1. Considering the high average income of Americans, does the United States have any real problems with scarce resources? Fully explain your answer.

2. Fred and Rick attended a chess tournament last night instead of studying for this test. However, the opportunity cost for Rick was much higher than it was for Fred. Explain why.

PRICE ELASTICITY OF DEMAND

In each one of the following situations, would demand be more elastic?

FULLY EXPLAIN EACH OF YOUR ANSWERS [Each of your answers should touch on a different elasticity factor: the relative price of the good, the time period to buy the good, the number of substitutes, or whether the good is a necessity or a luxury.]

1. The purchase of an airline ticket for a vacation in Miami or the purchase of an airline ticket for a job interview in Miami.

2. The purchase by Hal of Carolina's Finest Barbecue Sauce,which he believesis the best barbecue sauce in the world, or the purchase by Jeff of Carolina's Finest Barbecue Sauce,

one of several brands he has purchased over the years.

3.The purchase of a dining room table for $ 500 or the purchase of a tablecloth for the dining room table for $50.

4. The purchase by Karen of her Economics textbook a month before class started, or the purchase by Susan of her Economics textbook one day before class started.

1."People buy goods for the utility they expect the goods to provide them."

Give a personal example to illustrate this fact.

What is marginal utility? Give an example.

How does the Law of Diminishing Marginal Utility help to explain why firms need to bring out new variations of old products from time to time, e.g., Vanilla-scented Tide?

2. What would happen to the demand for Duke'sMayonnaise if the price of Kraft Mayonnaise increased? Explain why. What would happen to the demand for Duke's Mayonnaise if the prices of bread, ham, and cheese decreased? Explain why. Finally, what would happen to the SUPPLY of mayonnaise if labor costs at factories producing mayonnaise were to increase? Explain why.

answer:

A. "There is nothing buyers can do to make demand more elastic for the products

they buy."

B. "Sellers would like demand to be inelastic for all the goods they sell."

C. "Entrepreneurs are the most powerful players in a market economy."

D. An increase in the price of lemons will not change the DEMAND for lemons."

ELASTICITY PROBLEM.Complete the table.

Price Quantity demanded Total Revenue * Demandis

$7	40	$ 280	XXXXXXXX
$6	60	$ 360	A.
$5	70	$ 350	B.
$4	120	$ 480	C.
$3	150	$ 450	D.
$2	225	$ 450	E.
$1	500	$ 500	F.

*Elastic, Inelastic, or Unitary

Complete the following

1. __ elasticity of demand seeks to find out if two goods are

either substitutes or complements and to what degree.

2. A Price __________________usually results in a surplus of a good

in the marketplace.

3. The Income Effect is one explanation for the Law of ________________.

4. In economics, the word _________________ means "extra" or "additional."

MULTIPLE CHOICE.Select the one best answer to the following

(ALWAYS ASSUME "OTHER THINGS EQUAL.")

1. Which of the following factors could cause the demand for Coke to increase?

A. A decline in the cost to bottle Coke

B. A decline in the regulations on the soft drink industry

C. An increase in the price of Pepsi

D. An increase in the number of sellers

2. Which of the following is TRUE about price ceiling

A.They have often been used in agriculture.

B. They have usually resulted in a shortage of the good.

C. They are passed to please the sellers.

D. The Minimum Wage Law is an example.

E. All of the above are true.

3. The elasticity ofsupply for lemons for a time period of one day would likely be

A. Close to perfectly inelastic B. Very slightly inelastic to moderately elastic

C. Very elastic D. Close to perfectly elastic

4. Expectations of higher prices for refrigerators next month likely would lead to a(n)

_______ in demand today (other things equal).

A. Increase B.No change C. Decrease D. None of these

5. If the price of soy beans were to increase, the supply of wheat likely

would (other things equal)

A. Increase B.Decrease C. Not change D.What's left?

6. Which of the following is true about a pure market economy?

A. It is usually slow to adapt to changes, such as a sudden shortage of a resource

B. Economic risks to the individual are low

C.It is not very efficient in producing the goods society want

D.The self-interest motive discourages people from cooperating with each other

E.Prices signal players what action to take to maximize their self-interest.

7. Demand becomes more elastic as

A. The time period to buy the product is shortened.

B. The good is seen as more of a necessity.

C. Buyers have fewer choices.

D. The price of the good becomes a larger percentage of a person's income.

8. A decrease in DEMAND (with no change in SUPPLY) will lead to a(n)___ in the market price and a(n)________ in the quantity sold of a good

A.Decrease...decreaseB. Increase...increase C. Decrease...increaseD.Increase...decrease

9. If a 50% price cut results in a 60% increase in the quantity sold, [price] elasticity of demand is.

A. Elastic B.InelasticC. Unitary D. Enter Passcode for "D" answer

10. Unitary elasticity exists when

A. The elasticity coefficient = 0.

B. When Total Revenue and Price move in opposite directions.

C. When the elasticity coefficient = 1

D. When Total Revenue and price move in the same direction.

.

11. To raise the most tax revenue, the government should tax

A.Diamond jewelryB. Knives and forks C.Luxury cars and yachtsD. Big screen TV's

12. A good is classified as a normal good when IncomeElastic Demand

A.Is Positive B. Is Negative C. Is 0D. All of the above

13. The Law of Diminishing Marginal Utility helps to explain the

A. Law of Demand C. Law of Diminishing Marginal Returns B. Law of Supply D.Law of Murphy

14. An increase in SUPPLY (with no change in DEMAND) will result in

a(n) ______ in the market price of a good and a(n) _______ in the quantity sold.

A.Increase...decrease C . Increase...increase

B. Decrease...decrease D.Decrease...increase

15. Which of the following would be a Microeconomics topic?

A. The inflation rate for January

B.The unemployment rate for 2022

C.Monthly figures for the volume of exports and imports

D.The determination of teachers' salaries

E.All of the above

16. Demand is _______________ if the coefficient of elasticity = 1.50

A.Elastic

B.Inelastic

C.Unitary

D.Infinite

17. Which of the following is TRUE?

A.The Internet has made demand for many goods more inelastic.

B. The higher one's salary, the more demand is likely to be inelastic

for most purchases.

C. A goal of a firm's advertising is to make demand for their products more elastic.

D. Buyers would like the demand for all the goods they buy to be inelastic.

18. The economic payment to the owners of capital is called _______ in economics.

A. Interest

B. Rent

C. Profit

D. Commission

19. __________________________ costs, production costs that fall on third parties,

e.g., pollution, are one drawback of a pure market economy.