes only prices into account.
It considers the effects of all possible changes on demand.
It is accurate no matter what changes occur.
It is accurate only at one price level.

It takes only prices into account.

What determines how a change in prices will affect total revenue for a company?

elasticity of demand
the company’s pricing policy
values of elasticity
the consumers’ incomes

elasticity of demand

Select the term: The way that a change in price determines whether or not consumers buy goods

elasticity of demand
substitution effect
law of demand
complement
substitute

law of demand

A shift in the demand curve means . . .

a change in demand at every price
a rise in prices
a decrease in both price and quantity demanded
a change in consumer income

a change in demand at every price

Select the term: A good that is always used with another good

elasticity of demand
substitution effect
law of demand
complement
substitute

complement

Select the term: A graphic representation of the quantities of a good that will be bought at each price

demand curve
income effect
elastic
inferior good

demand curve

Select the term: A measure of how people change their buying patterns when prices change

elasticity of demand
substitution effect
law of demand
complement
substitute

elasticity of demand

Select the term: What happens when consumers react to an increase in a good’s price by consuming less of that good and more of other goods

elasticity of demand
substitution effect
law of demand
complement
substitute

substitution effect

What kind of table lists the quantity of a good that an individual person will buy at different prices?

demand schedule
demand curve
market demand schedule
market demand curve

demand schedule

When a consumer is able and willing to buy a good or service, s/he creates ____________ .

consumption
demand
elasticity
allocation

demand

What type of economic system is the United States economy based on?

cause and effect
centralized
market
production

market

When prices rise, what happens to income?

It goes down.
It buys less.
It rises to meet prices.
It is used to buy different things.

It buys less.

Select the term: A good that replaces another demanded good

elasticity of demand
substitution effect
law of demand
complement
substitute

substitute

Which good would be likely to be bought in the same quantity even if it doubled in price?

shoes
telephones
pencils
computers

pencils

What kind of changes would be expected in the demand of a country that has an increasing population?

a rise in the demand for recreation
a shift in the demand for high-quality food
a rise in the demand for shelter
a lowering in the demand for automobiles

a rise in the demand for shelter

What does it mean when the demand for a product is inelastic?

People will not buy any of the product when the price goes up.
A price increase does not have a significant impact on buying habits.
Customers are sensitive to the price of the product.
There are very few satisfactory substitutes for the product.

A price increase does not have a significant impact on buying habits.

What determines the price and the quantity produced of most goods?

the consumer’s perception of necessity
the interaction of supply and demand
the availability of substitutes for the goods
the quality of the goods that are produced

the interaction of supply and demand

How is the current demand for a good related to its future price?

If the price is expected to drop, current demand will fall.
If the price is expected to drop, current demand will rise.
If the price is expected to rise, current demand will fall.
Current demand is not related to future price.

If the price is expected to drop, current demand will fall.

What does unitary elastic demand mean?

The elasticity of demand is mathematically determined.
The elasticity of demand is different at each unit on the price range.
The demand is inelastic at a low price but becomes elastic as the price rises.
The percentage change in quantity demanded is exactly equal to the percentage change in price.

The percentage change in quantity demanded is exactly equal to the percentage change in price.

Select the term: A good for which the demand falls when income rises

demand curve
income effect
elastic
inferior good

inferior good

Select the term: Demand that is very sensitive to a change in price

demand curve
income effect
elastic
inferior good

elastic

What is a basic principle of the law of demand?

The higher the price, the more people will want the good.
Everyone has a limited income that they will spend.
When a good’s price is lower, people will buy more of it.
Services are of interest in the same way that goods are.

When a good’s price is lower, people will buy more of it.

How did the existence of the baby boom generation change demand in the United States?

Demand was raised for different goods with each age the baby boomers reached.
After they reached the teenage years, the baby boomers were integrated into the society and no longer affected demand.
People were poorer because they had so many children, so demand was lowered.
The baby boomers did not raise demand until they became adults, when they had their own money to spend.

Demand was raised for different goods with each age the baby boomers reached.