Questions for economic reasoning and discussion

1. What would happen to the demand for Pepsi-Cola if the price of Coca-Cola were doubled? Why would it happen?

2. Below is a list of consumer goods and services. Determine whether an item has an elastic or inelastic demand. Indicate the most important reason from the list below.

Cosmetic plastic surgery	Cheeseburger	Steak	Automobile
Loaf of bread	Air conditioning	Surfer shirt	Gasoline
10-speed bicycle	Electric guitar	DVDs	Apple juice

Reasons: necessity, luxury, many available substitutes, a few available substitutes, inexpensive, expensive, easy to delay purchase, difficult to delay purchase.

3. Choose the right variant. Only one is possible.

1. According to the law of demand, when the price of a good increases,

1. people will choose to purchase less of that good and more of other.

2. people will provide more of that good.

3. people will choose to purchase more of that good and less of other.

4. people will provide less of that good.

2. What does the law of demand state?

1. As incomes increase, people consume more of all goods.

2. The demand for a good increases with the number of consumers in the market.

3. As the price of a good declines, consumers purchase more of that good.

4. The supply of a good increases in proportion to the demand for it.

3. Which of the following provides an example of complementary goods?

1. Pepsi and Coca-Cola

2. French fries and catsup (кетчуп)

3. Milk and orange juice

4. Beef and pork

4. Which of the following would tend to have an inelastic demand curve?

1. Complementary goods

2. Luxuries

3. Goods with substitutes

4. Necessities

5. Which of the following best describes a product with elastic demand?

1. Consumers buy almost the same quantity of this product at a low price as they do at a high price.

2. A relatively large price cut is necessary to convince consumers to buy a little more of this product.

3. When the price of this product is reduced, consumers tend to buy more of it.

4. A relatively small price reduction will cause consumers to buy a lot more of this product.

6. The demand for a product tends to be elastic if

1. the product has a large number of good substitutes.

2. consumers generally spend a small fraction of their income on the product.

3. the product is regarded as a necessity.

4. the product has few good substitutes

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