ECO 105 TUTORIAL QUESTIONS Mara Lavin

Topic 3: Consumer Demand (Chapter 4, Ref. A)

TRUE OR FALSE
1. Total utility is the additional satisfaction received from consuming one more unit. F
2. The price elasticity of demand measures the response of consumers to a change in price. T
3. The demand is price-inelastic when the percentage change in quantity demanded is greater than the
percentage change in price for a particular good. F
4. Ceteris paribus, a price cut will most likely decrease total revenue if demand is inelastic. T
5. Ceteris paribus, the price elasticity of demand for a good with many substitutes is likely to be inelastic. F
MUTIPLE CHOICE
1. Which of the following is not a determinant of demand for a good? 
A. Tastes or preferences.
B. Income.
C. Prices of other goods.
D. Technological advances.
2. In economic theory, utility refers to the: 
A. Additional satisfaction obtained from one more unit of a good or service.
B. Satisfaction obtained from a good or service.
C. Willingness to buy specific quantities of a good or service at a particular price.
D. Decrease in satisfaction as more of a good or service is consumed.
3. Which of the following refers to the satisfaction a consumer receives from the consumption of a good? 
A. Price elasticity.
B. Law of demand.
C. Equilibrium price.
D. Utility.
4. In economic theory, total utility refers to: 
A. The additional utility from consuming the last unit of a good.
B. The amount of utility obtained from the entire consumption of a good.
C. The change in utility from the last unit sold.
D. How useful a good is to the consumer.
5. Marginal utility refers to the: 
A. Additional utility from consuming the last unit of a good.
B. Change in utility from the last unit consumed.
C. Utility derived from consuming all of the good.
D. Opportunity cost of the good.
6. According to the law of diminishing marginal utility: 
A. Total utility from consuming a good always rises.
B. Total utility from consuming one more unit of a good eventually falls.
C. Marginal utility of a good declines as more of it is consumed in a given time period.
D. Marginal product of labor declines as more of a variable input is used.
7. The law of diminishing marginal utility helps to explain the: 
A. Upward sloping supply curve.
B. Equilibrium price.
C. Downward sloping demand curve.
D. Equilibrium quantity of a good in the marketplace.
8. In economics, elasticity means ______. 
A. responsiveness

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 B. satisfaction
C. output
D. pleasure
9. The response of quantity demanded to price changes is shown by: 
A. Price elasticity of demand.
B. The determinants of demand.
C. Opportunity cost.
D. Income elasticity of demand.
10. Price elasticity of demand indicates the consumer’s response to changes in: 
A. Quantity.
B. Demand.
C. Price.
D. Supply.
11. Which of the following are determinants of price elasticity? 
A. The availability of substitutes.
B. The price of the good relative to income.
C. Whether the good is a necessity or luxury. 
D. All of the above are determinants of price elasticity.
12. The price elasticity of demand is defined as the: 
A. Percentage change in quantity demanded times the percentage change in price.
B. Unit change in price divided by the unit change in quantity demanded.
C. Percentage change in quantity demanded divided by the percentage change in price.
D. Unit change in quantity demanded times the unit change in price.
13. Suppose the price elasticity of demand for tacos is 0.80. If the price of tacos increases by 10
percent, then the quantity demanded of tacos should, ceteris paribus: 
A. Decrease by 8 percent.
B. Increase by 8 percent.
C. Decrease by 1.25 percent.
D. Increase by 1.25 percent.
14. If the price elasticity of demand for a product is 2.3, this means that quantity demanded will
increase by _______ for each _______ decrease in price, ceteris paribus. 
A. 1 percent; 2.3 percent
B. 1 unit; $2.30
C. 2.3 percent; 1 percent
D. 2.3 units; $1
15. If the price elasticity of demand is 1.5, and the prices gone up by 20 percent, the quantity sold will, ceteris paribus: 
A. Rise by 13.3 percent.
B. Fall by 13.3 percent.
C. Rise by 30.0 percent.
D. Fall by 30.0 percent.
16. If demand is elastic, then: 
A. Quantity demanded is not very responsive to changes in price.
B. Quantity demanded is very responsive to changes in price.
C. Consumer spending does not respond to changes in income.
D. Total revenue falls in response to a price decrease.
17. If demand is inelastic, then: 
A. Consumer spending does not respond to changes in income.
B. Total revenue rises in response to a price decrease.
C. Quantity demanded is very responsive to changes in price.
D. Quantity demanded is not very responsive to changes in price.
18. If quantity demanded rises only slightly following a moderate price cut, then demand is: 
A. Elastic.

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 B. Inelastic.
C. Unitary elastic.
D. Abnormal.
19. If demand is unitary elastic, then a price cut: 
A. Reduces total revenue.
B. Increases total revenue.
C. Does not change total revenue.
D. Sometimes increases and sometimes decreases total revenue.
20. Ceteris paribus, a price increase will cause total revenue to decrease for a firm, if the demand for its product is: 
A. Inelastic.
B. Elastic.
C. Unitary elastic.
D. Normal elastic.
21. Ceteris paribus, a price decrease will cause total revenue to decrease for a firm, if the demand for its product is: 
A. Unitary elastic.
B. Inelastic.
C. Elastic.
D. Increasing rapidly.
22. People find it difficult to get along without necessities, therefore demand for necessities: 
A. Is relatively elastic.
B. Is relatively inelastic.
C. Is relatively unitary elastic.
D. Does not change with changes in price.

23. Table 4.1 - Utility schedule

Complete the table and then use the information to answer the question(s) below

In Table 4.1, the marginal utility of the third unit is:

A. 5
B. 8
C. 12
D. 52

In Table 4.1, the total utility when four units are consumed is:
A. 57
B. 52
C. 8
D. 5

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