ECON 400 EXAM 1 QUESTIONS AND ANSWERS
What is the Law of Demand? - Answers - As the price of a good rises, consumers buy
less of that good.
What does the height of the demand curve represent? - Answers - The maximum price
consumers are willing to pay for an additional unit, reflecting their valuation of that unit.
What is consumer surplus? - Answers - The difference between what consumers are
willing to pay and what they actually pay, representing net gains to buyers from
purchases.
How is consumer surplus represented on a graph? - Answers - It is the area above the
actual price paid and below the demand curve.
What happens to the quantity demanded of pizzas at a market price of $20? - Answers -
The 16 thousandth pizza will not be purchased because the consumer is only willing to
pay up to $5 for it, while the 4 thousandth pizza will be purchased as the consumer is
willing to pay up to $35.
What is the difference between a change in demand and a change in quantity
demanded? - Answers - A change in quantity demanded refers to movement along the
demand curve due to a price change, while a change in demand refers to a shift of the
entire demand curve due to factors like income or preferences.
What is an example of an increase in quantity demanded? - Answers - If the price of
tablet computers falls from $300 to $100, the quantity demanded for DVDs increases
from Q1 to Q3 units.
What is an example of an increase in demand? - Answers - If consumer income
increases, the demand for tablet computers at all prices will increase, shifting the
demand curve to a higher quantity demanded at the same price.
What is an example of a decrease in demand? - Answers - If the price of pizza falls from
$20 to $10, the quantity demanded increases from 200 units to 300 units.
What is elastic demand? - Answers - Demand is elastic when the quantity demanded is
highly sensitive to price changes, as seen with tacos when the price increases from $2
to $4.
What is inelastic demand? - Answers - Demand is inelastic when the quantity
demanded is largely insensitive to price changes, as seen with gasoline when the price
increases from $2 to $4.
, What does a market demand schedule show? - Answers - It shows the relationship
between the price of a good and the quantity demanded at that price.
How do market prices coordinate consumer actions? - Answers - Market prices reflect
the forces of demand and supply, harmonizing the choices of millions of individuals
involved in the market.
What is the significance of the demand curve's shape? - Answers - The shape of the
demand curve reflects the law of demand, indicating that higher prices lead to lower
quantities demanded.
What is the relationship between consumer surplus and market price? - Answers -
Consumer surplus increases when the market price is lower than what consumers are
willing to pay for additional units.
What does a shift in the demand curve indicate? - Answers - A shift in the demand
curve indicates a change in demand due to factors such as consumer preferences,
income, or the prices of related goods.
What is the impact of a price increase on quantity demanded for inelastic goods? -
Answers - For inelastic goods, a price increase results in a relatively small decrease in
quantity demanded.
What is the impact of a price increase on quantity demanded for elastic goods? -
Answers - For elastic goods, a price increase results in a significant decrease in
quantity demanded.
What does the demand curve indicate at any given quantity? - Answers - It indicates the
maximum price that consumers are willing to pay for that quantity.
How does the market process relate to consumer choices? - Answers - The market
process aligns consumer choices through the interaction of demand and supply, leading
to equilibrium prices.
What role do local grocery stores play in economics? - Answers - They serve as
practical examples of economics in action, showcasing the coordination of supply and
demand.
What can be inferred about consumer behavior from the demand curve? - Answers - It
reflects consumer preferences and willingness to pay, illustrating how price changes
affect purchasing decisions.
What happens to the demand for pizza in a college town during the summer? - Answers
- The demand for pizzas generally decreases as students go home.
What is the Law of Demand? - Answers - As the price of a good rises, consumers buy
less of that good.
What does the height of the demand curve represent? - Answers - The maximum price
consumers are willing to pay for an additional unit, reflecting their valuation of that unit.
What is consumer surplus? - Answers - The difference between what consumers are
willing to pay and what they actually pay, representing net gains to buyers from
purchases.
How is consumer surplus represented on a graph? - Answers - It is the area above the
actual price paid and below the demand curve.
What happens to the quantity demanded of pizzas at a market price of $20? - Answers -
The 16 thousandth pizza will not be purchased because the consumer is only willing to
pay up to $5 for it, while the 4 thousandth pizza will be purchased as the consumer is
willing to pay up to $35.
What is the difference between a change in demand and a change in quantity
demanded? - Answers - A change in quantity demanded refers to movement along the
demand curve due to a price change, while a change in demand refers to a shift of the
entire demand curve due to factors like income or preferences.
What is an example of an increase in quantity demanded? - Answers - If the price of
tablet computers falls from $300 to $100, the quantity demanded for DVDs increases
from Q1 to Q3 units.
What is an example of an increase in demand? - Answers - If consumer income
increases, the demand for tablet computers at all prices will increase, shifting the
demand curve to a higher quantity demanded at the same price.
What is an example of a decrease in demand? - Answers - If the price of pizza falls from
$20 to $10, the quantity demanded increases from 200 units to 300 units.
What is elastic demand? - Answers - Demand is elastic when the quantity demanded is
highly sensitive to price changes, as seen with tacos when the price increases from $2
to $4.
What is inelastic demand? - Answers - Demand is inelastic when the quantity
demanded is largely insensitive to price changes, as seen with gasoline when the price
increases from $2 to $4.
, What does a market demand schedule show? - Answers - It shows the relationship
between the price of a good and the quantity demanded at that price.
How do market prices coordinate consumer actions? - Answers - Market prices reflect
the forces of demand and supply, harmonizing the choices of millions of individuals
involved in the market.
What is the significance of the demand curve's shape? - Answers - The shape of the
demand curve reflects the law of demand, indicating that higher prices lead to lower
quantities demanded.
What is the relationship between consumer surplus and market price? - Answers -
Consumer surplus increases when the market price is lower than what consumers are
willing to pay for additional units.
What does a shift in the demand curve indicate? - Answers - A shift in the demand
curve indicates a change in demand due to factors such as consumer preferences,
income, or the prices of related goods.
What is the impact of a price increase on quantity demanded for inelastic goods? -
Answers - For inelastic goods, a price increase results in a relatively small decrease in
quantity demanded.
What is the impact of a price increase on quantity demanded for elastic goods? -
Answers - For elastic goods, a price increase results in a significant decrease in
quantity demanded.
What does the demand curve indicate at any given quantity? - Answers - It indicates the
maximum price that consumers are willing to pay for that quantity.
How does the market process relate to consumer choices? - Answers - The market
process aligns consumer choices through the interaction of demand and supply, leading
to equilibrium prices.
What role do local grocery stores play in economics? - Answers - They serve as
practical examples of economics in action, showcasing the coordination of supply and
demand.
What can be inferred about consumer behavior from the demand curve? - Answers - It
reflects consumer preferences and willingness to pay, illustrating how price changes
affect purchasing decisions.
What happens to the demand for pizza in a college town during the summer? - Answers
- The demand for pizzas generally decreases as students go home.
