1. Which of the following best represents management's objective(s) in utilizing demand analysis?
a. it provides insights necessary for the effective manipulation of demand
b. it helps to measure the efficiency of the use of company resources
c. it aids in the forecasting of sales and revenues
d. a and b
e. a and c
2. Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.
a. as the price declines, the real income of the consumer increases
b. as the price of product A declines, it makes it more attractive than product B
c. as the price declines, the consumer will always demand more on each successive price reduction
d. a and b
e. a and c
3. An increase in the quantity demanded could be caused by:
a. an increase in the price of substitute goods
b. a decrease in the price of complementary goods
c. an increase in consumer income levels
d. all of the above
e. none of the above
4. Iron ore is an example of a:
a. durable good
b. producers' good
c. nondurable good
d. consumer good
e. none of the above
5. If the cross price elasticity measured between items A and B is positive, the two products are referred to as:
a. complements
b. substitutes
c. inelastic as compared to each other
d. both b and c
e. a, b, and c
6. When demand is _____________ a percentage change in ___________ is exactly offset by the same percentage change in _____________ demanded, the net result being a constant total consumer expenditure.
a. elastic; price; quantity
b. unit elastic; price; quantity
c. inelastic; quantity; price
d. inelastic; price; quantity
e. none of the above
7. Marginal revenue (MR) is ____________ when total revenue is maximized.
a. greater than one
b. equal to one
c. less than zero
d. equal to zero
e. equal to minus one
8. The factor(s) which cause(s) a movement along the demand curve include(s):
a. increase in level of advertising
b. decrease in price of complementary goods
c. increase in consumer disposable income
d. decrease in price of the good demanded
9. An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:
a. price of substitute goods
b. level of competitor advertising
c. consumer income level
d. consumer desires for goods and services
e. a and b
10. Producers' goods are:
a. consumers' goods
b. raw materials combined to produce consumer goods
c. durable goods used by consumers
d. always more expensive when used by corporations
e. none of the above
11. The demand for durable goods tends to be more price elastic than the demand for non-durables.
a. true
b. false
12. A price elasticity (ED) of -1.50 indicates that for a ____________ increase in price, quantity demanded will ____________ by ______________.
a. one percent; increase; 1.50 units
b. one unit; increase; 1.50 units
c. one percent; decrease; 1.50 percent
d. one unit; decrease; 1.50 percent
e. ten percent; increase; fifteen percent
13. Those goods having a calculated income elasticity that is negative are called:
a. producers' goods
b. durable goods
c. inferior goods
d. nondurable goods
e. none of the above
14. An income elasticity (Ey) of 2.0 indicates that for a _____________ increase in income, ____________ will increase by __________________.
a. one percent; quantity supplied; two units
b. one unit; quantity supplied; two units
c. one percent; quantity demanded; two percent
d. one unit; quantity demanded; two units
e. ten percent; quantity supplied; two percent
15. When demand elasticity is ___________ in absolute value (or _________), an increase in price will result in a(n) __________ in total revenues.
a. less than 1; elastic; increase
b. more than 1; inelastic; decrease
c. less than 1; elastic; decrease
d. less than 1; inelastic; increase
e. none of the above
16. The basic reason(s) for the increase in quantity demanded as the result of a price reduction is (are) _____________.
a. income effect
b. substitution effect
c. complementary effect
d. a and b only
e. a, b, and c
17. Empirical estimates of the price elasticity of demand suggest that the demand for household consumption of alcoholic beverages is:
a. highly price elastic
b. price inelastic
c. unitarily elastic
d. an inferior good
e. none of the above
18. Consumers will be in equilibrium with respect to the consumption of two goods if:
a. the ratio of marginal utility to price is equal for both goods.
b. the marginal utility of the lowest price good is greater than the marginal utility of the highest price good.
c. the ratio of the marginal utility of A to the marginal utility of B is equal to the ratio of the price of B to the price of A.
d. the marginal utility of both goods is identical, regardless of the price.
e. none of the above.