Q: Which formula represents the price elasticity of demand?

$$\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}$$

Question 1

Which of the following best describes the buyer’s problem in microeconomics?

Accepted Answer

Maximizing utility by considering preferences, prices, and budget constraints.

Question 2

If the price of jeans decreases from $$50 to 25 $$and the price of sweaters remains at $25, what happens to the budget constraint?

Accepted Answer

The budget constraint rotates outward, allowing more jeans to be purchased.

Question 3

What is the opportunity cost of buying one more pair of jeans if sweaters cost $$25 and jeans cost 50$$?

Accepted Answer

2 sweaters

Question 4

Given the budget constraint $$I = 300$$, $$P_x = 50$$, $$P_y = 25$$, what is the maximum number of jeans that can be purchased?

Accepted Answer

$$\frac{300}{50} = 6$$

Question 5

At the optimal consumption point, what condition must be satisfied between two goods X and Y?

Accepted Answer

$$\frac{MB_X}{P_X} = \frac{MB_Y}{P_Y}$$

Question 6

If a consumer’s indifference curve is tangent to the budget constraint, what does this represent?

Accepted Answer

The consumer’s optimal bundle, where the marginal rate of substitution equals the price ratio.

Question 7

Suppose the demand for ground beef is $$Q_d = 26 - 2P$$ and the supply is $$Q_s = -4 + 4P. $$What is the equilibrium price?

Accepted Answer

$$P = 5$$

Question 8

What is consumer surplus?

Accepted Answer

The difference between what a buyer is willing to pay and what they actually pay.

Question 9

Which formula represents the price elasticity of demand?

Accepted Answer

$$\frac{	ext{Percentage change in quantity demanded}}{	ext{Percentage change in price}}$$

Question 10

If the price elasticity of demand for eggs is less than 1, what does this imply?

Accepted Answer

Eggs are price inelastic; quantity demanded changes little with price.

Question 11

Suppose the price of coffee increases from $$3 to 5 $$and Alex’s demand curve is $$Q = 10 - P. $$What is the change in quantity demanded?

Accepted Answer

Decrease from 7 to 5 cups

Question 12

Which of the following is an example of the income effect?

Accepted Answer

A consumer buys more jeans and sweaters after receiving a raise.

Question 13

If the cross-price elasticity between peanut butter and jelly is negative, what does this indicate?

Accepted Answer

They are complements.

Question 14

If the income elasticity of demand for ramen noodles is negative, what type of good is ramen noodles?

Accepted Answer

Inferior good

Question 15

A restaurant owner notices that increasing prices leads to a decrease in total revenue. What does this suggest about the price elasticity of demand for their food?

Accepted Answer

Demand is elastic ($$ED \u003e 1)$$

Question 16

Suppose Jackson has a budget of $$33, tuna costs 3$$, and salmon costs $6. What is the optimal combination if the marginal benefit per dollar spent is equal for both goods at 3 units of tuna and 3 units of salmon?

Accepted Answer

Jackson should buy 3 units of tuna and 3 units of salmon.

Question 17

If a monetary incentive increases COVID-19 vaccination rates by 4.2 percentage points, what economic principle does this illustrate?

Accepted Answer

Incentives can alter consumer behavior and increase demand.

Question 18

Which formula represents the cross-price elasticity of demand?

Accepted Answer

$$\frac{	ext{Percentage change in quantity demanded of good x}}{	ext{Percentage change in price of good y}}$$

Question 19

If the price elasticity of demand for salmon is -0.37, what does this imply about world demand for frozen farmed salmon?

Accepted Answer

Demand is price inelastic; quantity demanded changes little with price.

Consumers and Incentives: The Buyer’s Problem, Preferences, and Elasticity

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